How effective is your school’s advertising?

This (quick) article is the fifth in a series examining popular business concepts as they apply to schools. Fair warning, this article includes a little bit of math. Read the introduction then skip to the ‘From Blackboard to Boardroom’ section if math isn’t your thing.

As noted in a previous post, John Wanamaker, U.S. Postmaster General (c 1889–1893), is widely regarded as a pioneer of marketing. He famously quipped: “I know that half of my advertising Dollars are wasted, I just don’t know which half”

Fortunately, things have moved on somewhat. Internet advertising and social media allow us to track which promotions are most popular, which get clicked and which don’t. However, Wanamaker’s sentiment remains. It is still very difficult to measure the impact of many marketing activities.

For school Admissions staff, the effectiveness of advertising is a particularly vexing question.

Fairly obviously, the more responsive your enrollments are to advertising the better. If you are going to spend money on advertising you want it to be effective — more advertising should hopefully lead to more enrollments. Equally, if enrollments are not responsive to advertising that is valuable information; you might divert money from advertising to other elements of your marketing (school tours or referral schemes, for example — see here).

To help measure the impact of advertising, it is possible to use Advertising Elasticity of Demand (AED), a mathematical measure of how responsive demand (enquiries and enrollments) is to changes in advertising expenditure.

The Maths Bit

Advertising elasticity of demand can be calculated using the formula:

The result of this formula should be positive. Sales should rise as expenditure on advertising rises. A negative figure would be very worrying, more advertising equals fewer sales! Ideally, the result should also be greater than 1; a given percentage increase in advertising expenditure results in a bigger percentage rise in sales. For example:

Where a 10% increase in advertising expenditure results in a 20% increase in sales AED would equal 2.

20/10 = 2

Demand for this product would be termed advertising elastic; its sales are responsive to advertising.

In contrast, if sales only rose by 5%, the product would be advertising inelastic.

5/10 = 0.5

Here an AED of 0.5 indicates that the 10% increase in advertising results in a smaller increase in quantity demanded (by only 5%); sales are not very responsive to advertising.

Advertising elasticity of demand is useful because it adds a dash of science to the art of marketing. Understanding AED may only go part way to knowing which half of your advertising expenditure is wasted — AED relies, after all, on actually being able to measure response to given promotions — but it does help. At the very least, AED focuses attention on how effective advertising really is, perhaps prompting some tough decision-making.

FROM BLACKBOARD TO BOARDROOM

For a school, measuring advertising elasticity can be relatively easy.

Imagine, for example, your school runs a campaign promoting Kindergarten classes. Any enquires subsequent to that campaign (above and above normal levels) could be logged. Changes in year-to-year or month-to-month advertising expenditure could also be recorded. With these figures advertising elasticity of demand could then be calculated. This would allow analysis of the campaign itself and also, more generally, whether Kindergarten places are responsive to advertising at all.

If demand seems to respond to advertising, then future campaigns should be worthwhile; if demand is not responsive to advertising other forms of promotion may need to be considered (discount schemes and free trials offered to local creches, for example).

Knowing which advertisements are most effective is important in informing future marketing activities. Why spend money on forms of advertising or through mediums which generate little return? Knowing which advertisements and which advertising mediums work best is valuable information, helping marketers make more effective marketing decisions.

Advertising will always be an inexact science, but a little bit of analysis, and a little bit of math, can help you to know whether your advertising budget is indeed being wasted.