Factors Affecting Profitability and ROI in Advertising

Understanding the key drivers of profitability and return on investment (ROI) in advertising is crucial for businesses. Factors such as brand size, advertising budget levels, interaction of budget and brand size, creative executions, and the impact of creativity on ROI play significant roles in shaping advertising success. By analyzing these factors, companies can optimize their advertising strategies to enhance profitability and achieve better ROI.

• Profitability
• ROI
• Advertising
• Brand Size
• Creative Executions

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1. The drivers of profitability

2. Brand size is a key driver of category ROI 30.0 25.0 Retail Average Category RROI 20.0 15.0 Automotive 10.0 Alcohol Restaurants Durables 5.0 FMCG 0.0 0 2000 4000 6000 8000 10000 12000 Average Annual Revenue ( m) Source: The Drivers of Profitability, 2023, Paul Dyson - accelero, based on 2,500 UK ROIs across 4 key studies

3. Advertising ROI is impacted by absolute budget level Practitioners agree advertising experiences diminishing returns this means ROIs drop as budgets increase Source: The Drivers of Profitability, 2023, Paul Dyson - accelero, based on Media Mix Navigator, Accelero Optimiser

4. Interaction of budget and brand size impact ROI performance Expected ROI performance by brand size and budget level Brand Size 50m 100m 200m 300m 500m 1,000m 2,000m 1% 2% 3% 4% 5% 10% 0.6 0.6 0.5 0.5 0.5 0.4 1.3 1.2 1.1 1.0 1.0 0.9 2.7 2.4 2.2 2.1 2.0 1.7 3.9 3.4 3.2 3.0 2.9 2.4 6.2 5.5 5.0 4.7 4.4 3.6 11.7 10.0 9.0 8.3 7.8 6.1 20.0 16.7 14.7 13.3 12.2 8.9 Budget (% of sales) Source: The Drivers of Profitability, 2023, Paul Dyson - accelero

5. Creative executions deliver a range of ROI (IPA Awards) Kevin the Carrot Made of More Cowboys 2018 Kevin and Katie John Hammond Kevin the Carrot Cowboys 2017 RWC Kevin and Pascal Sapeurs 3x 3x Long Way Home 4x 4x Basketball Greatest Showman Rugby 6N Surge Christmas Carrot Clock Favourite Things Cloud 0 5 10 15 20 0 5 10 15 20 25 30 35 Revenue ROI Revenue ROI Source: The Drivers of Profitability, 2023, Paul Dyson - accelero

6. Creativity is the biggest ROI multiplier within our control Potential multipliers of advertising profitability - (2023) Potential multipliers of advertising profitability - (2023) X 20 X 12 X 5 X 3 X 2.5 X 2.0 X 1.7 X 1.6 X 1.2 X 1.1 Budget setting across variants Budget setting across portfolios Budget setting across geographies Cost / Product seasonality Brand : Performance Multi- media Target audience Laydown / Phasing Brand size Creative quality Source: The Drivers of Profitability, 2023, Paul Dyson - accelero, ROI multiplier = area of the circle