Boxing clever: How retailers profit from Christmas ads

This Christmas could be bitter-sweet for the advertising industry.

The good news is that the traditional television commercial has been enjoying a renaissance. Thank John Lewis and its ad agency, Adam&EveDDB, for raising the bar each year since it began investing in festive ads in 2009.

This year, the department store’s Buster the Boxer film, about a dog leaping onto a trampoline a girl got for Christmas, has set online records (52 million views in its first few days) and spawned countless spoofs. Practically every major brand has jumped on the bandwagon with its own illustrious ad.

Sainsbury’s has gone for stop-motion animation. Marks & Spencer has enlisted Mrs Claus in a helicopter. The notoriously frugal Amazon has splashed out on a heart-warmer about a priest and an imam exchanging gifts. Even Heathrow Airport has a cute commercial, featuring teddy-bear grandparents arriving home to see their family.

The bad news is that the TV ad market is tumbling despite all these companies investing in advertising. ITV expects ad revenues to slump 7% in the last three months of this year, after three strong years in a row, as some advertisers have become cautious following the Brexit vote.

However, businesses should be wary of slashing ad spend in response to uncertainty. History shows that companies which keep investing in their brand will grow faster and gain market share.

Two recent studies back up that point and should be required reading in every boardroom. The first is a research paper by Adam&EveDDB about its advertising for John Lewis, which this month won the Grand Prix at the Effectiveness Awards of the Institute of Practitioners in Advertising (IPA).

It shows how continuously investing in marketing each Christmas has led to a virtuous circle of improving returns. The social buzz, newspaper coverage and sales increased every year. Every £1 spent on advertising delivered a return of £5 for John Lewis in the first few years of its Christmas TV campaigns. By last year, the return was £8.

The ads have even been funding themselves. Monty the Penguin generated £2.5 million in merchandising in 2014 — more than half the cost of the £4.3 million campaign.

The second must-read study is from Les Binet and Peter Field, marketing experts who have studied hundreds of the most effective ad campaigns over the last 30 years for the IPA. Their latest research has found companies that invest in paid media with mass reach grow three times faster than those that rely on their own content and public relations.

That’s important because it has become fashionable in recent years for marketers to move their spend away from traditional media such as TV and newspapers to online, mobile and live events.