Advertising Experiments at the Ohio Art Company

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This case is intended to be part of a first-year MBA marketing course, or a second-year elective in advertising, integrated marketing communications, market research, or marketing analytics. The case provides students with examples of two real advertising experiments and the challenges involved in executing the experiments. It allows for a discussion of the need for advertising experiments, and also, at a more general level, the need to measure the return on marketing. Biases surrounding the field experiments allow for a discussion of the problems with establishing a causal relationship between advertising and sales. Excerpt UVA-M-0752 Rev. Jan. 30, 2012 Advertising Experiments at The Ohio Art Company Headquartered in Bryan, a small northwest Ohio town, the Ohio Art Company was best known for its classic drawing toy, Etch A Sketch. In stark contrast to the faddish toys that crowded the toy market during the late 20th and early 21st centuries—as well as the increasing prevalence of toys featuring a licensed identity—the company's flagship product had endured for more than 40 years, sold over 100 million units, and appealed to children in dozens of countries worldwide. About 25% of the firm's revenues were derived from the sale of toys for writing and drawing. One of the oldest toymakers headquartered in the United States, Ohio Art produced about 50 toys in all, including the popular Betty Spaghetty line of dolls as well as water toys, children's drum sets, and sports sets. The company's slogan, “Making Creativity Fun,” emphasized its focus on arts-and-crafts-oriented toys. Although toys generated the majority of Ohio Art's annual sales, the production and sale of custom metal lithography contributed about one-third of the company's revenues. Exhibit 1 provides pictures of some of the major toys sold by the Ohio Art Company. Recent Performance History In recent years, Ohio Art had experienced a bumpy ride, alternating between profits and losses throughout the 1990s and up through much of 2006. The recession of the early 1990s helped Ohio Art to a certain degree, because many of its toys retailed for less than $ 20 and thus appealed to budget-conscious parents. Sales and profits peaked at $ 55.6 million and $ 3.4 million in 1992. Product placement of Etch A Sketch in the hit animated film Toy Story was a shot in the arm for Ohio Art in 1995. . . .