skills/evaluate-ad-investment/references/investment-model.md

# Advertising Investment Model

## Contents

1. Definition
2. Three classes
3. Qualification tests
4. Return and residual value
5. Evidence levels

## 1. Definition

Advertising deploys resources to alter the timing or probability distribution of purchase, recall, consideration, trust, or selection. Its value depends on what probability changes, for whom, for how long, and whether the change produces recoverable value.

## 2. Three classes

| Class | What it buys | Required condition | Primary evaluation | Withdrawal basis |
|---|---|---|---|---|
| Current value | Time and acceleration of existing demand | Identifiable demand and recovery path | Incremental conversions, profit, marginal return | Marginal return below boundary or no remaining improvement path |
| Non-current value | Future option or selection probability | Defined future state, mechanism, lag, and signal | Recall, consideration, trust, qualified demand, residual value | No expected signal or no defensible retained value |
| Organizational | Reassurance, legitimacy, continuity, or institutional convenience | Transparent organizational purpose | Organizational benefit and cost | Organizational decision, separate from market ROI |

`Defensive / maintenance cost` is an operating tag within non-current-value advertising. It commonly applies when the role is to preserve recall, reassurance, shelf selection, or a competitive baseline.

## 3. Qualification tests

### Current value

- Is demand already present or identifiable?
- Is the conversion and contribution-profit path defined?
- Can incremental or marginal return be estimated?
- Are stock, sales capacity, price, and experience able to absorb demand?
- Is a spend limit or stopping rule defined?
- Does spending pull future demand forward and, if so, at what cost?

### Non-current value

- Which future customer state should change?
- Why should exposure create that state?
- When should the state matter in a buying situation?
- What early and counter-signals can be observed?
- What remains after spend stops?
- What evidence would force redesign or withdrawal?

### Organizational

- What internal or institutional outcome is actually purchased?
- Who values that outcome?
- What is the explicit cost ceiling?
- Why is it not currently measurable as market investment?

## 4. Return and residual value

Residual value is not “something may remain.” Define the asset or probability expected to persist:

- Accessible memory and recall
- Trust or reduced perceived risk
- Entry into a future consideration set
- Owned audience or reusable evidence
- Distribution or partner confidence
- Learning that changes later decisions

Require a mechanism, relevant duration, signal, and decay assumption. Label unknowns rather than inventing durability.

Incremental definitions:

```text
Incremental effect = observed result − counterfactual result
Incremental CPA = additional advertising cost ÷ incremental conversions
Incremental ROAS = incremental revenue ÷ additional advertising cost
```

## 5. Evidence levels

| Level | Basis | Permitted claim |
|---|---|---|
| A | Controlled experiment or strong counterfactual | Conditional incremental or causal effect |
| B | Multiple independent sources converge | Strong investment hypothesis |
| C | Observational data, correlation, or one source | Consistency, indication, or hypothesis |
| D | Experience, analogy, or insufficient evidence | Exploratory hypothesis and limited exposure |