What Is Threshold Effect? Concept, Importance and Example

The term threshold effect is used to indicate that particular effect in which advertising of particular goods or services creates an impact on the behavioral responses of the consumer by making them more inclined towards buying that product.

Understanding The Concept Of A Threshold Effect

The threshold effect creates that minimum level of exposure of the advertising that is needed to be done so that the customer would get fully aware of that particular product or service that is being advertised. Thus with the help of the threshold effect, one can determine the minimum extent to which one must advertise their products or services so that they can make a change in the consumer’s behavior in context to that product that too in an appositive manner.

The threshold effect is nothing but a cumulative effect of the advertising campaign in a sustained manner. Now the term threshold effect was given so because in the field of business a phenomenon is observed in which the sales of that particular company surpasses a specific and fixed quantitative limit which is known as the threshold, hence this effect too was given the name ‘Threshold effect’.

With the help of the threshold effect, it becomes easy for the companies to bring the attention of the customers towards their products by a well planned and calculated strategy so that the customer may be able to recognize the product na the brand with which it is associated.  Thus once the customer gets aware of that product it is most likely that they would buy it at some point in time.

Now when this happens at a mass level, the sales revenue of the company is increased. This, in turn, increases the profitability of the company.

In general threshold, effect represents that particular limit uptill which the advertising of the products or the service that is being offered to the consumer has to be reached so that more and more people will come to know about it. This way more people will buy the products hence will increase the sales revenue of the company.

The main objective of the threshold effect is to create a change in the manner in which the consumer would behave towards the products had they not known about it completely. It is an indication of the level till which the advertising exposure should be done so that the marketing of that product could be channelized in just the right manner so that it crests a decent impressing on their fellow customers.

For any advertising campaign determining the threshold effect, one of the key aspects is for the right kind of marketing to take place. It is one of the basic things that be must be known before completing their marketing strategy. The use of threshold effect is thus mostly done by the advertisers or the marketers of the company.

While finding out the threshold effect they take into consideration several aspects like the brand value, the popularity of the brand, the demands of the customer, the needs of the customers, the diversification of their customer demographics on the basis of their age, income, reaching ability, etc.

After analyzing some these parameters and the similar ones, the marketers are able to formulate a strategy that would create an impactful threshold effect on their targeted customers and hence convince them into buying their product.

An example of the threshold effect

Now it is clear from the fact that the threshold effect is important for a business as that is the key to increase their sales revenue. The threshold effect is all about advertising a product in the right manner. Now there are several factors that are taken into consideration while marketing a product or a service.

The fact that people should be aware of the products is essential but one must also take care of the fact that the products are not over advertised otherwise that would negatively affect the customer base. Thus there is a right frequency on which the product should be advertised so that it can positively impact the purchasing behavior of the consumers.

To understand this, let us consider an example. The consumers come across various add through television, through social media like email, facebook, etc, through direct messaging and many other ways.

Now suppose if a company has launched a new mobile phone in the market which has many new features and is the latest version of its previously existing models. Now the company has to make sure that more and more people are aware of the launch of this new product.

For this, they will build up an advertising strategy. Now, this is where the threshold effect comes into account. The company has to make sure that the products neither advertised too less nor advertised too more. There is a thin line of difference between the two.

Thus after doing the relevant research on their targeted customer bases that can come up with the minimum number of times their mobile phones should be advertised so that it may bring a change in their consumer’s behaviors.  So for example, this company that is launching its new mobile phones, depending on their targeted demographics, they are needed to advertise their product 7 times.

Thus by advertising it for seven times the customers will get influenced by the ad and may take a decision of buying it. This is known as a threshold effect which determines the minimum limit till which the marketing should be done to convert an ordinary consumer into a potential one.

What is the importance of the threshold effect?

The threshold effect holds quite an importance in the marketing field. It is one of the most essential things to have when it comes to planning a proper marketing strategy that would not only help your products to reach out to the maximum number of customers but also affect their purchasing behaviors in a positive manner. The threshold effect is important because it may end up converting an ordinary consumer into a potential one.

For a sustained advertising campaign, understanding the threshold effect may be the game changer when it comes to establishing the product in the market. The threshold effect enables the customer to recognize the product as they see the ads of it on a repetitive basis.

Now the level of expenditure at which this threshold effect occurs can then be used as a benchmark to set proper budgets which could then be used for the advertising purpose in the futures. This is because if a threshold effect becomes effective and manages to bring maximum customers for buying the products, then on the basis of this same threshold effect, they can formulate a more accurate marketing strategy in future.

What is the usage of the threshold effect?

The threshold effect is widely used in the marketing field. It is one of the most important tools for the advertisers as this is going to determine the success of products to a lot more extent provided that other factors too work in an aligned manner. The threshold effect is that point where the marketers recognize the recognition or the awareness of the products by the customer for a given product or a brand.

Now here a customer would this to reduce the cost of their products until the time till which consumer starts to recognize those particular products. Now here one has to be very careful in terms of the threshold effect when it comes to marketing or advertising. There have been cases in which the threshold never reached, as a result of it, the customers aren’t able to recognize that brand.

To overcome this problem, the companies need to spend some amount of money on it so that the proper advertisement of the customer may become aware of one specific product.

What are the advantages of the threshold effect?

The main advantage of the threshold effect is that it helps the companies to create a positive impression of their products in the minds of their customers. It helps the companies to plan a budget so that they would spend accordingly to make the consumers aware of their products.

It also helps the companies in understand the amount to which the product must be advertised so that it may impact the thought process of their consumers and make them more inclined towards purchasing it.  Thus for any company who is about to launch its products in the market may take help of the threshold effect to reach out to a maximum number of customers.

Also, it is beneficial because if this threshold effect is analyzed in a proper manner, then one can actually turn them into potential ones.

What is the disadvantage of the threshold effect?

The only disadvantage of the threshold effect is that, if it is analyzed in the wrong manner it would adversely affect the advertisement of that product and hence affect the sales of that company.

Conclusion

Thus the threshold effect plays a major role in the advertising industry and must be taken into account so as to increase the sales revenues of the company which in turn may lead to an increase in the profit margin.