By Peter Murphy, head of OTC Business Insights at researcher IRI
OTC manufacturers should consider switching more of their advertising budget from TV to digital channels to improve their return on investment according to new research from IRI.
It has long been assumed that health brands achieve a higher return from digital advertising, but now it’s possible to prove it and explain the reasons why.
For the average FMCG product, the ROI from a TV campaign is 81p for every pound spent on advertising. For digital marketing the return is lower at 43p per pound allocated.
In the OTC category the reverse is true.
The return for TV advertising is 30p per pound but for digital it is 49p. This is a massive 63% difference.
In fact, OTC is the only grocery category where the ROI is higher for digital advertising than for TV.
So why is this happening?
IRI research into advertising effectiveness across media platforms indicates that while TV reaches a mass audience (the average person in the UK watched 650 hours of TV in the first half of 2015, according to commercial television marketing body Thinkbox) many OTC ads are not relevant to people when they are shown.
While adverts for a chocolate bar or a breakfast cereal will be of interest to the majority of viewers, few consumers watching will be suffering from a particular condition such as a sore throat or indigestion and have a need for a particular product. Of course, long-term brand equity does grow.
If you analyse the ROI from, for example, paid search for OTC brands you notice how consumers will specifically search for the conditions they are suffering from. The brands that can provide a cure or remedy will appear on page one of a user’s search engine before they head out to make a purchase.
This is about connecting with shoppers on their path to purchase before they even enter a store. For OTC brands, digital advertising can create the perfect marketing scenario of right product, at the right time to the right audience.
Digital advertising can also work more effectively than TV advertising for OTC manufacturers because they can include additional information and content. It can also encourage consumers to go down the self-care route and purchase solutions from a pharmacy or grocer rather than visiting a GP. Self-care is a priority issue for the Government as a way to save the NHS millions of pounds each year.
Of course, it would be a brave marketing director who ignores TV completely and pushes all of his or her budget into digital advertising. This research should instead inform OTC brand owners that they need to get their marketing mix right.
Even with digital there are different channels to consider, including paid search, display, video on demand and paid Social (paid Facebook/Twitter ads). With VoD and paid social there can be additional benefits for advertisers when their campaigns create a buzz among consumers and go viral.
Everyone accepts that measuring the success of a digital media campaign is notoriously difficult. One mistake many brands have made in the past is thinking that clicks and impressions mean sales. This is why having strong evidence of how digital can deliver better returns than TV will help brands shape their marketing strategy during 2016 and beyond.
So what will this mean for advertising budgets?
Many big OTC brands like to publicly announce they are spending millions of pounds on advertising a new launch, including investing in a high-profile TV campaign. They know this helps to persuade retailers to list a product and keep it on their shelves. Demonstrating this level of marketing commitment is crucial at a time when many supermarkets are looking at their range assortment to boost their own margins after a tough few years.
The OTC brands that want to spend the same amount to promote or launch a product can, however, allocate their money in a smarter way to generate the best ROI. Those manufacturers looking to reduce their budgets can become cleverer at using digital channels to achieve a cheaper but more profitable advertising campaign.
In today’s competitive and cluttered advertising market it is crucial OTC brands know which media will give them the best return. The answer they get might not be what they expected.