By Bhanu Bhardwaj and Joy Joseph
Over the past few years, many marketers have declared the end of television advertising. We’ve all heard the claims, mainly that TV ads are expensive, and not targetable or measurable enough. A new report from Google doesn’t help – it claims that YouTube ads were 80 percent more effective than television ads when 56 case studies were analyzed. Saturday Night Live on NBC even plans to cut 30 percent of the show’s ads next season and replace them with custom branded content produced by the show’s cast.
There is no doubt that TV advertising continues to evolve, and that more customization and personalization of practically everything, including ads, is the future. But, TV advertising is still highly relevant and, overall, has proven to have a strong impact on brand success.
Turner Broadcasting recently undertook a study to better understand and quantify the impact of TV advertising. The company used marketing mix studies conducted by IRI between 2013 and 2015, which covered $3 billion in marketing spend by 62 brands representing $20 billion in CPG sales across food, beverage, OTC health care, beauty and home care.
The study specifically sought to decipher TV advertising’s impact on driving KPIs, how it compares to other media, how TV ads impact consumer engagement with social media, and how reducing TV ad spend impacts sales. The study also explored how media ROI compares against promotion ROI.
The findings demonstrate the continued relevance and importance of TV ads:
- One out of five social engagements for brands is directly driven by TV advertising.
- ROI from TV ad spending has not changed during the past five years and, long term, TV’s ROI is actually higher than other media.
- Reduced TV ad spending results in a $94 million combined loss in sales, representing 68 percent of original sales.
When it comes to media ROI versus promotion ROI, the results get even more interesting. Obviously, advertising typically highlights benefits over cost while promotion highlights cost over benefits. Yet, media ROI outperforms promotion ROI across all categories in the short term AND underperforms for brands that focus a higher share of their budget on promotion.
What’s happening here? One theory is that brands are essentially being “unbuilt” because of a vicious cycle of brand commoditization. With budgets shifting from “above the line” to “below the line” marketing, diminishing brand differentiation, consumers’ focus on value and brands’ reliance on discounting, this is certainly the case for many brands and categories. To counteract this, we recommend that large and highly penetrated brands consider increasing media allocation while small brands should look to balance their media investments with a focus on efficiency since better media ROI helps fuel their growth. This means investing in more efficient media practices, such as purchase-based targeting and programmatic buying.
To Google’s point, digital video is an important tool. In fact, it can efficiently enhance the effectiveness of traditional media campaigns. Creative can drive over half of the overall lift of a campaign, and digital ad testing makes finding the right creative much easier. Several TV ad campaigns actually started out as viral videos. Also, digital video has indeed demonstrated strong returns relative to TV. But, there is no doubt that TV and digital typically perform better together. With the proliferation of screens and consumers’ increased distraction while viewing, all brands must leverage cross-media integration to enhance engagement.
In this era of ever-expanding media choices combined diminishing budgets, there are three key ways that companies can make the most of their media spend:
1) Re-evaluate your media/trade investments. Determine whether you are looking for short-term or long-term impacts, and make adjustments accordingly. Ideally, TV and digital work together with your intended target audiences, including those who have a propensity to purchase your product and category, and across the platforms they’re using.
2) Consider rebalancing your media spend. Increasing overall spend by 10 percent can significantly increase the ROI for both media and trade – the trade incrementality threshold is 60-70 percent.
3) Use digital to test and learn. Brand strategy and message are key drivers of media impact and brand growth, and digital can help validate those decisions.
For maximum growth, companies must more regularly assess the relationship between above the line and below the line investments to assess the impact of these changes on business performance. Only through this can you can create the optimal marketing mix investment strategy for your brand.
The study findings referred to above were initially presented at the 2016 IRI Growth Summit. For a copy of the presentation or to discuss how to make your media spend more efficient and effective, email us at Bhanu.Bhardwaj@IRIworldwide.com or Joy.Joseph@IRIworldwide.com.