Simulmedia: What is the Promotional Elasticity of Your Program? - Yuliya Torosjan - MediaBizBloggers

Program marketers need to know how much promotion is required for a particular program and at what point additional promotion stops being effective. Some programs respond better to promotion than others. The same level of promotional effort for two different programs can result in different incremental ratings. Programs that yield higher ratings are said to be more "promotion-elastic."

Elasticity is a measure of responsiveness. In the realm of television promotion, program elasticity is the ratio of marginal increase in viewers to the marginal increase in promotional effort*:

It tells us the increase in ratings to be expected for each gross rating point (GRP) increase in promotional exposure.

The measure of promotional elasticity may vary between different programs, as well as within the same program depending on the stage of its life cycle. For example, it is certainly possible to drive additional viewers to American Idol, a mature program with an established core audience. It would have been easier to do so, however, during the show's nascent stages at the beginning of the decade. Some other factors that influence program elasticity are day part, month, cast, and theme.

We examined elasticity in practice by looking at promotion level and corresponding program rating for the first several weeks of Kendra, a recently-launched E! reality series.

From this data we can estimate promotional elasticity as a coefficient of linear regression, where the dependent variable is the program's average reach and the independent variable is the amount of promotional effort. The coefficient of elasticity went from 0.01 in June down to 0.004 in July, indicating that in order to add 1 unit of average reach we would need an additional 100 GRP's of promotional exposure in June and 250 GRP's one month later. The graph below illustrates that the promotional efforts for Kendra were appropriately curbed down from week to week, responding to the reduction in promotional elasticity.

Network marketing departments have heuristic models for estimating a program's promotional elasticity (see this amusing example from ABC). They rely on their professional wisdom and marketing smarts to estimate the effort required to entice enough viewers to various programs. It is open to investigation whether such heuristic approaches are on par with explicit modeling of program elasticity using statistical methods.

An accurate estimation of elasticity is critical for a cost-effective optimizing of promotions. For example, programs with elasticity close to zero are not susceptible to program promotion, and marketers should be cognizant of that information when designing their promotional plans.

For future research, we could examine program elasticity in the context of audience segments. Different audience segments might require different amounts of promotion to make them tune in to a program. The logical step then would be reducing frequency of promos in the spots with large relative concentrations of "high elasticity" segments.

*Aiyer, J. P., and J. Rajgopal, "Managing Cable TV Commercial Inventories via Program Promotion," Marketing Intelligence and Planning, Vol. 19, No. 1, pp. 45-54, 2001.

Yuliya Torosjan can be reached at yuliya@simulmedia.com.

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