What We Have Learned About Maximizing TV ROI - Bill Harvey - MediaBizBlogger

By In Terms of ROI Archives
Cover image for  article: What We Have Learned About Maximizing TV ROI - Bill Harvey - MediaBizBlogger

June 24, 2009 was a special day in the history of marketing science. On that day, Mars, Inc. shared with the industry its findings that singlesource measurement enabled Mars brands to increase their TV ROI from 70 cents to $2 over a three year period in England, France and Germany where small singlesource panels have existed (3000-17,000 homes vs. 5000 for the U.S. Apollo, now shut down).

The good news for U.S. advertisers is that TRA with 370,000 households national and local (all DMAs measured) singlesource sample now makes these same practices Mars used in Europe, available in the U.S. for the first time on an ongoing basis (previous experiments having not been scalable/sustainable). TRA's unique approach using factual data from existing digital databases (scanner data by household matched to set top box data for same household) is what makes this scalability/sustainability feasible for the first time in history.

This Mars singlesource ROI proof revelation came at the ARF's AMS 4.0 conference in NY. The speaker was Laurent Laurignat of Mars Catalyst, in a co-presentation with myself presenting the latest U.S. TRA results leveraging TRA's 370,000 singlesource households. In today's blog posting I will share with you a few of the detailed findings as to how Mars increased its TV ROI, and amplify on this with the TRA findings presented at that conference.

Background

In order to drive up the TV ROI, one cannot do this simply by raising or lowering the overall allocation to TV (as Marketing Mix Modeling or "MMM" allows an advertiser to do). One must answer, accurately, several questions:

  1. 1-Which target group should I target – which will yield the highest ROI?
  2. 2-Which of my commercial executions should I stop using and which should I use more?
  3. 3-How much frequency optimizes ROI?
  4. 4-What days of the week hit my shoppers with best recency?
  5. 5-Do I want continuity or brief "shouts"?
  6. 6-Which programs best reach my ROI-driving target and also provide environments which enhance ROI for my brand, at the lowest cost against this compound metric?
  7. 7-What forms of branded integration and/or true sponsorship will add to my ROI?

MMM has not really helped with these seven basic questions. For decades, researchers around the world have struggled to make singlesource affordable and scalable as a means to more scientifically address these and other questions relating to messaging, segmentation, and media.

Problem

As reported by Deutsch Bank and IRI in 20041, the average CPG brand makes net 30 cents per dollar of TV advertising investment (after recovering the dollar). However, this is ignoring the cost of the product/distribution. It also ignores the longer–term (beyond one year) effects of TV advertising, which IRI found to double the one-year sales/ROI effect2.

The net of these countervailing factors makes TV on average a breakeven proposition based on average performance. Obviously, one would seek to beat the average performance, if there were a way to do that e.g. singlesource. In the absence of a viable commercial research solution for singlesource, some brands have tried to cut TV and this has generally led to market share declines, as in the case of Maxwell House in the late 80s/early 90s. Thus TV which used to be considered the driving force of all marketing is today regarded as a necessary evil by some in the C suite.

Singlesource appears on the scene as finally commercially scalable and affordable (using the TRA approach) at a time when Internet has drawn attention and mystique away from television advertising, and at a time when getting the answers to the seven primary questions needed to unlock the full power of TV advertising has never been more important.

Findings

  1. 1-Mars Inc. reports that in the three countries where singlesource was available, they invested a couple of years to learn how to use it, developing their own dashboard, and in the past three years, have increased their TV ROI in those countries from an average 70 cents to an average of $2.00.
  2. 2-Mars further reports that:
    1. a-65% of the lift effect comes from better understanding creative and 35% comes from better understanding media.
    2. b-Optimizing the media component alone provides ROI lifts of 20%-60%. The lowest lift of 20% would raise the average TV ROI reported by Deutsche Bank, $1.30, to $1.56. For a brand spending $20MM/year on TV, that would bring an additional $5,200,000 to the bottom line.
    3. c-Continuity strategy (called "Drip") works for most of their brands but a few brands benefit from brief high bursts.
    4. d-Only 1 in 3 creative executions has a significant impact on Sales. 1 in 3 has a mediocre impact, and 1 in 3 has no impact.
    5. e-Ineffective creative executions remain ineffective regardless of media strategy.
    6. f-Good creative executions can perform well for longer than two years.
    7. g-20 second commercials average just as high ROI as 30 second commercials (sometimes higher).
  3. 3-TRA reports that by knowing the purchaser target one wants to reach, and having singlesource data to identify which TV programs reach that target, on average that target rating point level can be increased by double with no increase in budget (or virtually double if paying a small premium to the networks). These lifts are higher if one is aiming at heavy category purchasers, or what TRA calls heavy swing purchasers (see next finding), and lower (average 25% lift) if one is simply targeting the entire category.
  4. 4-TRA has discovered a pattern that applies to a number of brands across CPG categories. In the early work completed as of this publication, five out of five cases show that over 80% of the purchase behavior changes linked to TV advertising come from a target segment that is characterized by two things: heavy category purchase and disloyal purchase of your brand over the past two years. This group is called Heavy Swing Purchasers (HSP). In the initial cases analyzed, we see that the subset of programs in which these brands advertised whose audiences skewed to the brand's HSPs delivered higher ROI than the average across all programs used by the brand. The average difference across the five cases is +185.64%.
  5. 5-TRA is sensitive to the fact that HSP is a small group for any given brand and advises that TV schedules be optimized with an eye to how the HSP targeted plans deliver against all purchaser groups e.g. heavy category, etc. When HSP is used as a targeting point, heavy category purchaser TRP and other specific purchaser target TRP also increase.
  6. 6-In order to analyze the stability of the purchaser: program relationships, TRA studied the degree to which the purchaser TRP lifts changed based on audience data separated in time by five months, so as to simulate the prebuy-to-postbuy effect. This indicated very little difference between the prebuy and postbuy numbers, suggesting that the relationships between program and purchaser are stable. In fact, Assael and Poltrack in earlier papers have reported the same thing, showing in fact that purchaser: program relationships are more stable than demographic: program relationships.3
  7. 7-If one brand among its competitors is alone using singlesource to increase purchaser TRP at no increase in budget, the effect is as if the brand increased its budget in terms of tending to gain dominance in Share Of Voice.
  8. 8-TRA indicates that reach against purchasers also increases when one uses singlesource to increase TRP against purchasers. In the early cases the average purchaser reach increase was 62.8%.
  9. 9-TRA does not propose that singlesource data replace Nielsen sex/age currency for TV buys. TRA proposes that its indices of purchasers among program audiences be used to qualify program value as a multiplier on the normal sex/age target CPM, and that the results of such practices be tested and analyzed via both time series and controlled experiments (A/B testing in cable zones) against actual sales/ROI. TRA argues that the likelihood that purchaser targeting can only improve ROI appears supported by the Mars data.
  10. 10-Although not intended as a replacement for Nielsen ratings or IRI brand tracking, TRA data correlate on average about .9 with these data sources.

The Mars disclosure of actually increasing TV ROI using singlesource in three countries is an exciting historical event. This is the first time in the history of marketing science that anyone has proven that singlesource can be used to actually increase TV ROI despite research imperfections, sample size limitations, bureaucratic and cultural inertia, and any other intervening variables.

Coming at a time when singlesource has finally been made scalable and affordable by means of massive database matching, the door is open now in the U.S. for the first time to begin to make TV advertising decisions on a more scientific basis. The real breakthrough is in the affordability of the research. TRA and Mars have shown that the size of the ROI improvement for a brand spending more than $20MM in TV dwarfs the incremental research cost.

Improvements in marketing cost effectiveness as a result of singlesource could improve the financial performance of many corporations and contribute to a more robust economy less prone to periodic recessions. Only time will tell if such lofty benefits are actually realized.

References

1 Andy Farr, 2004, "Evidence that TV advertising works", WPP Reading Room http://www.wpp.com/wpp/marketing/media/tv/tv-advertising-works
2 Mike Hess, 2006, email sent to answer ANA information request
3 Henry Assael, David Poltrack, Bart Flaherty and Bill Harvey, 2008, ARF AMS 3.0 paper, "Linking TV exposure to purchasing behavior: achieving the Gold Standard of accountability" http://www.traglobal.com/press/ARF_AMS_3.0_CBS.doc

Bill Harvey has spent over 35 years leading the way in the area of media research with special emphasis on the New Media. Bill can be contacted at bill@traglobal.com.

Read all Bill’s MediaBizBlogger commentaries at Bill Harvey - MediaBizBlogger.

Copyright ©2024 MediaVillage, Inc. All rights reserved. By using this site you agree to the Terms of Use and Privacy Policy.