The 5 Truths of TV Advertising Effectiveness

January 18, 2010

Question:  Is TV advertising less effective today than 15 years ago?

If you think you know the answer, read on. Digital and social media are having a transformational effect on Marketing content, organizations and processes. This being said, what’s often ignored is what we know about TV advertising effectiveness in the here and now. 

The 5 TV Advertising Truths

I recently wrote about “The 5 Myths of TV Viewership,” and this post forms a book-end with that earlier one. Like TV viewership, there are many myths about how and whether TV advertising actually works in the current environment. Here are the 5 most prevalent ones–some of which you might find surprising:
MYTH:   TV Advertising Takes a Long Time to Work
TRUTH #1:   Advertising Works Fast, When it Works

Part of the mythology of TV advertising is the “3+” frequency myth. That is, it takes a minimum of 3 repetitions of an ad for it to move a consumer down the purchase funnel. For CPG, this is simply not true. 

The advertising response curve is "convex"—the greatest marginal response is from the first exposures.

Numerous single source tests have demonstrated that when TV ads work, they work quickly to build sales (Rubinson, Journal of Advertising Research).  In fact, the TV ad effectiveness curve is generally convex—e.g. early airings have the most impact, and additional airings decrease in effectiveness (Taylor, Kennedy & Sharp: Journal of Advertising Research). When ads work, they tend to work quickly. 

MYTH:  When TV Ads Work, They Have Large Impact
TRUTH #2:  Ads Generate Small Impact Over Time

The question “What sales impact is my ad having?” has been studied rigorously since the advent of single source data (e.g. BehaviorScan or other panels which track the single variable impact of advertising on purchase behavior). On average, for the CPG categories studied, every $1 invested returns about $.10 (Taylor, Kennedy & Sharp Journal of Advertising Research). The sales return on an invested TV ad dollar has varied between .06 and .14 over the past 20 years (Hu, Lodish, Krieger & Hayati Journal of Advertising Research). And the sales lift is larger in year 2 than year 1. 

MYTH:  DVR’s are Killing Ads
TRUTH #3:  Ad Impact is Similar With or Without DVR’s

Yes, it’s hard to believe, but the evidence suggests that DVR homes have about the same recall of TV ads as non-DVR homes (du Plessis, Journal of Advertising Research). 

 

There’s likely a range of reasons for this phenomenon, including people with DVR’s watching higher engagement shows, DVR’s increasing total TV viewing time, etc. Interestingly, research shows that consumers have the same recall and understanding of your ad when fast forwarded as when viewed in a normal manner, if they have already seen it normally once (du Plessis, Journal of Advertising Research).   

MYTH:  Digital Ads are More Likable Than TV Ads
TRUTH #4:  TV Advertising is More Likable

People assume that because the web is a “lean-forward” medium, ads in this environment are naturally more engaging  and well liked. Research shows that this is not the case. On average, TV ads are liked better than digital ads (Moult & Smith, Journal of Advertising Research). Here I should also say that likability doesn’t necessarily translate to effectiveness. 

MYTH:  TV Ads are Declining in Effectiveness
TRUTH #5:  TV Ads are as Effective Today as 15 Years Ago

This is perhaps the biggest myth of all—that TV ads are losing effectiveness over time. Falling TV ratings and the rise of social media and mobile are hurting TV ad effectiveness, right? Wrong. The research on this topic, across time and geographies, strongly suggests this is not true. As noted earlier, advertising demand elasticities have fluctuated over the past 15 years, but are not declining (Rubinson, Journal of Advertising Research). So, TV advertising is as effective (or ineffective) as ever. 

Future of TV Advertising

So, if TV advertising is still effective, what’s the future of TV advertising? I’d suggest it will be in three areas: 

1. Cross Media – The rise of digital and social media has created numerous new means and forms to advertise and engage consumers. Research clearly shows that the impact of a TV ad is even higher when a consumer has been exposed to your brands ad on the web, and vice versa. Thus, CMO’s should focus on building cross media campaigns that continue to leverage TV as appropriate, but in new combinations with new social media and digital initiatives (for more on social media marketing, see “How the Future Social Web will Transform Marketing”). 

Social media has entered the traditional marketing ecosystem.

2. New TV Ad Forms – As TV evolves from network to networked TV, new advertising form factors are cropping up. iTV is already in place and many brands are experimenting with this new approach. Additionally, Shelly Palmer and others have proposed new ad forms such as speed bumps, telescoping ads, etc. which are being enabled by “networked” TV. Marketers need to keep an eye on these new ad forms and be ready to experiment, learn and adjust. 

3. Earned Media – There is vast opportunity for brands to understand how to use paid media to drive earned media. However, this is a nascent and poorly understood area that deserves much greater experimentation. Nonetheless, understanding how paid media drives earned, earned drives paid, and how they influence one another is fertile ground for future advertising model innovation. 

So, back to our original question: “Is TV advertising less effective than 15 years ago?” The answer is a clear “no,” just as you should answer the question “Shouldn’t we completely forget about TV advertising and just concentrate solely on new media?” 

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Is iTV the Next Digital Marketing Frontier ?

August 24, 2009

Engagement, conversation, interaction. Whatever you call it, the web has ushered in a new era for Marketers to not just preach their gospel to consumers, but to actually engage in a more meaningful two way dialogue.

But, there’s another digital frontier beyond the web, and one that also has vast potential to change the way Marketers interact with customers — interactive TV. iTV marries traditional TV with digital interactivity–by using your TV remote to “point and press.”

iTV -- The Next Digital Frontier ? (visual courtesy of bobrien.com)

iTV -- The Next Digital Frontier ? (visual courtesy of bobrien.com)

As Meg Brossy, SVP Marketing at Brightline iTV, an iTV consulting firm and services provider, says:

“Consumers are being pulled in many different directions today. Done right, interactive TV allows marketers to feed viewers’ desire for entertainment through compelling ad experiences – when, where and how viewers want to encounter them.  When a consumer voluntarily opts-in to engage with the brand in this way, not only does ad effectiveness jump, but product/brand recall and purchase intent is heightened and the consumer embraces the information. The results our advertiser clients see from iTV speak for themselves.”

Did You Know ?

  • 75MM U.S. consumers now have digitally capable iTV
  • iTV reaches 7MM more consumers in the U.S. than broadband
  • 7 major satellite/cable TV companies can now provide iTV
  • “Time shifting” is growing, continuing traditional ad erosion

Implications for Marketing

TV no longer needs to be a passive medium that is in danger of irrelevance as consumers time shift and avoid uni-directional one to many broadcast ads. Instead, iTV creates opportunities for brands to interact with consumers in a variety of ways. An interesting view of this is “TV ads that refuse to be ignored” at ECommerce Times.

iTV -- Extending Interactive Marketing Beyond Web and Mobile to TV

iTV -- Extending Interactive Marketing Beyond Web and Mobile to TV

Most Marketers seem vaguely aware of the theoretically large potential of digital TV, but largely unaware that it’s moved from “potential” to “real, scalable and impactful.” With iTV, brands can expand the range of interactive platforms beyond on-line and mobile to include TV.

Brands are catching on. Unilever has 30+ brands using it. J&J and others are not far behind. And the medium isn’t limited to CPG, as TD Ameritrade, Nike and others are experimenting aggressively.

5 Ways Brands Can Leverage iTV

  1. Improved Targeting– iTV enables brands to tailor the message to the audience. For example, TD Ameritrade offers three different investor options for consumers to “point and press” to learn more about a particular investing style. Instead of a single message, it’s now possible to let viewers choose the message most relevant for them.
  2. Content Marketing — Suddenly, there’s a large opportunity for brands to create relevant and meaningful content to deepen and surround their brand promise–via the TV. Consumers can access educational content, games, or virtually any type of brand relevant content. For example, Hellman’s developed simple games and recipes to drive increased usage.
  3. Partner Marketing– Brands can partner their iTV creative content with relevant TV programs to increase viewer engagement. Consumers can now interact with a brand during a TV program about a similar topic — e.g. consumers can learn about sleeping bags while watching Man vs. Wild, etc.
  4. Direct Response Activity– Brands can use iTV to request free samples, sign-up for newsletters, etc. Viewer data is housed within the cable or satellite providers platform, so viewers don’t even have to provide personal info in reaction to direct response activity.
  5. Metrics and Measurement– iTV is digital, which means it’s measurable in the same ways as the web. ITV brings more sophisticated engagement and ROMI measurement to traditional TV spend.

Results & Impact — Encouraging

Brightline iTV claims CTR’s typically range from 3-6% vs. <1% typically seen on-line. Viewer engagement measured by time spent with brand typically increases dramatically. And, companies like Unilever seem convinced about the ROMI of such programs as evidenced by their increased participation in this new medium.

iTV — Too Good To Be True ?

So, what’s not to like about iTV ? Well, there are challenges:

  • Complexity– Each of the 7 cable and satellite companies have their own proprietary platforms and measurement approaches. Creative developed for iTV has to be modified across platforms. While these challenges are not insurmountable, they create cost and complexity and have deterred many Marketers in the past.
  • Opt-In / Audience Size– CTR’s are impressive, but there’s still an open question about consumer education and opt-in. iTV will only be as good as the number of consumers who know how to use it and are willing to opt-in. To date, it’s unclear what fraction of the 75MM viewers are actually “engage-able.”
  • Organization Skills– Where does iTV fit ? Is it creative or media ? Who drives it–ad agencies or clients or special service agencies ? What works and what doesn’t ? Like any nascent technology, there’s a lot to learn.

The world is moving digital – but not just on the web. iTV is arguably the next digital frontier for Marketers. CMO’s need to ask a very simple but fundamental question:

Should my brand be exploring iTV ?

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Will Pruning Your Business Build Your Brand ?

July 20, 2009

Nothing is more sacrosanct in Marketing than never giving up a customer. But is keeping all of your customers always the best way to build your brand? Here’s a possibly controversial view:  in the future it will become even more important to gracefully remove dissatisfied customers from your franchise–and this will be key to maintaining a healthy and growing brand.

Build Your Brand by Pruning Low Value Customers (visual courtesy of AdWeek)

Build Your Brand by Pruning Low Value Customers (visual courtesy of AdWeek)

This is because “recommendations from known people” is the most powerful form of advertising, and your detractors are likely hurting your brand more than you think. And as my recent blog post “How the Future Social Web will Transform Marketing” pointed out, word of mouth from friends will become vastly more important in the future.

Are all Customers Equal in Value ?

Not all customers are equally satisfied. Whether you’re using standard satisfaction metrics or Net Promoter Score, a customer satisfaction metric popularized by Fred Reichold in his book ‘The Ultimate Question,” it’s important to not just look at overall satisfaction, but to understand differences in customer satisfaction across products, channels, customer groups, acquisition channels, etc. to identify potential problem areas.

Net Promoter Scores -- Identifying High and Low Value Customers

Net Promoter Scores -- Identifying High and Low Value Customers

Customers are also not equal in economic value. Some are more valuable and some are less. Measuring the profitability or life-time value (LTV) of a customer is a complex, but important marketing metric.

Customer Lifetime Value -- Some Customers Are Unprofitable (courtesy of Pear Analytics)

Customer Lifetime Value -- Some Customers Are Unprofitable (courtesy of Pear Analytics)

Not surprisingly, customer satisfaction and lifetime value are related. More satisfied customers are generally more loyal, more willing to pay a higher price, less likely to switch brands based on promotions and price deals, and are more likely to generate positive word of mouth that positively benefits your brand. Conversely, less satisfied customers are likely to generate negative word of mouth. This is critically important because “recommendations from people known” is the single most trusted form of advertising based on a recent Nielsen study.

Building Trust -- Recommendations From Friends Count Most

Building Trust -- Recommendations From Friends Count Most

Measuring your various customer groups on satisfaction and customer profitability is the starting point for understanding whether pruning customers will build your brand. Slice your data to identify groups of customers with low satisfaction and/or profitability, understand why, and then determine whether the problem is economically solvable. If not, you have to ask whether it makes sense to prune the customers.

“De-Recommending” Your Brand

Because if you don’t, dissatisfied customers will be “de-recommending” your brand and eroding your hard earned brand equity. Research has shown that only about 5% of customers will complain, but of the balance 95% that don’t, they’ll not only remain dissatisfied but also tell an average of 9-10 people each about their poor experience. They are, in Net Promoter terms, brand detractors that hurt your brand.

 Examples Where Pruning Could Make Sense

  • Channel Experience – Customer satisfaction by channel — web, phone, retail, etc. is often significantly different. Should you shut down a channel ?
  • Product Variant – Product satisfaction frequently differs by product variant, with some variants having much lower satisfaction. Should you eliminate a product or product line ?
  • Acquisition Channel– Some acquisition vehicles deliver lower satisfaction and lower profit customers than others. Should you de-emphasize an acquisition channel or tactic ?

Gracefully cutting business lines and exiting dissatisfied and vocal customers from your franchise in these and other similar situations is important to building your brand. Why? Because exiting dissatisfied, low value customers will reduce negative word of mouth, improve your average satisfaction, and improve profitability. And not doing so will become ever more risky as the future social web enables customers to bring the opinions of their friends with them as they traverse the web and interact with products and services like yours.

Are you bold enough to build your brand by pruning your business ?


10,000 Hours to Marketing Success

May 26, 2009

In his recent book “Outliers,” Malcolm Gladwell posits that success is a function of timing, culture and hard work. He defines hard work to reach genius level competence as 10,000 hours of practice. What do the Beatles, Bill Gates and other geniuses have in common ? Apparently they all practiced their craft at least 10,000 hours.

Should your Marketing team also have 10,000 hours of practice ? That’s almost 6 years of Marketing experience. It raises an interesting question: why is it that some organizations don’t consider Marketing a real craft ? Why is Marketing often seen as the function that anyone can do, and hence, doesn’t require specialist knowledge ? Or, as the Branding Strategy Insider blog put it: 

It has been my experience that “marketers” are quite varied in their ability – from “clueless” to “brilliant.” The problem is that many people can’t tell the difference between these two extreme ends of the continuum.

Well, Marketing skills do matter. Did you know that companies with higher demonstrated Marketing skill levels perform better financially than companies with lower Marketing skill levels ? This has been proven empirically, as covered in “Market Orientation, Corporate Culture and Business Performance,” by S. Singh.

Improving Marketing Skills Leads to Better Business Results

Improving Marketing Skills Leads to Better Business Results

According to the Marketing Excellence Survey, a Marketing skill benchmarking service which has surveyed over 45,000 employees, improving people’s marketing knowledge leads to changes in their beliefs about what marketing can contribute to the business. This, in turn, causes changes in behavior, improved use of marketing metrics, and finally, better business results.

The intuitive, but often overlooked finding that higher skills equals better results over time, means that Marketing skill development should be a focus of every organization. No set of Marketing strategies are complete without a strategic plank focused on this important area.

Here are 4 simple steps for developing your Marketing organizations skills:

  1. Make It A Priority– The CMO has to make this a priority. It’s too easy for skill development to be deprioritized when workloads heat up. Take a longer term view. Don’t try to accomplish everything in a year, but do strive for consistency. Engage employees from top to bottom in the development of the program.
  2. Benchmark Marketing Skills — There are a number of firms such as Marketing Excellence Survey (MES), which specialize in measuring marketing skill levels. Benchmark skills within your industry and relative to others. In addition, assess which skills are most important given the business model and marketing strategies. This, combined with benchmarking, will help you focus the organizations limited resources.
  3. Train the Organization – Implement targeted training programs to address the most important skill gap areas. You can create programs in-house or pull program content from organizations like the CMO Council or Corporate Executive Board or others. Whichever approach you choose, it’s important to match the content to the identified skill gaps and involve the most senior marketing leaders in the training.
  4. Measure Progress — Measure the quality of the trainer and content for each training module. Learn and improve with each training session. Periodically re-run the original benchmarking study to see where you’ve progressed and where you haven’t, and adjust accordingly.

If you’re still not convinced, how about this:  a focus on Marketing skill development provides a clear signal to the Marketing organization that senior management cares about them and their development. It motivates employees and reinforces their importance to the firm.

CMO’s are challenged to get results and get them fast. There’s a need to exploit every possible tool in the Marketing toolkit to get better results. It’s obvious that increased marketing competency should lead to better results. With the research to prove it, there’s really no excuse left — whether it takes 10,000 hours or not.


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