October 27, 2010 Leave a comment
If the speed and number of commitments for this year’s network TV upfronts are a bellwether for the economy, then better times may be on their way. It is encouraging to see marketers increase their media spend and focus on messaging other than “buy now” and “we are having a sale.”
Even though media spending significantly declined during the last two years, we experienced a continued acceleration in the evolution of how media is consumed. Time shifting, place shifting and device shifting are all themes we are becoming increasingly comfortable with. Control continues to move from the content provider to the consumer, and the consumer is increasingly comfortable creating and sharing their own content.
All these changes speak to the need to re-examine some of the most basic principles of good media planning – especially as marketers commit Tarp-sized funds in the upfront. One of the most important concepts in media planning is effective reach and frequency. This is about understanding the cumulative number of impressions your campaign delivers to an individual consumer. Too few impressions and your message won’t break through. The painful result is that your entire media budget has gone to waste. Too many impressions and you have not only wasted part of your media budget, but you have also succeeded in annoying the very target you were trying to swoon.
The middle ground –between not enough impressions and too many– is the efficient frontier. While this concept is rather pedestrian to well-schooled media planners, its application in today’s distributed cross-channel media world is anything but.
The usual suspects such as Comscore, Nielson, @Plan, Simmons or MRI are only marginally helpful in navigating these stormy waters. Savvy marketers have looked to new sources of information to determine what constitutes effective reach and frequency. And not surprisingly, aggregate consumer activity online for a brand or its product has proven to be a rich source of information.
While building out various econometric models that quantify the relationship between media spend and sales, we found it necessary to determine the decay curve or half life for various media channels. We needed to understand how long a broadcast, print or online impression would have an impact on a consumer in order to determine effective reach and frequency.
How Much Is Too Much
With any media plan, you are going to reach the most “accessible” consumers first. Consumers who are pulled into the Internet constantly or always have a TV on in the background are going to be easiest to reach (tips on breaking through the clutter will be a future post). As you start to reach more and more people, the harder it becomes and the more it costs. Building reach beyond a certain point is never cost effective, especially through one medium.
How to Measure the Point of Diminishing Returns
When people think of the impact of media, they often attempt to measure it using a simple linear relationship, sales= b*media levels. However, we all intuitively recognize that the real impact media has on us is not so simple. That’s why we suggest utilizing the concept of diminishing returns.
By replacing the standard relationship with a more dynamic equation like the generalized logistic regression, sales = media ceiling / (1 + exp(-growth rate *media levels)) you can model a relationship where the impact of additional media varies. In the case of modeling reach, we can account for, and quantify, the fact that the hundredth household you add doesn’t have the same impact as the twentieth household. After a point, not only does the cost increase substantially with additional households but their intrinsic value also decreases.
In this treatment, we develop both a ceiling and a growth curve. Using this format provides flexibility to account for the fact that after a certain point you can throw as much money as you want into media and it won’t bring you additional value. This concept is often referred to as a saturation point or the point of diminished return.
This is a concept that you can utilize with traditional measurements like TRPs and frequency or with interactive measures like impressions and post ad activities. Where you fall on this curve generally has to do with the size of your brand and your share of voice. Small brands and new upstarts find it expensive to get started because they need to build a ‘base of awareness’. Brands that are household names are often nearing the ceiling and advertising becomes less effective, but this is how they stay household names. Mid-size brands often have the most to gain because they are well within the healthy point of the curve when additional spend / reach / frequency delivers the most bang for the buck.