Media
Advertising Gets an ROI Makeover
Measurement focus shifts from audience size to audience engagement as
“accountability” permeates the media buying world
By Stewart Schley
No single line about advertising has proved as enduring as retailer John
Wanamaker’s proclamation that “Half the money I spend on advertising is
wasted; the trouble is I don’t know which half.”
The acknowledgment encapsulated in the department store merchant’s
quotation – that not all advertising pulls its weight – has helped to fuel more than
half a century’s worth of media growth. A big part of the reason for fairly steady
annual increases in ad spending, after all, has been a general understanding that
even if not every TV commercial, radio spot, magazine ad or billboard makes the
cash register ring or the awareness meter rise, bets can be hedged by pouring
more exposure over more media outlets and counting on sheer volume to
produce results.
“Spray and pay” is the more modern variation of Wanamaker’s famous
quotation, and it expresses a sort of tacit agreement that has long prevailed
between marketer and media: neither of us may know exactly what advertising
accomplishes, but both of our fates depend on us believing it accomplishes
something. A March 2005 article by Ken Auletta in the New Yorker magazine
perfectly illustrated this concept. Wenda Harris Millard, a Yahoo! sales executive
who previously was the publisher of Family Circle magazine, told Auletta that in
1992 a full-page ad in her magazine sold for $160,000. Yet as Auletta wrote, “If
Bufferin had asked what impact its ad had on sales, Millard says, the magazine
wouldn’t have had a clue.”
But today, the longstanding leap of faith among major advertisers is
beginning to unravel as new technologies and sophisticated consumer-behavior
research change the rules of the advertising game. Like never before, advertisers
are demanding the same sorts of proof-of-performance that previously have been
associated with more tangible business investments like computers or
manufacturing machinery. For financial managers in the TV and radio
businesses, this emerging trend toward “advertising accountability” will challenge
longstanding assumptions about the economic relationships between audience
size and spot revenues, and the ability to predict revenues based on traditional
metrics like ratings and demographics.
“I suspect it will have a profound impact on how we plan for our
businesses going forward,” says Richard Bonsignore, vice president and
controller of WLS-TV in Chicago.
He’s not alone. As a September 2005 BCFM seminar in New York City
made clear, the new emphasis on media proof of performance and demonstrable
return on media investment already is rattling the media industries. TV and radio
networks, publishers and other industry participants are being called upon to
demonstrate that advertisements they run have a direct and measurable impact
on a desired business outcome. Whether it’s measured in monthly sales
performance, consumer attitudes toward brands or simple product awareness,
the burden of accountability is shifting to media sellers. Those that score well on
follow-up tests and measured metrics will be rewarded with bigger shares of
budgets and continued revenue support. Those that don’t stand to lose clients
and revenues.
As industry consultant and former ESPN executive Edward Padin puts it,
the concept of advertising accountability “offers the opportunity to drive or stunt
your growth.”
Padin, a partner in the media consulting firm Padin & Estabrook, appeared
at the BCFM seminar titled “Advertising Accountability.” The seminar featured
presenters from both client-side and media-buying organizations, plus updates
from audience research firms on new ways to measure exposure to media
content.
Padin, who began his media career as a TV spot buyer with Grey
Advertising, says the accountability movement fits into a traditional business
need to understand ROI associated with any major investment. The only irony is
that advertising has been able to escape this sort of financial scrutiny for a long
time.
Media-mix analysis
For Padin, advertising accountability involves accurate audience measurement;
schedule integrity; and accurate and timely post-schedule reporting. For many
TV and radio operations, those attributes already are in place. But what’s new is
an emphasis on determining the behavioral outcome of media campaigns.
Metrics that relate the audience delivered by a media vehicle to sales response
or brand awareness are what matters.
Mathematical analyses of campaign impact are being used to determine proper
weighting of ad spending by media, says Padin. This emerging “media mix
analysis” discipline is designed to allow marketers and their media-buying
partners to quickly make decisions on where to place buys based on measured
performance. As Padin notes, a new crop of specialists including Hudson River
Group, Information Resources Inc. and Marketing Management Analytics is
emerging to help evaluate the right mix of media to serve campaign goals. One
early finding: media vehicles that offer timely feedback tend to stand out, and
may be better-positioned to capture larger ad-budget shares. Direct-response
advertising over cable TV networks is one example Padin points out. Internetbased campaigns that offer nearly immediate measures of response also are
reaping benefits from the media-mix analysis era.
Another hallmark of the new era of accountability is that the relationship
between audience size and the cost of advertising appears to be in question.
Metrics like cost-per-thousand viewers increasingly are less important than what
research suggests about the actual response of viewers reached. Even prized
audience demographic characteristics account for less than they used to.
Instead, according to several BCFM speakers, marketers are looking for
measurable results in behavior more so than raw eyeball exposure.
Media-mix analysis is mainly the province of large advertisers so far.
Padin notes that unless advertisers have a large pool of advertising to evaluate,
it’s difficult to come to conclusions about which media performed best. But as
scientific evaluations of response and audience behavior become more common,
it’s likely that media-mix analysis will permeate a broader cross-section of the
media business.
That means TV, radio and cable networks and stations need to prepare
now to deliver the sort of “prove it” ROI analysis that the Internet has been
demonstrating for years with detailed measurements of how many online users
click through banner ads, ask for more information and otherwise interact in ways
that can be tracked and reported back to advertisers. “The Internet opened a
Pandora’s box,” says Padin. “And you can’t close it.”
Without some sort of demonstrable impact on purchasing or awareness,
larger advertisers and the media agencies that buy advertising on their behalf are
likely to put their money somewhere else. The good news is that if media sellers
can demonstrate that campaigns helped to fulfill advertiser goals, they’ll be
rewarded, says Padin. “If you in fact improve your level of accountability, you will
make more money,” he says.
Advertiser insights
Just what are large advertisers looking for as they scrutinize their media
investments? One of the world’s most prominent consumer brands, McDonald’s
Corp., wants to know more about how consumers are interacting with media as
they go about their daily lives, and how exposure to messaging from McDonald’s
influences – or fails to influence – their patronage of restaurants. For the large
fast-food retailer, simply tallying GRPs against targeted demographics isn’t
enough anymore. Increasingly the company is using media optimization tools
that help planners account for different spending habits demonstrated by various
demographic groups and culturally defined segments. It’s also relying more on
creative ways to integrate advertising, or at least something resembling
advertising, into media and, consequently, into the lives of people. Senior vice
president, global business research Eric Leininger says a McDonald’s affiliation
with the MTV emerging-artist series “Advance Warning” meets that goal. The
program’s content and its aspirational appeal to young people dovetails with an
effort by McDonald’s to maintain relevancy and awareness with teens and young
adults. Plus, MTV’s global range – the network is televised in 159 countries –
meshes with McDonald’s worldwide presence. Finally, Leininger says companion
“Advance Warning” Web sites that offer fans deeper looks into new bands
broaden the reach of brand messages that tie McDonald’s to the program. In
other words, it’s about more than just buying a TV spot schedule and paying
attention to Nielsen ratings. Instead, McDonald’s is relying on help from the likes
of consulting firm Accenture and some of the consumer-purchasing data
available from A.C. Nielsen Co. and Information Resources Inc. to understand
how its media investments move the sales needle.
Leininger says it’s impossible to identify one medium that outperforms
others on the “accountability” scale. Even outdoor advertising – which struggles
to provide the sort of instant viewership data many TV networks and local
stations can churn out – is appropriate in some aspects for the McDonald’s
media mix, given the proximity of billboards to restaurant locations. Still, he said
one universal demand now exists for all media: there must be some sort of
measurable return on investment that flows from every dollar McDonald’s spends
on advertising. And that’s not just a temporary trend.
“If this whole discussion around ROI sounds like a bad dream, pinch
yourselves,” says Leininger. “You’re awake, and it’s not going away. It’s only
going to continue.”
Buyers’ role
Media buyers are attempting to respond to client pressure for more accountability
by looking at a new measurement indicator: “engagement.” Rather than being
content knowing that commercials are appearing in lots of households, the large
media buying agencies that control the majority of global ad spending want to dig
deeper into the relationship between consumer response and advertising
environment.
For example, in television campaigns, the buying firm MediaVest
increasingly is interested in qualitative values such as viewer loyalty to programs,
and attention and recall levels associated with particular programs. Those are
increasingly important considerations given that there has been an unmistakable
decline in recall levels over the past 20 years, says Bill Tucker, executive vice
president and managing director.
“We know for a fact that TV is losing its impact based on commercial recall
slippage over the last 20 years. You can see the drop. It’s amazing,” he says.
To combat that concern, MediaVest is poring over data that may indicate
how engaged viewers are with certain TV programs. “Not all GRPs are equal,”
says Tucker. As an example, he points to a comparison of program attentiveness
measures tied to three network-TV programs: “24,” Seventh Heaven” and “Las
Vegas.” Among findings by IAG Research is the conclusion that “24” led the trio
in categories of “general recall,” “brand recall” and overall “likeability.”
Those are the sorts of measures that fit into more holistic evaluations of
media spending as buying agencies seek to solve advertisers’ demands for more
accountability. “We’re not just looking at ratings anymore,” Tucker says. Instead,
critical to advertising accountability, he says, is a focus on “engagement vs.
exposure.”
But Tucker is quick to acknowledge that measuring the true impact of
media is hard work. It takes time, money and most important, a synthesis of data
that aren’t always available the way agencies would like.
Andrea Marder agrees. A senior vice president and group account director
for buying agency TargetCast TCM, Marder says clients and agencies need to
work more closely to develop the sorts of proprietary research that will provide
more scientific evidence of the link between media exposure and consumer
behavior. She acknowledges that boiling down advertising ROI to an exact
science is impossible. In the securities and finance sectors, for instance, it’s
extremely difficult to pinpoint the extent to which fund inflows and outflows may
be influenced by advertising exposure.
But one immediate tool Marder believes in is awareness tracking. She
says that by conducting pre-campaign surveys of brand awareness, preference
and purchase behavior, and comparing results to post-campaign analyses,
advertisers can get a better sense of just how their messaging seems to be
working.
On the media side, she agrees with Tucker that attention to audience
engagement and receptivity to advertising is more important than ever. “It’s very
important to acknowledge that a GRP is no longer a GRP,” Marder says. Rather,
she wants to know whether “your audience and your target are going to be
receptive when they receive that message.”
Separately, MediaVest’s Tucker is looking forward to findings that will
stem from “Project Apollo,” which is the working title for a new marketing
information service being explored by Arbitron and A.C. Nielsen Co. in
collaboration with Procter & Gamble. According to Nielsen and Arbitron officials,
the project “would collect and connect three types of data via a single source:
multi-media message exposure, brand recognition and preference, and actual
purchase behavior.”
The executives say “Apollo” is designed to help answer questions that are
high on the list of the new advertising accountability era:
•
Are advertisers spending too much or too little?
•
Is the industry standard marketing expenditure allocation of 28.5 percent
on consumer promotion, 17.5 percent on advertising and 54.0 percent on trade
marketing and promotion the right mix for our products?
•
How do advertisers allocate the budget across media to achieve the
biggest impact at the lowest cost?
With the Apollo project, “For first time we’ll really be able to link the cause
and effect of advertising on sales from a single source,” says Tucker.
Bottom line: For industry financial managers, the migration toward
advertising accountability demands an appreciation of new metrics that could
determine who wins and who loses in a technologically rich media era. Networks
and stations that are accustomed to making assumptions about audience ratings
as a guide to help forecast revenues and economic performance may need to
grapple with a new set of guidelines.
Unfortunately, these new metrics are more difficult to assess, and are likely to
depend more on qualitative, hard-to-predict barometers such as audience
engagement levels, commercial recall and whether people actually pay attention
to advertising.
As any marketer will agree, divining the way human beings will react is
difficult work. But it’s a key ingredient in the role and goal of advertising
accountability. In the new media era, it’s not so much “ROI” as “ROO,” or “return
on objective,” notes MediaVest’s Tucker. His advice: keep in mind the new
vocabulary of advertising. It’s not about counting eyeballs, but “measuring and
predicting how communication exposure affects and impacts consumer
response.”
Stewart Schley is editor of The Financial Manager.
Remember This?
Primetime adult viewers able to name an
average commercial in last break of show
just seen
1965
1981
2000
25%
5%
2%
Source: Media Dyanamics Inc.