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How Much Broadcast and Cable Should Advertisers Really Buy?

July 19, 2013

By: Bill Harvey

The big four broadcast networks' prime-time programming still gets the highest TV ratings, and with them the highest advertising prices. So it's no surprise to see advertisers and their agencies steadily adding cheaper alternatives, like prime-time cable, and decreasing their share of dollars spent with broadcasters. But an increasing amount of evidence suggests that not every rating point is created equal.

There was a strong correlation between how much broadcast prime-time a packaged goods brand bought and the return on its TV spending, for example, according to the Advertising Research Foundation's Adworks II study in 1998, which used over 400 BehaviorScan tests -- about $200 million in research.

Brands with 31% or more of their gross rating points in broadcast prime-time achieved 67% higher sales response, according to the study. Putting about half of the brand's dollars in broadcast prime-time, about 24% of its gross rating points, turned out to be the optimal allocation. The rest of the TV gross rating points would optimally be 31% daytime broadcast, 31% cable and 14% syndication and spot TV.

We now have more recent evidence from other sources confirming broadcast TV's apparent extra effect. TiVo Research and Analytics(TRA) matches individual households' set-top box data with their frequent shopper card information and other purchase records. When it examined four TV ad schedules with more than half their money in broadcast and four schedules that went the other way, TRA found that favoring broadcast averaged three times the return on investment.

MediaVest research head David Shiffman also used TRA data to determine that three of the agency's top clients got a better return from broadcast prime-time, despite the much higher ad rates there.

And Effective Marketing Management, a well-known research company that has done over 5,000 studies for the elite packaged goods companies, has found similar results with brands that ran base tests in cable and syndicated TV, then added broadcast prime-time.

Now we have to try to understand why.

One hypothesis worth testing: Because broadcast prime builds reach among consumers so much faster than any other TV environment, viewers all know the same thing and can talk to each other about the shared stimuli very quickly -- the next day or, with second screens on iPads and smartphones, in the same moment. Perhaps something about sharing experiences quickly goes more deeply into people's hearts and minds, getting them to think about brands in more positive and prominent ways.

If reach is an indicator of sales power because of both audience size and this sharing enhancement effect, however, then what we should really be talking about may not be broadcast prime-time, but high-rated programs, whether they run on CBS or The History Channel.

There are over 100 original series on cable, with more coming every year and steadily improving traction among viewers. AMC's "The Walking Dead" was last season's highest-rated scripted series on TV.

That may be the simplest way to look at it, meaning marketers and media buyers would be wise to lock in substantial percentages of their budgets on high-rated programs, even if the higher prices mean they can't run the same ad as many times. They should not treat all rating points equally, assembling broadcast-sized reach from an expanding sprawl of small cable shows. But neither do they need to exclusively buy broadcast for the sake of it. That's the first takeaway.

It would also appear that the traditional marketing mix models have limited abilities to separate out different kinds of TV buys and creative executions. More data following individual households' media and purchases alike need to be used to make sure returns are maximized, as the media landscape keeps changing. That's the second takeaway.

As seen here: http://adage.com/article/guest-columnists/mix-broadcast-cable-advertisers-buy/243175/

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