How to Measure TV advertising ROI (and the surprising distribution of performance by network)

26 Sep

If you want to build a great global brand, you’ll likely need to buy TV advertising. For most marketing organizations this means big budgets, a dependence on agencies, opaque pricing, and imprecise performance and ROI measurement. Even highly sophisticated marketing organizations struggle to get the most from their TV investments.

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The challenge with TV advertising is that it’s difficult (if not impossible) to identify people that saw your ad and to know whether the impression led to real-world action or behavior change.

How to measure TV advertising

To measure and optimize the impact of TV ads, you need to do two things. The first is to measure the aggregate impact of TV advertising as a marketing channel. This can be done through very granular purchase analysis or surveys that measure brand awareness and preference changes modeled against media investments. If your marketing investments are at scale, you can typically measure the impact of different advertising channels (TV, social, online video, email, banner, and even out-of-home) on the results that matter to you.

For most TV advertisers, however, this aggregate channel view is not enough: it’s essential to get closer to spot-level impact to get the most value for every invested dollar. While not all brands can do this, it’s typically possible if your TV advertising drives an immediate measurable action such as branded search for your company/product or visits to a digital site or application. If you can measure a digital outcome granularly, then it is possible to statistically model the cost per engagement for categories of TV spots such as particular shows or TV networks. The more ads you run during a show or network throughout the season, the more accurate this measurement might be.

Doing this right requires the ability to look at your search and engagement data over time — ideally by second — attempting to pick-up the engagement bump attributable to a specific TV advertisement. These bumps are typically quick and recognizable. While they may only measure a portion of customer engagements (some happen much later), they provide a good statistical measure of performance. While they may not capture all of the benefit of advertising, it should help identify the relative performance of ads to help better optimize your TV spend.  If you run very few ads, you will not have enough data for this type of analysis.

The surprising distribution of performance by network

When you finally see the details of show-by-show and network-by-network TV advertising performance while also measuring daypart and spot length, the results are surprising. In our own analysis, we looked at performance of our ads across more than two dozen networks and a hundred programs with significant numbers of ad impressions.

The results were shocking. While we expected the impact-per-dollar-spent on a TV spot would vary by network, show, daypart, and program reach (high-reach programming is more expensive than low-reach programming), we were surprised by the broad distribution of results.

In our analysis, we looked at the the cost to drive a web visitor with TV advertising. The range of real-world results was spectacular: On a network level (CBS, NBC, ABC, CNN, ESPN, etc), we found cost per engagement varied by more than a factor of 15. That’s right: the impact of 1$ spent on TV ads run on the highest performing network equaled the impact of more than $15 in advertising from the lowest performing network.  In other words, a portfolio of ads run on the lowest performing network were less than 7% as effective as a similar portfolio of ads run on the best performing network.  Not surprisingly, when you look at show-by-show performance you will find an even greater range of performance variation.

Why do these differences exist? There are a few reasons. First, demographics vary by network and different audiences respond differently to any one company’s ads. Second, TV ad pricing is partly based on the reach of a show (high reach shows include valuable light-TV watchers) and the desirability of the program with advertisers. The wider the audience and the more popular the show with advertisers, the more expensive ads will be on a per-impression basis. In the highly-fragmented U.S. TV advertising market, there are many opportunities to lower costs by aggregating audiences.

For marketers buying TV advertising, it’s nearly impossible to get great results without a clear picture of awareness gains or cost-per-engagement by network, show, spot length, day part, and ad version. By optimizing all of these factors — smart TV advertisers can improve TV advertising performance and ROI by 500% or more while still maintaining target market reach.

 

 

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