Lost revenue triples dollars saved reducing budgets
Cutting TV ad spending led to much lower sales for most of the marketers included in a new study.
The study was conducted by consultancy 84.51° in partnership with TiVo Research, A+E Networks and Turner Broadcasting and comes as networks are beginning to make upfront presentations to media buyers and clients.
Looking at 15 consumer packaged goods brands that cut TV spending in 2014, sales dropped for 11 of them by a total of $94 million.
For every dollar cut from the TV budget, sales fell $3 dollars, the research found. Return on investment dropped as well. The average marketer reduced its ad budget by $3.1 million, resulting in lost sales of $8.6 million.
The study would appear to make the case for continued TV ad spending even as ratings continue to decline for most networks. Some advertisers recently shifted those funds to digital advertising, but problems with both fraud and viewability issues—not to mention less robust sales boosts—led to some of those marketers returning with higher spending on TV.
“Our interest in this study stemmed from concerns over the extent to which some brands were reallocating television budgets to digital platforms, and that they would lose dramatic amounts of sales attributed to TV, which likely would not be made up in digital,” said Howard Shimmel, chief research officer, Turner Broadcasting. “The study proved our first concern true, being that the brands studied lost three dollars in sales for every dollar moved out of television. We will work with TiVo Research to further address our secondary concern, how the ROI of digital compares to TV, and whether digital can make up for the loss in sales attributed to TV.”
In terms of other marketing goals, the companies that cut their ad spending reached fewer potential customers. The lower spending enabled their commercials to reach on 25% of their purchasers, down from 35% in 2013, leaving 75% of those customers as available to competitors. Each household was reached every 3.5 days, down from 2 days, which is ideal, according to the study.
“In today’s multi-screen content universe, consumer brands are reallocating advertising dollars to digital spend, however, our research found that TV advertising is more effective than ever,” said Betsy Rella, VP of research, TiVo Research. “This study confirms a direct link between TV advertising spend and ROI for brand advertisers.”
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Source: Broadcasting Cable