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ROI Measure Gaining Favor

Nov 10, 2003  •  Post A Comment

If media planning sometimes seems like religion, it’s because the field has always been driven by a few gospel-like principles that haven’t changed all that much since the dawn of the mass media marketplace.
In the beginning, it was all about reach and frequency.
As if it were writ in stone, the goal of any media campaign was to generate as much reach among a brand’s target audience with enough frequency that the consumer actually recalled an advertising message. Then some cracks began to appear in the stone.
The first fissure started nearly a decade ago, when some of Madison Avenue’s leading media thinkers began to question the notion of an effective frequency, and within a few short years frequency was essentially abandoned as a foundation for any respectable media plan. In its place the ad industry embraced the notion of so-called “continuity planning,” or what media planning guru Erwin Ephron coined as “recency.”
The idea was that a frequency of only one advertising exposure is enough to generate recall and even sales as long as a consumer was in the mindset for a product or a service. And since most mass-marketed products-especially consumer packaged goods-theoretically always have consumers looking to buy them, the goal of media planning became to reach as many consumers with as much continuity as an advertising budget would allow.
Now a new crack has emerged in the gospel of media planning, but unlike other revisions to the essential doctrine, this new split represents an almost theological shift and one that could greatly change the role of television in the advertising mix. According to this new testament, reach is no longer the goal of media planning, return on investment is.
Never mind that at best, the precise meaning of ROI is often murky and usually subjective. The fact is that many major marketers have begun to lose faith in reach-based media planning and have begun ROI in its place.
From the point of view of these marketers, the shift makes sense. When they didn’t know what the results of a media buy were, they were forced to generate as much reach as possible in the hopes that some of those ad exposures would generate results. And for a long time that worked, because the costs of media were reasonable and the complexity of the media marketplace was manageable.
Many feel that is no longer the case, in large part due to the rising costs of television advertising. More important, many believe they can now measure the results of their media buys using sophisticated sales regression models-commonly known as marketing mix models-and in most cases, television begins to suffer by comparison.
In a recent white paper on the new media planning doctrine, Mr. Ephron offered one such example, based on an analysis done by Carat’s Marketing Management Analytics unit, a top marketing mix modeler. The analysis, which looked at 25 major consumer packaged goods brands and 20 non-CPG brands, found that TV lags other major media in generating sales results for every advertising dollar these marketers invested.
Mr. Ephron said the findings should not be surprising. Because TV already is such a dominant part of most media plans, its ability to generate incremental results has essentially maxed out. Mr. Ephron calls this effect “satiation” and its discovery represents one of the greatest threats to TV advertising budgets if the new gospel of ROI becomes broadly embraced.
“If” is the right word to describe that prospect, said Mr. Ephron, who only recently began to shift his own media planning beliefs from the reach-based doctrine.
“It’s a 360-degree turn from where we are,” he said, acknowledging that the ad industry is facing an ideological crisis: “It seems to me that media planning is going in two different directions. You can’t plan for reach and ROI at the same time.”
Such comments would seem like heresy for any top media planning thinker, but coming from Mr. Ephron, it would be tantamount to the pope, or at least a top cardinal, questioning his faith.
While the ROI movement has been percolating for some time, Mr. Ephron said several recent developments have caused him to begin shifting his own beliefs, including his work in developing the new Advertising Research Foundation Model for measuring advertising effectiveness.
Along the way, he also began consulting with top print and outdoor media groups and saw how they struggled to retrofit their media into TV’s reach-based model, which he believes handicapped their ability to demonstrate results.
Surprisingly, Mr. Ephron said TV’s reach-based planning model has infected the thinking of even new media that originally were premised on an ROI model-especially the Internet.
“The Internet is mesmerized by television dollars,” he said. That was evident last week during a feisty discussion on the media mix in which Mr. Ephron participated with two leading interactive ad agency media planners during an online industry conference.
But those online experts-Karen Anderson, media director of Modem Media, and David Song, group account director of MPG/Media Contacts-also said they are moving away from reach as a media planning metric in favor of ROI.
“It’s all about the dollars. It’s not about the [gross ratings points],” Ms. Anderson said during the Ad:Tech New York session. By dollars, Ms. Anderson was not referring to ad dollars, but to sales results generated by advertising buys. In other words, ROI. MPG’s Mr. Song agreed, noting that his agency’s media plans now emanate around “business solutions,” not “reach and frequency.”
That may be the case, but Mr. Ephron challenged that far too little research has been done on Internet advertising and across too few brands to benchmark the ROI of online advertising vs. established media like TV, at least not in terms of overall advertising effects.
Until those benchmarks are established, Mr. Ephron said ROI goals, and even the basis for measuring them, must come not from ad agencies, but from advertisers themselves. Media has to start with the marketer.
“They have to establish the brand’s goal, the brand’s target and the ways of measuring success,” he said.