Despite the recession and rapid advent of social platforms on smartphones and tablets, TV has retained its dominance as the most effective way to advertise, delivering more profit than any other form of commercial communication. TV advertising has become more efficient in the last three years, generating significantly more online interaction, as the trend toward multi-screening grows.
These are the principal findings of a new study commissioned by Thinkbox, the marketing body for commercial TV in the UK, and conducted by Ebiquity’s Marketing Performance Optimization practice. It was showcased at Thinkbox’s ‘Payback 4: Pathways to Profit’ event in London in May 2014.
The study is an econometric analysis of more than 4500 ad campaigns across 10 advertising sectors between 2008 and 2014. It compared, on a like-for-like basis, the sales and profit impact of five forms of advertising: TV (linear spot and sponsorship), radio, press, online display, and outdoor.
In the period 2011-14, TV gave an average ROI of £1.79 for each £1 invested, up from £1.70 in 2008-11. TV has consistently delivered the highest ROI of any form of advertising in the last seven years, despite the twin opposing forces of technological and media proliferation on the one hand and economic recession on the other: factors long predicted to diminish the impact of TV advertising.
Reasons for TV’s increasing effectiveness include: ‘multi-screening’ viewers being able to act instantly on what they see; advertisers’ more sophisticated understanding of how to employ multiple TV ad opportunities and integrate them with other media; a golden age of TV content, creating a higher quality environment for advertisers; and the recent and sustained fall in cost of TV advertising.
Optimum TV investment – The optimum share of advertising budgets that should be spent on TV for brands in both the finance and retail sectors is 60%. For FMCG, this proportion should be significantly higher, and for many brands this represents an opportunity to increase investment in TV significantly.
TV’s ‘halo effect’ boosts other forms of advertising – TV advertising creates a ‘halo’ effect across a brand or range of goods. 37% of TV advertising’s effect is achieved on products not directly advertised. So if a finance brand advertises a current account on TV, the campaign is likely to boost sales of other products, such as mortgages or insurance.
Multi-screening viewers boost branded search – TV advertising consistently makes other elements of campaigns work harder. TV’s effects have been shown for all accompanying media, but one of the most pronounced effects is on branded search. The volume of branded searches sparked by TV advertising has increased by 33% (relative) per rating point during 2011-14 compared with 2008-11.
Press and radio are next best at generating sales – TV consistently outperforms all other media in generating sales and is, on average, twice as effective per equivalent exposure as the next best performing medium. Press advertising delivers 52% of the sales uplift TV creates, radio 27%, online display (excluding Video On Demand) 13%, and outdoor 11%.
Theory in practice: Arla makes best use of TV as part of an integrated approach to advertising
Compared with the scale and reach of retail and financial services, it is notoriously difficult for FMCG brands to deliver meaningful, sustainable improvements in ROI. This is why the approach to using TV taken by dairy powerhouse Arla stands out. For its Lurpak and Anchor butter brands and Cravendale branded milk proposition, Arla has developed integrated, multilayered communications strategies, with TV central to all communication. This includes use of TV sponsorship and VOD, supported by great creative (including ‘Good Food Deserves,’ ‘Taste Like Home,’ and ‘Thumbcats’), and evidence-based improvements in media planning and buying.
“TV advertising has become more efficient in the last three years, generating significantly more online interaction, as the trend toward multi-screening grows.”
From 2011-14, Lurpak and Anchor grew 19% against category growth of 10%, delivering a market-leading net gain of 9% in a saturated market at 99% penetration. NPD has been instrumental in growing sales, with Lurpak’s Cooks Range and new Anchor baking products justifying additional shelf space in retail by selling incremental units. Cravendale, likewise, has grown 3% by value against a category dropping by 9% in the past three years. This performance is even more impressive against the backdrop of the ‘milk wars’ – with discounters (Lidl, Aldi) and then the major multiples looking to drive footfall by slashing the price of (unbranded) milk and effectively further commoditizing the marketplace.
Arla has enhanced ROI for all three brands over the same three-year period – 30% for Lurpak, 37% for Anchor, and 38% for Cravendale. Improvements have been delivered for media effectiveness and efficiency, ensuring that all three brands use the right creative with the right weight and seasonality.
Arla’s Stuart Ibberson says: “We always start from each brand’s target audience. TV is a central pillar to our campaigns. No other medium has the scale or reach of TV. We use other, specific media to amplify TV, but with TV at the heart of everything we do, that’s proved to be the best way to get to our target audience. And that’s how, working with Ebiquity’s Marketing Performance Optimization team, we’ve consistently outperformed both the category and the market.”
A rosy future – short and medium term
Total TV advertising revenue in the UK increased by 3.5% in 2013 to reach a new record high of £4.63 billion, according to full year revenue figures from UK commercial TV broadcasters. This is the fourth consecutive year that TV ad revenue has grown in the UK, demonstrating that the economy is showing more than just green shoots. Investment in TV is forecast to grow again in 2014, boosted by the World Cup in Brazil. The Advertising Association and WARC predict TV ad revenue will grow by 6% in 2014.