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How Long Does Your Ad Have an Impact?

If the speed and number of commitments for this year’s network TV upfronts are a bellwether for the economy, then better times may be on their way. It is encouraging to see marketers increase their media spend and focus on messaging other than “buy now” and “we are having a sale.”

If the speed and number of commitments for this year’s network TV upfronts are a bellwether for the economy, then better times may be on their way.  It is encouraging to see marketers increase their media spend and focus on messaging other than “buy now” and “we are having a sale.”

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Even though media spending significantly declined during the last two years, we experienced a continued acceleration in the evolution of how media is consumed. Time shifting, place shifting and device shifting are all themes we are becoming increasingly comfortable with.  Control continues to move from the content provider to the consumer, and the consumer is increasingly comfortable creating and sharing their own content.

All these changes speak to the need to re-examine some of the most basic principles of good media planning – especially as marketers commit Tarp-sized funds in the upfront.   One of the most important concepts in media planning is effective reach and frequency.  This is about understanding the cumulative number of impressions your campaign delivers to an individual consumer.  Too few impressions and your message won’t break through.  The painful result is that your entire media budget has gone to waste.  Too many impressions and you have not only wasted part of your media budget, but you have also succeeded in annoying the very target you were trying to swoon.

The middle ground –between not enough impressions and too many– is the efficient frontier.  While this concept is rather pedestrian to well-schooled media planners, its application in today’s distributed cross-channel media world is anything but.  

The usual suspects such as Comscore, Nielson, @Plan, Simmons or MRI are only marginally helpful in navigating these stormy waters.  Savvy marketers have looked to new sources of information to determine what constitutes effective reach and frequency.  And not surprisingly, aggregate consumer activity online for a brand or its product has proven to be a rich source of information.

While building out various econometric models that quantify the relationship between media spend and sales, we found it necessary to determine the decay curve or half life for various media channels.   We needed to understand how long a broadcast, print or online impression would have an impact on a consumer in order to determine effective reach and frequency.

How Much Is Too Much

With any media plan, you are going to reach the most “accessible” consumers first.  Consumers who are pulled into the Internet constantly or always have a TV on in the background are going to be easiest to reach (tips on breaking through the clutter will be a future post).  As you start to reach more and more people, the harder it becomes and the more it costs.  Building reach beyond a certain point is never cost effective, especially through one medium.

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How to Measure the Point of Diminishing Returns

When people think of the impact of media, they often attempt to measure it using a simple linear relationship, sales= b*media levels.  However, we all intuitively recognize that the real impact media has on us is not so simple.  That’s why we suggest utilizing the concept of diminishing returns. 

By replacing the standard relationship with a more dynamic equation like the generalized logistic regression, sales = media ceiling / (1 + exp(-growth rate *media levels)) you can model a relationship where the impact of additional media varies.  In the case of modeling reach, we can account for, and quantify, the fact that the hundredth household you add doesn’t have the same impact as the twentieth household.  After a point, not only does the cost increase substantially with additional households but their intrinsic value also decreases.

In this treatment, we develop both a ceiling and a growth curve.  Using this format provides flexibility to account for the fact that after a certain point you can throw as much money as you want into media and it won’t bring you additional value.  This concept is often referred to as a saturation point or the point of diminished return.
 
This is a concept that you can utilize with traditional measurements like TRPs and frequency or with interactive measures like impressions and post ad activities.  Where you fall on this curve generally has to do with the size of your brand and your share of voice.  Small brands and new upstarts find it expensive to get started because they need to build a ‘base of awareness’.  Brands that are household names are often nearing the ceiling and advertising becomes less effective, but this is how they stay household names.  Mid-size brands often have the most to gain because they are well within the healthy point of the curve when additional spend / reach / frequency delivers the most bang for the buck.

How Long Does Your Ad Have an Impact

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Consider when a TV ad airs.  The ad’s impact on sales isn’t necessarily immediate.  People see an ad that may incite them to purchase, yet they may wait a few weeks before actually buying the product.  That is why the relationship between media and sales is not always simple or straightforward.  The first way to counteract oversimplification is to test for a lagged effect.  Consider an ad that airs today.  It may have an effect this week or next week or three weeks from now.  We can lag the media back a certain number of weeks in order to determine the strongest possible relationship.

The second way to address the non immediate effect of media is through ‘decaying’ media.  Consider that same ad that airs today.  It may have it largest impact this week, but it still retains some impact next week; some impact in week three, and even some impact in the following weeks.  In order to capture this relationship, analysts ‘decay’ the impact of media by using the concept of half-lives.  By using a half-life of three weeks, we say that an ad retains 50% of its original impact three weeks later.
   
If your brand airs 120 TRPs of television media this week, how might that media weight react over time?  Given a three week half-life the impact of that media would be:

This concept, generally known as ‘Adstock Decay’, is a common practice in media measurement.  The question that we now face is how well does this concept hold up in the face of media fragmentation and a barrage of different messages?  Very well, actually.  The siloed nature of audience measurement allows modelers to treat media types separately. 

In our analytics work across various industries, we have been able to establish a number of general benchmarks that you can utilize to determine a starting point for your decay investigations:

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You may be wondering why there is such variability in these values.  One reason is the relative strength of a brand or product and consumers’ level of engagement with a particular vertical.  But a much more important factor is the strength of the creative content or execution. The most expensive media plan in the world will not make up for poor creative.  Conversely, powerful creative may actually require fewer TRPs or impressions to accomplish its goal.  Measuring creative performance is very important and that is a topic for another time.

This data validates some long-held beliefs.  We all realize that magazine ads are generally a less interruptive ad format and often have very high levels of engagement when they are in a publication that the reader has a deep personal connection to.  Our data clearly demonstrates that most full funnel media plans would significantly benefit from having magazine print as part of the plan.

Additionally, we see that TV continues to perform well – the death of broadcast advertising continues to be greatly exaggerated.  We also understand that TV has a much longer impact than online.  Again, this isn’t surprising — I am much more likely to remember an HD ad from my 60 inch LCD than my 15 inch PC monitor. 

An important note on online performance: the type of media buy has a significant impact on its half life.  A rich media buy on the home page of Yahoo or MSN performs more like TV compared to a retargeting, run of site, buy focused on in-market shoppers.  It is critical to understand these differences and account for them in your digital media plans.  This is one of the many ways that digital media planning is significantly different from broadcast or print media planning.

Same Tools, New Mindset
    
The key thing to remember from all of this is that fragmentation of media calls for fragmentation of measurement.  It doesn’t nullify the tried and true techniques of capturing reach, frequency, saturation and decay.  It merely makes us treat each media stream separately according to the way it’s consumed. Understanding these relative decay curves greatly helps planners assemble a media plan that avoids waste and delivers optimal reach and frequency. 

Steve Kerho is the SVP, Analytics, Marketing Optimization at Organic (www.organic.com).

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About the author

Steve has over 24 years of agency and client side experience leading CRM, interactive marketing, sales and media practices for brands including Nissan, Bank of America, Visa and Procter & Gamble, to name a few. In 2011, he was named an Adweek Media-All Star for his innovative work measuring earned and owned media content and developing predictive analytics models to optimize digital ecosystems.

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