How To Avoid Diminishing Returns For Ad Dollars

(By Bob McCurdy) It’s the 2018 planning season and each year, like clockwork, “point of diminishing returns” discussions come to the forefront in conversations with clients and planners. Here’s how you can be sure radio is part of an advertiser’s marketing approach.

Last week, I was working with an advertiser who was mapping out their 2018 marketing plan, a plan that is set to perpetuate a “siloed” media approach. There will be bits of print and digital but will be 95%+ TV. Their sales have been reasonably strong in ’17, which makes this media mix discussion more challenging but the sales in their overall sector were also robust and good selling is never wasted, particularly when supported by data.

My challenge is to illustrate how a more balanced media mix would generate even better results. Since they are in an “even keel mode,” my discussion is centering on:

1. The understanding that all media plans can be refined and enhanced.
2. There’s a point when no matter how much more effective any media channel might be initially that the next ad dollar would be better spent on another media channel.

Commspoint and Scarborough were utilized to establish that the heaviest TV viewers by the end of this year will have been exposed to their commercial 145 times. This type of frequency might make sense if the product was a FMCG (fast moving consumer good) that’s purchased several times/week, but not for this advertiser whose purchase cycle is annual+.

We might need to remind our kids 145 times to take out the garbage, but most marketing experts would agree that a frequency orgy of this magnitude is not the ideal strategy to optimize any media budget.

Next, Commspoint’s reach curve capability lent support to the idea of budget reallocation, as it highlighted that due to this advertiser’s sheer GRP tonnage, TV’s “reach potential” maxed out a mere 10 days into their 12 week flights. The discussion ended by noting that TV will not effectively reach all potential customers. Over 25% of the target demo (the lightest TV viewers) will have seen their messaging only 10x annually — less than once per month. Not good.

Commspoint’s optimization option demonstrated that allocating a small percentage of their budget to radio would increase the lightest TV viewer’s exposure from 10x annually to 25x annually — a significant improvement against a consumer segment that has above-average purchasing power. The other benefit stressed for adding radio to the mix would be “encoding variability” — consumers exposed to the same message in different media will encode the messaging in a deeper, more complex, long-lasting manner.

Mounds of frequency is wasteful for one simple reason. In advertising, the first exposure typically has the most impact, the second exposure has impact but less than the first and the third exposure has impact but less than the second, etc. with each subsequent impression costing the same.

The ARF quantified the point of diminishing returns last year in their study, “How Advertising Works, Today,” concluding that, “Over-investing in one medium can have diminishing returns and cause sales to decline.”

They demonstrated that the 10^th exposure to a banner ad is 40% as impactful as the first, the 20^th exposure is only 11% as effective as the first, the 30^th is only 2% as effective as the first, and the 40^th actually began to have an overall negative impact. Is there any reason to believe it would be different for TV, radio, or print?

Once again accessing Commspoint, using the 40^th exposure as a “negativity benchmark” and assuming that the ARF’s finding above is “directionally” applicable to TV, would mean that this advertiser’s messaging could potentially have a negative impact on 61% of their target consumers, which is the percent of their target demo that will be exposed to their commercial 40+ times annually. A bit of a stretch, maybe, as commercial negativity is the result of exposure cadence and other factors, but it made our point.

The bottom line is that even a slight reduction in TV dollars would enhance the productivity of their TV spend and bolster their TV generated ROI. Our discussion is centering on not using radio if there are any “extra dollars” but using radio to generate more bang for their advertising dollar.

The concepts discussed above can be reviewed with any of our “siloed” clients, as individual media channel over-indulgence more often than not leads to ad campaign under-performance.

Bob McCurdy is the Vice President of Sales for the Beasley Media Group and can be reached at [email protected]