Large advertisers rely on television because it best satisfies reach and frequency goals better than available alternatives. But many marketers believethe medium has become less effective. Fragmentation is likely the underlying cause.
Back in the day, the bulk of
individual commercials used to run in programming with high absolute ratings and audience shares, so very few commercial units were required. Reach goals were readily achievable as most everyone
watched at least one of the three networks, and the frequency with which consumers saw commercials could be reasonably balanced.
In today's 500-channel home, media inflation has
forced marketers to allocate budgets where audiences are more fragmented than network prime time. Over time, marketers have shifted the mix of their buys from high "base cost"
inventory, such as broadcast network programming, to low base cost inventory, such as national cable programming.
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They would pay high rates of inflation but concurrently held the line on budgets. For example, with 10% rates of media inflation and base cost CPMs of $20 on network and $10 on cable, a shift from 60% network/40% cable to 45% network/55% cable would yield no increase in the absolute size of a budget.
Because audiences are smaller on individual cable programs, marketers require hundreds or thousands of additional commercial units.
Looking at viewing habits through our panel of 16 million anonymous set-top boxes, the full consequences of fragmentation are apparent in ways that could not have been analyzed using conventional audience panels. For example, a large insurance advertiser recently bought 8,000 units during a campaign, reaching70% of viewers during that time. Nearly 10% of viewers were exposed to the commercial more than 20 times, and nearly 15% of viewers were exposed between 10 and 20 times. More than 30% of viewers were exposed between one and five times and, as implied above, 30% of viewers were not reached at all.
Figures were virtually identical -- whether considering all audiences, adults 18-49 only, car owners or non-car owners. Such an outcome would
have been unlikely in a three-network world. Conventional approaches to planning and buying cause these skewed reach and frequency outcomes, causing television to be less effective for
marketers.
What can marketers do to deal with the problems associated with fragmentation on traditional TV?
Beyonda "status quo" of mix shifts to maintain budget levels with reduced effectiveness, marketers have options.
Every marketer that presently buys national television will pursue one or more of these options over time, as status quo approaches are producing less reach and increasingly skewed frequency outcomes. But if one option dominates, there will be different winners and losers, and the media industry could change significantly as a result.
The industry needs more of this type of reasoned analysis and we agree that fragmentation and erosion are major forces at work. But they are not the only forces as we all know. Given economically-driven as well as new tech adoption-driven audience member defections to non-linear platforms, marketers had best prepare to give media planners/buyers a bit more freedom and even a few more bucks for carefully engineering more media-complex campaigns.
While I do not disagree with any of the comments re TV fragmentation's impact on TV buying, the article confuses tuning with viewing.
It also seems to totally ignore the principle of placing ads in targeted programmes according to known product targets and programme audience skews - a principle I think still remains valid to this day.
So, an amended version of what is probably the most important paragraph would read ...
Looking at tuning habits through our panel of 16 million anonymous set-top boxes, the full consequences of fragmentation are apparent in ways that could not have been analyzed using conventional audience panels. For example, a large insurance advertiser recently bought 8,000 units during a campaign, reaching 70% of tuned STBs during that time. Nearly 10% of tuned STBs were exposed to the commercial more than 20 times, and nearly 15% of tuned STBs were exposed between 10 and 20 times. More than 30% of tuned STBs were exposed between one and five times and, as implied above, 30% of tuned STBs were not reached at all.
Given that not all potential viewers in a household view a programme that is tuned, this can make a massive difference to the analysis. While this is self-evident, one only need look at the difference between HUT and PUT ratings to confirm this.