• by Brian Wieser , September 22, 2011

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.

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.  

• Buy TV. It has always has been bought to extend reach, but with higher budgets.  Beyond raising costs substantially, this approach risks irritating consumers as many would be exposed to a specific commercial dozens of times.  
  
  
• Increase use of cross-platform video inventory.  Although it is possible that reach can be extended, assessing whether this happens is reliant on the adoption of accurate cross-platform measurement techniques.  Costs will be higher as operations associated with executing campaigns across platforms remain distinct. Frequency will still remain unbalanced.  Most important, consumption levels on nontraditional video platforms will need to increase significantly before they can make a meaningful difference for a large, broadly-focused advertiser.
  
  
• Increase use of non-video-based marketing channels.  Shifting budgets to other media involves challenges associated with cross-media measurement, as well as incremental operational costs.  For companies that have already shifted budgets out of television, simply shifting money to non-media marketing platforms, such as trade promotion or events, has been the most efficient choice, owing to a lack of better options.  
  
  
• Buy unreached audiences and balance frequency for reached audiences on traditional TV through data-driven ad networks.  Marketers can reach more audience for the same cost, or the same audience for less cost to drive improved marketing outcomes.  Use of such platforms - such as ours at Simulmedia - requires an acceptance of new decision-making processes and a willingness to work with an intermediary.
  

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.