Today, this issue has taken on added significance with COVID-19 and the need to customize media locally based on localized business restrictions and outbreak levels.
Most of us were taught to look at local media based on a breakeven analysis: the point at which the costs of local media make it more efficient to buy nationally. The breakeven point was often at only 10-15 DMAs, depending on the markets, rendering local media “inefficient” for many marketers.
That makes some sense, but there are two problems:
Lack of prospect focus. The vast majority of people in any DMA are not likely to visit a given store. For example, if a potential “customer” lives and works in Geneva, Illinois, and your stores are in downtown Chicago, how often are they making that 58-minute (without traffic!) trip?
Lack of geographic customization. The DMA is too big an area for many marketers. With significant differences in demographics, economics and shopping behavior by geography, effective media planning should be at a trade-area or ZIP level.
Here are a couple of tips to gauge the real efficiency of national versus local media and, in turn, focus on people who will actually buy from you.
Get customized. Look at your store locations, drive times, historical sales, and shopper demographics to create custom trade areas. Most marketers see significant differences that are often best addressed by local media.
Rethink your math. Calculate the cost to buy media in your specific custom trade areas and compare it to the cost of national media to deliver that same custom trade area. Remove impressions delivered outside the custom area because they aren’t “gravy”; they are waste. (For our purposes, the objective is driving retail sales; obviously the equation gets adjusted for ecommerce goals).
Using such an approach allows for a fact-based assessment of the true efficacy of local media—not just on eyeballs, but on sales. Factors such as store density, market media costs, time of year and purchase cycle all impact the results. In practice, the answer is often not a simple either/or, but rather a matter of degree.
Even when it favors national media, for example, the analysis highlights specific geographic pockets showing the most upside opportunity for localized emphasis.
Add to this the unique situation of COVID-19 and the fact that some products are either not available or in short supply in some markets, and the scales often tip a bit further toward local.
So, the next time someone says national media is more efficient, you can respond: “Well, it depends. What are your objectives, how dense are your locations, are all stores open to the same degree amid the pandemic, and how do you feel about paying for people who will never buy from you?”
Generally speaking the CPMs for local stations are similar to those of the national broadcast networks in most dayparts, however, when national cable buys are included in a national TV buy---as is usually the case--- the very low cable CPMs give a broadcast network plus cable plan a huge edge over local station buys.
But that's not the real issue. For one thing, local market rating surveys are a joke compared to their national counterparts and there are many more non-Nielsen sources enabling better tatgeting nationally than local. More to that point, because of the wide variations in national cable content---and the resulting mindset/product use variations from show to show---a national advertiser can develop far better targeting metrics than are available locally. In a typical market virtually all of the broadcast fare on a network affiliate ---including local news---has the same audience profile---targeting olf folks, mainly. If you want young, you go to the independent stations and buy spots in syndie sitcom reruns but that also gives you a low brow audience profile.
Moreover, few advertisers have any idea whether it pays them ROI-wise to heavy up in high BDI markets---where the brand is already doing well or give more weight to other markets ---such as high CDI's but with low BDIs. In the latter case, the markets are strong for the category but not for the brand. While I often recommend tests to advertisers to solve this riddle, aside from nods of agreement, nothing ever happens.
A final point. Many national advertisers relish the look of their TV buys and the positive image that "sponsoring" such high profile content affords them. Also, many national advertisers buy national TV time on a corporate, not a brand by brand basis---seeking low CPMs as their reward. Both of these behaviors favor national, not local buying.
I happen to agree that local TV should get far more support from certain national advertisers---but being realistic---the pendulum has been swinging in the other direction for some time now---I'm sorry to say.
Thanks for the perspective, Ed. To further clarify, my main point is that when you calculate CPM based only on people who live/work within a realistic distance of a physical store (instead of the entire population of a DMA), it completely changes the CPM math. This holds true even when buying the exact same show locally as nationally. When you remove the "phantom" national impressions that are predominantly reaching people who will never visit said store from the national CPM calc, suddenly national doesn't look as efficient (usually). I agree the tools like local ratings are also lacking in the industry, which is why we've invested in our own sub-DMA level ROI modeling tools-- to skip ratings altogether and focus on what clients really care about, which is sales response.
Rob, just because a person lives, say 50 miles from a store where an advertiser's product is sold doesn't mean that he/she can't buy that product. As I'm sure you will agree, many people---especially in remote areas---buy products online or make periodic trips to the nearesttown or city where items they need are available. In addition, they talk about products with others--sometimes recommending them or taking such recommendations from others. As for targeting people who live in a store's "trading area"---that's fine but you can't assume that everyone who lives---say 50 miles from the store is a prospect for your brand.A number of them are but many may not be. You need some way to distinguish between the two. If a national advertiser was, somehow, able to send commercials only to households living in certain geographic configurations that would not necessarily eliminate "waste". Worse, the advertiser would have no way of knowing who in these profiled homes was watching the shows that were selected as commercial "adjacencies".
I do think that what you are advocating makes much more sense for local stations to explore with local advertisers---in particular those who are directing more of their spending to digital media. National advertisers often rely on store chains, dealers, franchisees, etc. to promote their products locally and, in many cases, they foot part of the costs via "co-op" deals with their distribution partners.
At one time, neighborhood/local/area newspapers and major newspaper geographically sections served this purpose. Some direct mail and val packs fill in a few gaps even now. Co-op deals are usually not that good except for some jewelers selling Rolex and better. On line sales: littered with ads and time consuming. Affordablity is a huuuuge problem. Good luck in transitioning to new positions which will take a while before it gets figured out or most all local businesses that will be left will find a way to drop out of messaging via any traditional methods.