5% Solutions

What is it about Madison Avenue and the number 5%?

Back in the early 1980s, big ad agency Ted Bates Advertising famously helped put cable TV on the map when its media chief Walter Reichel advocated a “5% solution” allocating that percentage of its clients' TV ad budgets into the fledgling medium.

This week, big media-buying agency GroupM declared its own 5% solution, pleading to allocate that portion of its clients' ad budgets into buys on diverse-owned media outlets.

In both cases, the commitment was designed to compensate for the under-representation of important media audiences.

Back in the 80s, it was reaching young, affluent, and growing families that were shifting their viewing from broadcast to narrowcast cable channels including ESPN, MTV, Lifetime, USA and A&E.

Today, GroupM is seeking to offset the under-representation of advertising being spent to reach America’s increasingly multicultural and diverse media marketplace, and the audiences that spend their time with them.



But why 5%? Why not something more proportionate to the actual multicultural composition of the U.S. population? Lots of reasons, I’m sure.

One is the simple inertia of business culture and the fact that it’s just really hard to alter too much too fast.

Another is the ongoing myth that you can reach multicultural audiences just as easily -- and possibly more efficiently -- as part of dual (or multiple audience) buys on “mainstream” media.

The logic there is that diverse audiences -- ethnically, racially, culturally, gender-wise and otherwise -- via general media that reaches “everybody.”

While that continues to be partially true, some influential industry leaders -- most notably, Procter & Gamble Chief Brand Officer Marc Pritchard -- have worked hard to convince the industry that is no longer is the case, and that the advertising, media and marketing world has actually flipped: It’s now better to reach general audiences by discretely targeting diverse audiences with media, content and advertising that speaks directly to them.

Pritchard demonstrated that empirically at the Association of National Advertisers recent media conference, showing how P&G has actually used the strategy not just to reach diverse targets, but to improve its overall media reach while spending less money to do so.

So why 5%?

Another rationale, I guess, is the so called 85/10/5 rule in which investors -- including advertisers and agencies -- place 85% of their capital in something stable and well-established, 10% in something that is emerging, and 5% in risker but potentially higher-return bets.

Given the composition of the U.S. population and the hyper-fragmentation of its current media marketplace, I don’t think that principle applies here.

So again, why 5%?

I mean, in a half-trillion-dollar advertising marketplace, it’s not exactly chopped liver, so putting a line in the sand -- any kind of line -- is better than none at all. At least it moves the ball forward.

And based on GroupM’s own disclosure this week, it has been doing an impressive job of that. In the 18 months since it established its “media inclusion initiative,” GroupM’s investment in Black-owned media, as an example, outpaced the rest of the industry by “triple digits.”

And eyeballing GroupM’s current 5% pledge vs. the rest of the industry -- according to a recent analysis of Standard Media Index data also released this week by the Association of National Advertisers Alliance for Inclusive Multicultural Marketing -- for all the commitment the ad industry has made over the past two years, diverse-owned media’s share of U.S. ad spending still is only 1.85%.

So nearly three times that is a pretty decent pledge on GroupM’s part.

And if the lesson of Ted Bates 5% solution for cable TV is any model, diverse-owned media should be doing a lot better in the years to come.

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