• by Margaret Henderson Blair , January 26, 2006

With the cost of TV advertising increasing nearly 20 percent during the last two years -- up 12.3 percent in 2003-2004 and up 6.4 percent in 2004-2005 -- the media industry is eager to identify new ways to improve the effectiveness of the medium. Gross rating points are no longer an adequate metric, and advertisers have begun looking for alternatives.

Indeed, the willingness to accept change is refreshing in an industry that has typically been slow to adapt to new systems and methods. Just as the U.S. auto industry did not readily accept W. Edwards Deming's statistical methods of process management in operations, the marketing and advertising business has often resisted the cutting edge of measurement and process management.

Deming took his message to Japan when he couldn't find an audience for it here, and helped the Japanese beat the u.s. auto industry with his quality management approach. Fortunately, that history is not likely to repeat itself. Most business leaders now understand that changing the worker will not change results. The process requires change, and marketers must think about the science of success.

Advertisers increasingly realize that managing TV ads relative to their unique brand preference-building power can improve their Return on Marketing Investment (ROMI) more than enough to offset recent price increases. It can also give marketing executives unprecedented flexibility in adjusting ad plans to achieve quarterly business results across a portfolio of ads, brands, categories, and media inventory.

In the context of ROMI, measuring and managing the message is worth four times as much as measuring and managing the medium, and managing them both together is worth five times as much as measuring and managing the medium alone.

As a result, Preference Points Delivered (PPD®) is now being embraced as the ROMI measurement standard for the combination of the media and the message. The PPD metric combines GRPS, accounts for wearout, and factors in the business value of the message in a manner that predicts sales volume, market share, and market value in the short term and over time.

Today, boardrooms are buzzing about the PPD metric, engagement, and brand preference. Clearly, marketing communications efforts need to lead to improved top and bottom lines, and this realization is the basis for the resurgence in accountability.

C-level executives now know that they need not look for something entirely new and untested. They have at their fingertips decades of theoretical and empirical support. In the 21st century, the marketing communications industry is ready for the ROMI metric and change. The industry wasn't ready when the metric was first proposed at an Advertising Research Foundation media workshop in 1993, but thankfully the times, they are a-changin'!

In one quarter, companies who have worked with ARS/rsc to manage their TV ads relative to their unique business value have realized dramatic improvement in the market impact and ROMI. Using the ROMI measurement solution and Outlook® forecasting and planning tool has helped improve the return at both the top and bottom lines more than enough to cover the recent cost increases of the TV medium overall.

Cepacol: Case Study

The ARS Group's work on behalf of Merrell Dow Pharmaceuticals' Cepacol brand demonstrates quantitatively how the PPD metric works. The ARS Group used the results of a Cepacol split-cable weight test to verify learning with respect to how advertising works to impact market results, determine how quickly it wears out, and compare it to earlier findings.

The split-cable weight test for Cepacol mouthwash was commissioned by the advertiser to determine whether increased ad spending produced an according sales effect. The test used one ad in three markets, monitoring mouthwash purchases of two matched panels of households. The base weight cell received an ad spending level of $4 million, and the heavy spend cell received an ad spending level of $8 million.

The recommendations called for the advertiser not to increase ad spending under existing conditions, to investigate the impact of multiple exposures to the current ad on both core Cepacol users and non-users, and to consider implementing a continuity/frequency-oriented promotion for current users, including on-pack coupons, proof-of-purchase programs, and multiple unit promotions.

The ARS Group's PPD metric and learning refuted the conclusion that "no observable increase" resulted from increased ad spending, noting that the split-cable results were influenced by the length of the test and ad wearout. Had the test been read earlier, before both panels had received similar levels of PPD delivery, the effects of increased weight would have looked very different.

Our research showed that there was a strong relationship between the PPD metric (high spend PPD delivery minus base PPD delivery) and market share (high spend share minus base weight share). The correlation between the cumulative difference in PPD delivery and the difference in market share is r=.88, suggesting that differences in PPD drove differences in share between the two panels early on, and smaller differences later on as the ad wore down in the high spend panel (see chart above).

We recommended subsequent weight tests to learn how to manage advertising weight, ad effectiveness, and wearout for increased returns, by refreshing ads with poolouts or new executions. Measuring the business value of each ad and managing that advertising (and its subsequent wearout) by using a PPD paradigm will continue to assist advertisers in maximizing return on marketing investment. The tools are readily available, easy to use, and have led to significant increases in sales and profits for the advertisers who have used them.

Margaret (Meg) Henderson Blair, D.Sc. is the president and CEO of The ARS Group (RSC). The RSC application for forecasting ads' impact on sales is the subject of pending patents. (romi@arsrsc.com)