Payback 4

Payback 4: pathways to profit – research summary

Much has changed in the world of advertising over the last few years, but the importance of proving the effectiveness of advertising investment remains paramount. Payback 4: pathways to profit, is an independent study commissioned from Ebiquity by Thinkbox.  It compares, the sales and profit impact of five different forms of advertising: TV, radio, press, online display and outdoor.

In Brief

‘Payback 4: pathways to profit’ – commissioned from Ebiquity by Thinkbox – is an econometric analysis of over 4,500 ad campaigns across 10 advertising sectors spanning the 7 years to 2014. It compared, on a like-for-like basis, the sales and profit impact of five forms of advertising: TV (linear spot and sponsorship), radio, press, online display (excluding video on demand) and outdoor.

This a follow-up on Ebiquity’s previous effectiveness study for Thinkbox, Payback 3: ad success in tough times, which was published in 2011. According to Ebiquity, TV consistently demonstrated the highest return on investment (ROI) of any form of advertising over the last 7 years.  This is in spite of a period of economic recession and major upheaval in media technology and consumption.

Key Points

  • TV gave an average return of £1.79 for every £1 invested during 2011-14. This is up from £1.70 for every £1 invested during 2008-11.
  • TV advertising is twice as effective at creating sales uplift per equivalent exposure than the next best performing medium (press)
  • TV advertising has a ‘halo effect’ across a brand’s portfolio. 37% of TV’s sales effect is felt by products not directly advertised in the TV campaign
  • TV’s ‘multiplier effect’ makes other forms of advertising work harder
  • TV created 33% more branded online searches per TV rating point during 2011-14 than in 2008-11

Download the Charts for this research study hereIn Depth

The background:

Unless you’ve been living in a bubble for the last decade, you can’t help but notice that we’ve finally emerged from the depths of one of the worst recessions in modern history. This has had a significant effect on marketing.  Ad expenditure is under constant pressure and greater scrutiny than ever. We all want to know if, and how, our advertising pays back in real terms.

It therefore makes sense for us to zone back into payback to ascertain whether advertising return has stayed the same or whether the ground has fundamentally altered. Given the seismic shifts that television has undergone in the last few years, both in terms of consumption and regulation, we now have an ever expanding canvas of formats to work with. Spot advertising remains the core focus of most TV activity, but it’s now often teamed with formats as varied as VOD, AFP and product placement. Thinkbox remains committed to providing as complete a picture as possible when it comes to deconstructing television payback.

We therefore commissioned Ebiquity to update, refresh and expand on their previous payback work. This draws on over 4,500 econometric models, 10 categories, 100 advertisers and over seven years’ worth of their clients’ data.

In particular, Ebiquity honed in on three very different product categories; these were retail, finance and FMCG.

The Headlines:

1) TV advertising remains the most effective form of advertising and creates the most profit for businesses pound for pound

The study found that TV gave an average profit return of £1.79 for every £1 invested during 2011-14. This is in spite of the economic flux and significant changes in both technology and consumption.

Payback 4: pathways to profit Slide

This is also more than any other medium and shows a profit increase of over 5% since 2008-11.

There were significant differences between the three categories Ebiquity split out in terms of profit payback but TV’s payback has increased since 2011 and TV outperformed all other media for retail, financial services and FMCG.

Payback 4: pathways to profit Slide

2) TV is the lead effectiveness medium

TV advertising consistently outperforms other media when it comes to generating sales. TV is twice as effective at creating a sales uplift per equivalent exposure as the next best performing medium, which is press. In simple terms, if one exposure on TV delivers 100 product sales, then an equivalent exposure on press would deliver 52 product sales.

Payback 4: pathways to profit Slide

3) TV’s ‘halo effect’ boosts sales of other products within portfolio

TV advertising creates a ‘halo effect’ across a brand or range of goods. In fact, 37% of TV’s total sales effect is transferred to other brands within the portfolio; so if a finance brand advertises a current account on TV, the campaign is also likely to boost sales of its other products, such as mortgages or insurance.

4) There is plenty of scope to optimise TV investment across categories

Based on the effectiveness analysis, Ebiquity identified the optimum share of advertising budgets that should be spent on TV. For both finance and retail brands, 60% of the ad budget should ideally go on TV. For FMCG brands, it should be significantly more than this with Ebiquity identifying a major opportunity to increase investment in television.

5) Advertising on TV boosts other media

TV advertising’s ‘multiplier effect’ consistently makes other elements of a campaign work harder. TV’s positive effects are felt across other awareness building channels: for radio advertising this effect can be greater than 100% and up to 50% for press and outdoor.

Payback 4: pathways to profit Slide 4

6) TV advertising increases branded search

The study found that the amount of branded searches created by TV advertising on search engines such as Google has increased by 33% per rating point during 2011-14 compared with 2008-11. It is likely this has been encouraged by the increase in ‘multi-screening’ – using an internet connected device while watching TV. Multi screening is great for TV as it enables viewers to respond in an instant. In addition, the proportion of brands featuring specific online calls to action in their TV ads has increased from 2% in 2005 to 16% in 2013.

7) TV sponsorship works as a medium in its own right

Using the most comprehensive record of TV sponsorship in the UK, Ebiquity identified that nearly a quarter (23%) of advertisers used sponsorship vehicles for the first time in the year preceding March 2014. Using the sales data from their own sponsorship-using clients (consisting of retail and FMCG), they discovered that TV sponsorship generated a higher level of profit ROI than other display media; excluding TV spot (there was not enough data to compare online display).

Payback 4: pathways to profit Slide 5

In summary

The research reveals that TV continues to be the most profitable medium and that this profitability is increasing over time. It is the lead effectiveness channel across many different categories, driven by its ability to optimise the impact of other media, particularly online. Sponsorship and VOD are gaining prominence, though the latter in particular is still in its infancy and the lack of data reflects that. Where data is available for sponsorship, we can see it acts as a channel in its own right, in terms of size and investment and indeed payback.

 

Relevant search terms: ROI, return on investment, payback, profit, effectiveness, halo effect, sponsorship






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