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Cost of TV advertising

For most businesses, the cost of advertising is a very prominent consideration, and this is no different when it comes to TV.  The below section covers how TV is traded, what impacts the overall price and some other considerations that will influence the cost of TV advertising.

How is TV traded?

The currency on which TV is traded is called a cost per thousand (CPT), which is the cost of buying 1,000 impacts (an important distinction to make is that this is not the cost of reaching 1,000 individuals).  These CPTs are variable, constantly changing and are usually represented in the form of a percentage discount off the station average price (SAP).  The SAP is benchmark price against which most buying and selling of TV advertising is calculated.

How do we arrive at the station average price (SAP)?

The SAP is a functionality of supply and demand. The supply in the case of TV advertising is represented by commercial impacts (the number of people watching TV on commercial TV stations) and the demand is represented by advertiser revenue.  As you can see from the below diagram, the two sides of the equation work either together or against each other to push prices up or down.

TV-Pricing-is-a-function-of-supply-and-demand

Below are some examples of what can impact supply and demand:

The Economy – When we go into harder financial times, marketing budgets are often very early on the chopping block, impacting demand. The general public also has less money to spend, meaning they spend more time at home and crucially, more time watching TV, impacting supply.

Programming – The shows on TV can impact both supply and demand. Popular programming such as live sport will draw in both viewers and advertisers, impacting both supply and demand.  The programming on non-commercial channels can also impact supply, as it can migrate viewers away from commercial viewing.

Weather – On the rare occasions that it is sunny here in the UK, audiences take the opportunity to get out and about, resulting in less time at home in front of the TV, impacting supply.

Audience – Different trading audiences have different SAP attached to them. Supply and demand influences these prices depending on how much TV they watch and how desirable to advertisers they are.

Region – Different regions of the UK have different SAPs dependant on the supply and demand within that individual region. For example, London is the most expensive region to advertise in, this is because of the low supply (due to longer commutes, longer working hours, etc.) and high demand (due to how attractive the audience is to advertisers).

Month – The cost of each individual month is again dictated by supply and demand. The cheapest month to advertise in is January, there is little advertising spend in the market and audiences spend more time at home due to the weather and having overspent over Christmas, conversely, despite the high supply, September to November are the most expensive months to advertise as the increased pre-Christmas advertising demand outstrips the effect of the increased viewing.

Other cost influencers

Negotiated discount – The final CPT is based on a discount against SAP. This discount tends to be negotiated either annually or on a campaign basis, and is usually weighed against agreed levels of quality, access to premium programming etc.

Length of Advert – Different lengths of adverts have different price loadings attached to them. 30” adverts are the base we work from, so have a cost loading of 1.00.  Any adverts longer than 30” will pay a loading proportionate to the extra time on screen e.g. 60” has a price loading of 2.00 as it is twice as long as a 30”.  Adverts that are shorter than a 30” have a loading as detailed below:

Second-length-factors

 

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5. Measure results and review

Once your ad has aired, find out how to evaluate the TV delivery and measure business results

1. Define your marketing objectives

This section will help you sharpen your plan of action by asking the right questions to deliver your business goals