Addressable advertising on TV: An advertiser's perspective

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For CSI conference, 10.05.10

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  • Good morning. My name’s Adam Rattner, and I’m currently the - Coca-Cola Great Britain and Ireland Media Manager - Responsible for all media spends’ productivity and profitability Coca-Cola spent last year in GB something in the region of £12m in TV media, £6m in outdoor and a similar amount again in press, radio, cinema and online. So I know a bit about advertising – but when it comes to new technologies I think it’s fair to say I must be one of the least knowledgeable in this room.
  • Good morning. My name’s Adam Rattner, and I’m currently the - Coca-Cola Great Britain and Ireland Media Manager - Responsible for all media spends’ productivity and profitability Coca-Cola spent last year in GB something in the region of £12m in TV media, £6m in outdoor and a similar amount again in press, radio, cinema and online. So I know a bit about advertising – but when it comes to new technologies I think it’s fair to say I must be one of the least knowledgeable in this room.
  • In fact as a client in a big corporate I feel something of a luddite in this room and in this process. After presentations from media outlets, stategic plans from comms planners, scrutiny from planner buyers and sign off from brand marketing teams, my job is in a lot of ways to be the final bridge between our finance department and our media spend. Justifying that where we spend our money will definitely get returns. My job is so often not to herald new technology, but to apply a healthy cynicism and financial scrutiny to it’s use. So if it’s true, II know the least about this technology in the room – why am I here?
  • Well I watch – and love – a fair bit of TV. That might be the reason. But I suspect the reason I was invited today was less to do with the insights that might be gleened from my tv habits (although more of that later) and more to do - with money. At the end of the day it’s people like me – people who aren’t necessarily the most technologically minded – who will fund these new technologies. People like me, who may very well get excited about the latest available gadgets, but who’s bottom line is to demonstrate that money that gets spend = an increase in sales, who will provide those advertising dollars, pounds and euros by which this will sink or swim.
  • So I guess I’m here to interrogate, and give colour to charts like this. This is from a US study that suggests that US advertiser are willing to pay a premium – here estimated at around 10%, maybe up to 20% to use technology to target that TV spend to householder profile. Is that true? Is the same true of European advertisers? Truth is, I don’t know. I’ll give some colour today by giving one point of view of one media buyer from one large advertiser. But of course it will not effect all advertisers the same. Will the main financial benefit of these technologies be – like search advertising did for the web, and cable advertising did for regional advertisers across the states – to open up TV advertising to many, many more smaller adverters generating large revenue from the aggregate of their smaller spends? Perhaps it’s an opportunity to be jumped on by premium goods luxury advertisers who have only a very niche target in mind or by Direct Response advertisers keen for a take from TV the kind of response rates they can achieve through CRM. I can’t tell you about any of that. But I’ll give you one perspective on a certain kind of advertiser – what some of the implications will be for the big FMCG brands that hold a decent share of current brand TV advertising spend.
  • So, if that’s what I’m here for – to give you an idea of how sellable these technologies are – to the end user, that’s what I’m going to try and talk about today. What are the costs of TV advertising? The value of TV advertising? And how these new technologies might justify a price premium by demonstrably improving the productivity of TV spend.
  • So, thinking about cost. What’s the problem with TV advertising from an advertiser’s point of view?
  • The problem is, you can’t use TV to target specific audiences effectively.
  • Here’s a picture of the biggest shows that were on British TV last year. Despite digital multichannel growing to almost full penetration the power of the big channels to deliver big shows is still very much in evidence. Despite the 200+ options on at that time – Simon Cowell’s runaway hit the X-factor could still pull in 30% of the available audience – an enormous 30 grps. For an advertiser to hit such a large audience at once is very attractive. But the argument goes that the smaller rating channels also have a benefit. With more niche, more targeted content, they attract people who are not interested in the mainstream, light viewers, with discerning tastes. Channels like MTV or Comedy Central are designed to pick up light viewing younger audiences.
  • But the data does not back this up. Here we’ve got a profile of light, medium and heavy viewers vs. Large and small shows. And the truth is that all shows get a mix of audiences. And in fact big shows have a higher percentage of those hard to reach – and typically younger and more advertiser attractive – light viewers. MTV does of course reach younger viewers, but if they only have limited viewing time, they are more likely to use it to watch the big water cooler moment TV.
  • In fact a double jeopardy law exists in the TV market. Not only do more people of all types watch the big shows and big channels more – but they watch them for longer hours as well. Small channels are used as part of a repertoire – they are rarely used as the primary source of entertainment.
  • Even the most targeted content we find delivers a poor proxy for the specific demographic audiences an advertiser is so often after. Music channels are 70% under the age of 35 (average: 39 percent) but still 5 percent of their audience delivery is aged over 55-plus. Sport channels, so commonally used to target men, are in fact only 65% male (heathy vs an average of 51 percent, but hardly discreet). Even “Men & Motors,” the men’s lifestyle channel in the UK (Tagline; “Fast Cars and Women”), has a 30% female audience, and only 5% of the men who subscribed to the channel actually watched it in a week, and those that did devoted less than an hour of their 30 hours of weekly viewing to it.
  • And that’s not the only problem with TV
  • There’s also the problem of ad avoidance. It used to be that people would get up to put the kettle on – now there are more technology based was to avoid the ads. The fact that ad avoidance by PVR is lower than we might have expected really only points to the fact that people are already habitually tuned to avoiding ads by other means. A 2003 study show that only around one third of ad viewing is active, one third partial while people use the web, read or talk, and one third complete avoidence. So, clearly any technology that had people more engaged would be of benefit.
  • So in targeting and in engagement, TV definitely poses series problems – but advertisers conintue to be high spenders on TV . . . Why?
  • We measure our sales by week – just the same as people go shopping. Which means to hit our weekly targets – to effect every shopping purchase, we need a medium that can reach all our consumers every week. TV does this phenomenally well. Almost everyone watches some TV every single week. And for whatever reason this seem to be improving. Be it HDTV in the home or PVRs that mean there is more of what you want to watch available the whole time – whatever the reason, the distractions of twitter, wiis, haven’t turned people away from the main screen in the house – a blessing for advertisers.
  • This chart shows average H/W+K TV costs in the UK up to the end of last year. Dropping year on year on year. A challenge for broadcasters, but a big reason for continued investment for advertisers like us. Even after some healthy inflation in the front half of this year, TV is still cheaper than it was in 1995.
  • For all the death knells of traditional TV – when it comes to measuring TV in broad terms – in awareness or ROI we see no mainstream drop in effectiveness. Given the problems we stated with targeting before, why not?
  • Because the truth is that reach not targeting is the most important media metric for business growth
  • To demonstrate this – have a look at this chart compiled by Marketing Science institute Ehrenberg-Bass, looking at annual penetration and frequency to drink across the US soft drinks market. What’s striking is that where penetration is bigger, so is frequency of consumption. Ehrenberg-Bass dub this the Double Jeopardy Law. Smaller brands have much smaller customer bases and those consumers buy the brand slightly less often. To grow you must substantially increase the size of your customer base. Targets to substantially or only lift purchase frequency – amongst a small target – are doomed to failure. It never happens.
  • Here’s some more data from the US. Here we’ve got frequency of buying in a year by household. Quite a lot of households only buy Coke once in a year. A number buy it twice. A few less buy it three times. A few less again make a purchase four times a year. And so on and so on. Very very few of our customers buy us every week – and to target them is easy. The money we spend on pack design, on price promotion, feature and display and on pack competitions and give-aways are all noticed by these consumers who regularly spend time with us, but is invisable to those consumers who don’t make a habit of going down the carbonated soft drinks ailse. The vast majority of our buyers are infrequent buyers and the challenge is to make those customers, who do like and drink us – when they remember, but who have so many better things to think about, to think about and consider us just a little more a little more often. If all our light buyers bought us just twice a year more – we’d have doubled our sales. And the what’s really key here is that all sales patterns always look like this
  • Never like this. You never get the majority of a brands buyers being heavy consumers or even mid consumers, at any stage in a brand’s life cycle. Therefore to grow a brand you always need: More light buyers More med buyers A few more heavy buyers And so broad reach – not niche targeting needs to be the paramount feature of advertising.
  • So just to underline the point – why does broad reach on TV work for us? 70% of people who bought a cola in the last year – us data again – purchased Coca-cola at least once. That means that 30% of cola buyers bought a competitor, but not us. Of our own customers the average buying amount was 12 times a year, but in fact less most of our customers buy it a lot less. About half of them only buy it once or twice a year. So red coke is a very broad proposition – and to grow sales we need more sales from our light med and heavy buyers, so broad reach is a must. But we do target more specific demographics with our portfolio range – don’t we need tight targeting for Diet Coke and Coke Zero?
  • Well the second truth of marketing – and reason that TV is so effective - is that targeting demographics has it’s limits.
  • Here’s an example from Nestle. For their Yorkie brand they famously tried to target males with their ‘not for girls’ campaign. The campaign was hugely successful in terms of total sales – and did end with a consumer base that is more male than any other in the category. But none-the-less 47% of their buyers are still female – and if they hadn’t reached them through broadcast TV, they’d be missing out on a bunch of sales.
  • And the same is true of our coke brands. We certainly message our brands differently – but we know that a whole load of guys love the taste of Diet Coke and lots of women have Coke Zero as they no sugar Coke of choice. The truth is – we don’t fit into nice little marketing buckets. How does that apply to TV?
  • Well as much in TV as anything else. Looking again at my most watched programmes of the moment, this comes through loud and clear. As well as the Champion’s League a typical young male programme I watch glee, because I think it’s hilarious, even though I fast forward the musical number, Top Chef on the firmly female Diva TV, because I’m a foodie and East Enders, even though I hate it, because my female housemate is a fan and sometimes I’ve got to let her have control of the remote. And those limitation in demographic targeting – both at a consumption level and an audience level - are reflected in the our use of TV. We target of different coke products differently. We buy different audiences on TV. But ultimately there is a lot of cross-over.
  • This review of some of the biggest programmes we bought for each brand last years shows just that. Across our two no sugar variants – targeting men and women separately our top programmes were the same. Hollyoaks, Big Brother, and Friends (even after all these years) deliver the highest ratings and broadest reach against young audiences for both brands. Now, by being broad we clearly pick up audiences outside our the core target. Some of that is wastage – but some of it isn’t. The truth is that the same consumers will drink all our products. By excluding an audience from seeing our advertising – men that drink Diet Coke and women that drink Coke Zero – we decrease our reach and impact on consumption. And corporately there’s also a responsibility angle. We offer a range of standard and diet beverages. All consumers should have the opportunity to see the range of products we offer and make informed choices on that basis. And there’s one more reason why TV does such a great job for us:
  • We almost never target just one audience at a time.
  • Very often we need to reach both a teenage audience who are our principle sparkling drink consumers and the mums and dads who hold the purse strings and do the shopping.
  • And what’s great for advertisers at the moment is that the latest digital trend is making that easier. Whilst the broadband revolution increasing pushed teens out of the living room and into the bedroom to use desktops – the rise of wireless has seen a move back – as teens can do what they do online – without having to give up on sociability or indeed television. Questions about attentiveness arise, but then they always have – what remains is a definite opportunity to reach large numbers of teens and their shopping families together.
  • It’s an opportunity that we as a company have embraced with open arms this year. Working with ITV1, the largest channel in the UK we’ve developed a Saturday night partnership that ties Coke up with the very biggest entertainment shows and promotes our with Food message. It’s the scale of this activity and it’s broad reach of all our important audiences that gives it such significance to our business. It’s this flagship media activity that has allowed us to ramp up conversations with our customers – the big supermarkets who will give us more in store presence when they see that we are supporting our products with such scale. And that relationship is fundamental to how we grow volume. Let me share an example from the Canadian market – activating the recent Vancouver games.
  • I love this picture, because it a pretty accurate example of how our advertising actually works. (by a consumer – which is why it’s a bit grainy). Execution in store accounts for a far higher degree of sales that external marketing ever can. Get feature and display right in the soft drinks aisle and you instantly shift sales amongst our heaviest buyers. Get it as good as this – so it extends beyond the aisle and even to front of store – and you start picking up light and new buyers as well. What’s also great about this picture is you can see the TV screen – the store’s management were inspired to create this level of display because of the power of our TV marketing. And to be inspired by it they have to see it as well. TV is great at galvanising a business – a mass media that effects consumers, shoppers, customers and staff. And there’s value in that.
  • Despite everything I’ve said reach is not the only media objective we go after. In fact we frequently seek to create high engagement with key targets at a cost to the total coverage we could achieve. Let’s take a quick look at a couple of the exceptions and see why they do indeed prove the rule.
  • Here’s a great example of some very tight targeting for our Glaceau Vitamin Water brand. Trouble is with the cost of that sign running into the millions, he’d have to drink an awful lot of water to make it pay back.
  • Here’s another example. This one is how we use TV in a way that isn’t broad reach, but is very, very focused. So why do we do it? Completely irrational – or does it create long term brand value. What we think it does – it drive recruitment. It’s designed to bring into the brand teens who will be loyal (or as loyal as consumers ever are) for years to come. Glaceau’s strategy was just the same. It’s been made famous across the world by millions of one-to-on conversations with potential consumers through sampling and social media asking people to ‘try me’. Low reach, high engagement activity has to be for recruitment. It has to pay back over the very long term. But can a 30” spot do this? TV is typically used to effect immediate volume and sales – and in that world, where we are nudging consumers – pushing those light, medium and heavy buyers to purchase once more a week, month or year – high reach and low cost are king. So far, I’ve given you a more than healthy dose of scepticism as to why the advertising community might not be crying out to pay premium prices for targeting TV. At the moment we get a good deal. We buy broadly targeted audiences on TV and we essentially get additional broad reach for free. So if addressable TV leads to high frequency against niche audiences, that might have value to some advertisers, but less to the big spending fmcg ones. However there is a way that addressable TV can deliver productivity that will have appeal
  • If reach is the goal, then frequency is the enemy
  • One clear fact that’s apparent in measuring ROI of media is diminish returns. Like most diminishing returns we measure that in curves. When you first spend money in a channel, as every pound spent reaches someone new, your ROI tends to shoot up. But as you spend more you find you increasingly build more frequency amongst heavy consumers and less incremental reach. When you get to that point on the curve you’re usually best putting your money elsewhere. But every campaign has a different curve – it’s as much an art as a science picking the right weight of TV up front.
  • Take our recent Powerade campaign. We had a cracking TV spot where a hydrated Powerade drinking Wayne Rooney was seen in a football dual against a dehydrated version of himself. We needed to reach you men who were keen football players – who played sport at least twice a week. It’s a Very engaging spot, but comprehension could be tricky, there’s Low category understanding about the role of sports drinks and Lots of competitor advertising. So based on norms we believed the optimum frequency for each individual was 4. At 400 - 450 TVRs we knew we could build 4+ cover – beyond that weight higher frequencies (5 or 6) were more readily being built. But even though the average was four – very few people are the average.
  • What you actually find is the viewers we want – the ones who might actually be out playing sport – are naturally light viewers – they are out the house more. And they might only see it once or twice. But the coach potatoes – the ones who would never need to drink Powerade could see the same commercial at those weights many many more times – because of how much TV they watch. But if addressable TV could frequency cap (even if by household) we wouldn’t need to spend the money on high frequency against heavy viewers – in order to reach the desirable light viewers. Even if there wasn’t this distinction between behaviour types – an effective frequency cap would be the most cost effective way to move from campaign bursts to consistency across the year and always ensuring that we were building the all important reach of a campaign. Perhaps we wouldn’t want to cap after reaching a certain frequency – but we might want to be much smarter than playing the same ad out again and again.
  • Here’s our World Cup campaign launching this month with the tag line What’s Your Celebration. The first execution to a household would be the brand ad. But if we’ve served that two or three times we could serve a promotional offer. If they see another execution we might ad you know what make an event of watching the next big game – Coke goes great with food – and the next one – you know what, we’ve got a zero calorie option as well.
  • To me – this is the first big story of addressable advertising. Not niche targeting – but the ability to extend reach more cost effectively than ever before. I know this might make me a something of a luddite – high reach and low cost not being the most pioneering thoughts in media planning – but that’s what still get advertisers to pay out money and that’s what see returns. Beyond that – there are many many ways to that these kinds of system could add value, that people much smarter than me will go into. We already know the value of consumer data – data we are building up with projects like our online loyalty platform Coke Zone – and one day we’d love to fuse this data with our ATL. But also know that with a million people signed up its a big programme, but a fraction of the reach of our product sales. Platforms like this are fantastic learning for the future – learnings we can afford because of the engine of growth that TV remains. That’s something we’re not in a hurry to give up.
  • But there are values beyond profit – and we are always looking to strengthern our credentials as a responsible advertiser – one that does not target pre-teens. And there is value in that as well.
  • Addressable advertising on TV: An advertiser's perspective

    1. 1. Addressable advertising on TV: An advertiser’s perspective CSI Conference, 11.05.10 Classified - Internal use
    2. 2. Who am I? - Coca-Cola Great Britain and Ireland Media Manager - Responsible for all media spends’ productivity and profitability Classified - Internal use
    3. 3. Classified - Internal use
    4. 4. What I watch Classified - Internal use
    5. 5. Financials (what i’d pay, to who) Classified - Internal use
    6. 6. <ul><li>The costs of TV advertising </li></ul><ul><li>The value of TV advertising </li></ul><ul><li>Increasing productivity to command a higher price </li></ul>Classified - Internal use
    7. 7. The problem from an advertisers point of view Classified - Internal use
    8. 8. You can’t use TV to target effectively Classified - Internal use
    9. 9. Classified - Internal use
    10. 10. Lighter viewers watch bigger shows Classified - Internal use Source: 3 1971 figures reproduced from Goodhardt, G. J., A. S. C. Ehrenberg, and Collins, M. (1975). The Television Audience - Patterns of Viewing. Hants, England, Gower Publishing Ltd. Page 78., reported in TV Futures, by Ehrenberg-Bass
    11. 11. Bigger channels are watched more Classified - Internal use Source: Figure reproduced from Barwise, P. and A. Ehrenberg(1988). Television and Its Audience. London, Sage Publication. Data is from New York 1976 and for UK in 1987.
    12. 12. Sport channels are 65% male ( average: 51 percent) Classified - Internal use
    13. 13. And also . . . Classified - Internal use
    14. 14. <ul><li>Picture of a kettle </li></ul>Classified - Internal use
    15. 15. But, we continue to be high spenders on TV . . . Why? Classified - Internal use
    16. 16. <ul><li>It works! </li></ul><ul><li>People are watching more TV than ever before </li></ul>Classified - Internal use
    17. 17. Classified - Internal use
    18. 18. <ul><li>It works! </li></ul><ul><li>People are watching more TV than ever before </li></ul><ul><li>TV has been getting cheaper year on year </li></ul>Classified - Internal use
    19. 19. Classified - Internal use
    20. 20. <ul><li>It works! </li></ul><ul><li>People are watching more TV than ever before </li></ul><ul><li>TV has been getting cheaper year on year </li></ul><ul><li>TV is not becoming less effective </li></ul>Classified - Internal use
    21. 21. Reach, not targeting is the most important media metric for business growth Classified - Internal use
    22. 22. Classified - Internal use
    23. 23. Classified - Internal use
    24. 24. Classified - Internal use
    25. 25. Classified - Internal use
    26. 26. Targeting demographic groups has it’s limits Classified - Internal use
    27. 27. Classified - Internal use
    28. 28. Who actually consumers Diet Coke Classified - Internal use
    29. 29. What I watch Classified - Internal use
    30. 30. Classified - Internal use
    31. 31. We almost never target just one audience at a time Classified - Internal use
    32. 32. Dual targeting Classified - Internal use Targeting the end consumer and shopper
    33. 33. The move back into the living room Classified - Internal use
    34. 34. Watching programmes together (With Food) Classified - Internal use
    35. 35. The importance of ATL to support shopper marketing Classified - Internal use Getting in-store right
    36. 36. The exceptions that prove the rule Classified - Internal use
    37. 37. Classified - Internal use
    38. 38. <ul><li>Irrational? </li></ul><ul><li>Deep engagement </li></ul><ul><li>Long term brand value? </li></ul>Classified - Internal use
    39. 39. If reach is the goal, then frequency is the enemy Classified - Internal use
    40. 40. Diminishing returns on TV Classified - Internal use
    41. 41. Planning the weight of TV <ul><li>Very engaging, but difficult comprehension </li></ul><ul><li>Low category understanding </li></ul><ul><li>Lots of competitor advertising </li></ul><ul><li>Optimal frequency: 4+ </li></ul><ul><li>TVR range: 400-450 </li></ul>Classified - Internal use
    42. 42. Heavy viewer: 15 / 16 Light viewer: 1 / 2 Classified - Internal use
    43. 43. 1. ‘ What’s your celebration?’ 2. Win World Cup tickets every day 3. With food message 4. Coke Zero Classified - Internal use
    44. 44. Fusing with coke zone Classified - Internal use
    45. 45. Stakeholder benefits Classified - Internal use
    46. 46. <ul><li>We don’t want to pay more for reduced ROI (want to see that it works for sales) </li></ul><ul><li>We do want a stronger broadcast environment (with more investment in programming) </li></ul><ul><li>We do want more attentive advertising (and audience scale) </li></ul>Classified - Internal use
    47. 47. References: Marketing theory from Ehrenberg-Bass ( www.marketingscience.info ) Media data from Fairbrother Lenz Eley ( www.flemedia.com ) Classified - Internal use
    48. 48. Thank you. e. [email_address] linked in: Adam Rattner twitter: ratters Classified - Internal use

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