The ROI of Television Advertising

Posted on by Chief Marketer Staff

Pick a perspective:

1. Nearly 80% of advertisers say traditional television advertising has become less effective, according to a study by the Association of National Advertisers and Forrester Research.

Or:

2. Half of all U.S. adult Internet users say TV captures their interest most effectively, according to a study by Burst Media.

The answer? Both.

Television advertising does work. But the direct response status quo is being challenged by companies looking for an approach that better marries response with brand and yields quantifiable results and accountability, dollar for dollar.

Think of it as a TV advertising merger that combines the best ingredients of what creative television can do with a strong call-to-action.

We call it ROI-Positive Advertising.

This new approach transcends both brand-building and direct response advertising to deliver a measurable, positive return on investment. It’s where creativity meets accountability, where brand meets results. And it’s more than just a sum of the two parts.

Here’s a snapshot:

*It’s a high-concept creative ad with an immediate call-to-action.

*It drives consumers to call or log on and, most importantly, to purchase.

*Results are trackable and quantifiable.

*ROI-positive campaigns result in a positive return on every ad dollar spent, whether accounted for through bottom-line results or a measurable increase in brand value.

*Brand awareness is built through the frequency afforded by increased media budgets that are rapidly scalable due to positive ROI on every media dollar spent.

Cultivating a trustworthy brand is critical and is an integral part of what drives response using the ROI-Positive approach. But brand-building alone is not enough.

Take this statistic from a study conducted by the Millard Group in 2004: only 2% of respondents indicated that brand was the crucial factor in their purchase decision.

The Internet has changed forever the relationship between a consumer and information. Just triggering a response falls short in a world in which consumers increasingly click-to-buy. The goal no longer is direct response. It’s direct action. Not intent to purchase, but an actual purchase.

Accountability is the watchword in a universe where millions of clicks can mean little in terms of revenues. Today’s crop of more mature, more ROI-driven Internet businesses appreciate television’s ability to combine brand building with sales-driven advertising—exactly the winning combination that was missing before the dot.com bubble burst.

This advertising success cannot be achieved by slapping a URL onto a television ad or scrolling an 800 number along the bottom of the screen. As with other television advertisers, these spots work when they combine the power television wields over every other advertising medium to create an emotional connection with the accountability of a call to action.

You’ve all seen the advertising success stories: eHarmony.com, Register.com, Geico.com and Expedia.com.

Take Register.com, a company that offers a suite of online services to help small businesses grow. It’s targeting entrepreneurs—a group that has a lot at stake. Its campaign needed to reach beyond product-specific messages to identify the overarching emotional needs it meets for its customers.

For Register.com’s audience, it boils down to this: there are few things more daunting than getting your business online. So the company created a campaign that conveys its understanding of the stress with testimonials from actual entrepreneurs.

As a result, Register.com’s brand and its sales of services like Web site creation, web hosting and e-mail have grown. The company has built a sustainable brand and a sales strategy with accountability.

There is a huge opportunity for savvy marketers to attract advertisers that might not otherwise have considered DR TV under the old template.

Progressive Auto Insurance is another potent example. Its entire brand is built around creating trust with consumers by offering comparative quotes from the company’s own competitors. Its ads underscore that trust by including examples of people who have saved money, but also by admitting that Progressive’s rates aren’t always the lowest.

The campaign builds a relationship by doing what television does best: creating an emotional bond with the consumer as an honest partner in the search for affordable auto insurance.

This is where creativity meets accountability, where brand meets results. It’s where advertising dollars equate directly to revenue. And it’s making other DR formulas look like old news.

ROI-Positive Approach + Television = Powerful Ads

Television presents a huge opportunity to connect with potential customers in a powerful way. Ask yourself some questions when evaluating whether television is right for your company and how to make it work effectively for you:

Identify the emotional need you meet for your customers. If you’re not sure, ask them. Chances are, you’re selling a form of relief from a particular problem that causes them anxiety. Do you ease their fears? Make their jobs easier? Help them compete against larger, more established businesses? Whatever your actual product or service, there’s likely an emotional need driving it.

*Evaluate your margins. As a general rule, television works best for companies with a margin of 5 to 1, cost of goods to retail price point (though I’ve experienced success with 3 to 1 margins in some cases).

*Work with an agency that will help you develop an ROI-positive campaign – one that transcends both brand-building and direct response advertising to deliver a measurable, positive return on investment. Your spots should build your brand while driving sales – resulting in that positive return on every ad dollar spent.

*To measure that ROI success, work with your agency to determine your response ratio factor in all costs including creative development, retainer fees, actual cost of media, etc., to get a response ratio that accurately measures the efficiency of the media to drive a particular response (a phone call or a Web site visit, for example).

One thing hasn’t changed in the history of television advertising. The key to connecting with your potential customers is to understand, and tap into, the emotion that lies at the heart of the problems you’re offering to solve for them.

Television stands alone in its ability to tell a story, providing your best chance to show your audience that you understand the emotion that drives them.

Then sit back and get ready to count your success, dollar for dollar.

Lucas Donat (lucas@donatwald.com) is a founding partner of Donat/Wald, a firm specializing in ROI-positive advertising. Its clients have included eHarmony.com, Hotwire.com, Stamps.com, Movielink.com, Mattel Toys, Columbia, MGM/UA and more.

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