Are advertising budgets well spent?

In times of economic crisis especially, it is tempting to focus on costs. Media budgets are limited in general, and print advertising in particular is experiencing a considerable decline. Online advertising is flourishing, while TV seems to maintain its share.

But what about the return on investment of advertising in these media channels? Is the shift toward online a rational decision? A media campaign should not be judged solely on costs, discount, or reach.

It is results that count. How can the yield of advertising be judged?

In the last few years, return on investment (ROI) has become the most popular key performance indicator to evaluate the selected media mix.

Thorough method of measuring media ROI: Following the example of a German study, Dutch news media and GfK Research have studied the options to optimise media usage.

In a study of 10 different multi-media campaigns, the additional sales of brands is compared to the media spend to calculate the yield of the advertising euro.

And the insights from this study appear to be similar to earlier results: By fine-tuning the chosen media channels, much more media effectiveness can be realised.

Remarkably, the print media are delivering the best returns. Beside these interesting observations, some useful additional insights can be derived.

The highlights of this media ROI study will be presented during INMA’s Advertising Ideas Day in Amsterdam on February 28.

Method of ROI study: GfK Panel Services is a research company specialising in ROI studies. This agency measures through a consumer panel both the purchase and the media behaviour.

Most media usage and also FMCG purchases are registered electronically; other media and other product purchases are tracked through a questionnaire.

By correlating the media exposure and purchase behaviour, the impact on additional sales can be calculated, the so-called “sales uplift.” 

In this approach, media ROI reflects the relationship between the gross advertising costs and the short-term returns on these media investments.

In this cross-media study, 10 diverse campaigns were studied, including advertisements for: coffee, a lottery, an Internet provider, a dairy brand, travel agency, and global players such as H&M, IKEA, and Vodafone.

The study reports the performance of five media channels: news print, magazines, radio, TV, and online banners.

The results: Recently, GfK has aggregated these campaigns into one meta study that reveals clear insights. Print advertising appears to have the highest ROI: 120%. Every euro invested in news print ads delivers a return on average of €1.20.

That means that advertisers on average earn back their print advertising investment within the campaign period and even earn 20% extra.

And print campaigns don’t have to be limited to sales-oriented advertising; the study also shows that even branding campaigns in newspapers deliver better ROI than TV spots.

GfK’s explanation for the outstanding performance of newspaper ads: The internal pacing of print ads enables confrontation at a suitable moment. If the message is relevant, the reader can decide to take his time to examine the offer. Because reach is built within 24 hours, newspapers perform very quickly.

Magazines also deliver outstanding performance. With a return of 130%, magazine advertisements produced the highest ROI of all media channels. The magazine use in this study delivers a modest but much targeted reach. Because of that the performance is strong but the scope is limited.

GfK: “Just like newsprint, internal pacing of magazines is a factor of success. Besides this, magazines give advertisers the opportunity to target sharply and to choose a suitable Umfeld (German media planning expression for the editorial content around an advertisement) for their ads.”

Over-spend of TV: Although the reach of TV and radio are considerable — ROI of 60% and 80%, respectively — these media channels perform below average. The study shows the media mix in The Netherlands often looks similar: many confrontations through radio, TV, and online, and a modest use of print.

GfK: “The large reach of TV offers advertisers a good starting point, but this study shows that this channel is deployed in abundance, what causes a reduced effectiveness.”

For radio, the advertisers should observe good timing and a short and powerful message.

Online banners in these 10 campaigns delivered a moderate reach and a modest impact. However, because of the low gross rating point (GRP) tariffs, this channel offers a good ROI of 110%.

Striking is that the more expensive print ads deliver the best ROI. On average, GRP costs for newsprint are twice as expensive as TV and eight times as much as radio. The impact, however, is so big that newspapers deliver far better ROI, even if calculations are based on gross prices.

Olaf Croon on behalf of Dutch news media: “This reminds me of the classic dish soap advertising. The A-brand is more expensive, but thanks to a better formula it cleans twice as much dishes. Being a media professional, you shouldn’t focus on costs only. In all observed media mixes, the costs per GRP have been leading; especially TV spots, cheap in the Netherlands with an enormous frequency, while the added effectiveness of the last hundreds of GRP is close to zero.

“By shifting media channels within a given budget, significant uplift in return can be achieved. Cost per ROI is, therefore, far more interesting than cost per GRP.”

Recommendations for better ROI of advertising: Advertising in print media is most lucrative, followed by online banners. Radio and TV stay behind. The key takeaway is that success lies in the shares within the chosen media mix. It is wise not to rely on only one media channel.

With optimalisation of the frequency much can be gained. TV is not efficient because of an overspend in GRPs. Because of the diminishing returns, more than 10 confrontations are a waste. With a modest shift toward print, a campaign can be significantly more effective.

On the whole, print media appear to be a smart choice for advertisers. They deliver good ROI, especially with several inserts. As Mr. Croon noted, innovation in advertising is indispensable, but this study shows that conventional channels like print can realise an excellent media ROI.

Print deserves a fair share. A mixture of conventional media and new media is key. But my recommendation is, above all, not to behave “penny-wise, pound-foolish.”

Again, the highlights of this media ROI study will be presented on INMA’s Advertising Ideas Day in Amsterdam on February 28.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .