MediaMix The Natural Laws of Advertising One Iron

Media-Mix & The Natural Laws of Advertising

One Iron Law of Advertising n n n Ad dollars follow consumers. Often this Iron Law works sluggishly. Ten years ago, few consumers used the online medium. Today consumers spend more time online than reading newspapers or magazines. But, although the fastest growing medium, online still receives fewer dollars than newspapers or magazines (about half in 2007, according to TNS).

Media’s Natural Laws n n Herschel discovered Celestial Mechanics; Newton the Laws of Gravity. We are just discovering Media’s own natural Laws. Recency, Optimizers and Marketing-Mix Modeling all give the same advice: adding too much of anything in media brings lessened response. This phenomenon is called “diminishing marginal utility” and affects everything that is done in planning.

Diminished Marginal Utility n n Regardless of the strength of a medium, adding dollars will usually produce a lessened consumer response - diminishing marginal utility. The sales effectiveness of a medium relates almost inversely to its share of the ad budget. * The more dollars spent, the less response per dollar. This is why any single medium alone cannot produce the most cost-effective media plan, and it’s why Media Mix is at the top of every media planners list. *John Philip Jones, The Ultimate Secrets of Advertising (August publication)

% of Schedule’s Potential Reach Extra Reach Is Expensive +13% +12% +16% +41% +69% % of Schedule’s Total GRPs Source: Media Mentor; Target: Persons 12 -64

Media Response Curve n As dollars increase, the curve starts to flatten until the last dollars produce very little added response. As reach increases, dollars buy less reach and more frequency. Medium A Response n Media dollars

The Media Mix n Mixing media is a simple way to improve response. As response starts to weaken, the media planner Magazines shifts to the next medium. Online Television Response n Media Dollars

Build Reach More Cost. Effectively Without Duplication n In the media mix, television starts building reach cost -effectively. Adding a second medium will build more reach for less money. It will duplicate television less than television will duplicate itself.

The Cost of Incremental Reach 30 $15. 40 A 30 reach costs $15. 00 Reach CPM 35 $33. 20 Five additional reach points - cost more than doubles to $33. 00 Reach CPM 40 $44. 50 Five additional reach points cost $44. 50 Reach CPM Source: X*Pert Reach Optimization

Reach % CPM vs. Cost Per Incremental Reach Point Magazines Internet Television $ Investment Source: The Ephron Consultancy 2. When the reach of one medium starts to flatten in relation to the dollar investment, an effective campaign incorporates another medium, building reach in a cost efficient manner 1. After a certain reach point, each additional media dollar achieves less consumer response and builds reach at a much slower, and costlier rate

Summary n n When CPM’s reasonably represent media value, spreading the dollars will usually produce a more cost-effective plan. The unprecedented growth of the Internet fastest of any ad medium on record - has left many advertisers trailing in the consumer’s dust. Why should media dollars be spread as far as online? Because it’s where consumers are and it’s where the action is (and online costs less). Add reach and increase efficiency.