Media-Mix & The Media-Mix & The Natural Laws Natural Laws of Advertisingof Advertising

One Iron Law of AdvertisingOne Iron Law of Advertising

Ad dollars follow consumers.Ad dollars follow consumers. Often this Iron Law works sluggishly.Often this Iron Law works sluggishly. Ten years ago, few consumers used the Ten years ago, few consumers used the

online medium.online medium. Today consumers spend more time Today consumers spend more time

online than reading newspapers or online than reading newspapers or magazines.magazines.

But, although the fastest growing But, although the fastest growing medium, online still receives fewer medium, online still receives fewer dollars than newspapers or magazines dollars than newspapers or magazines (about half in 2007, according to TNS).(about half in 2007, according to TNS).

Media’s Natural LawsMedia’s Natural Laws

Herschel discovered Celestial Mechanics; Herschel discovered Celestial Mechanics; Newton the Laws of Gravity.Newton the Laws of Gravity.

We are just discovering Media’s own natural We are just discovering Media’s own natural Laws.Laws.

Recency, Optimizers and Marketing-Mix Recency, Optimizers and Marketing-Mix Modeling all give the same advice: adding too Modeling all give the same advice: adding too much of anything in media brings lessened much of anything in media brings lessened response.response.

This phenomenon is called “diminishing This phenomenon is called “diminishing marginal utility” and affects everything that is marginal utility” and affects everything that is done in planning.done in planning.

*John Philip Jones, The Ultimate Secrets of Advertising (August publication)

Diminished Marginal UtilityDiminished Marginal Utility

Regardless of the strength of a medium, adding Regardless of the strength of a medium, adding dollars will usually produce a lessened consumer dollars will usually produce a lessened consumer response - diminishing marginal utility.response - diminishing marginal utility.

The sales effectiveness of a medium relates The sales effectiveness of a medium relates almost inversely to its share of the ad budget.*almost inversely to its share of the ad budget.*

The more dollars spent, the less response per The more dollars spent, the less response per dollar.dollar.

This is why any single medium alone cannot This is why any single medium alone cannot produce the most cost-effective media plan, and produce the most cost-effective media plan, and it’s why Media Mix is at the top of every media it’s why Media Mix is at the top of every media planners list.planners list.

28.4

48.1

68.0

79.1

88.5

100

16.7 33.3 50.0 66.7 83.3 100

Source: Media Mentor; Target: Persons 12-64

% of Schedule’s Total GRPs

% o

f S

ched

ule’

s P

oten

tial R

each

+69%

+41%

+16%

+12%

+13%

Extra Reach Is ExpensiveExtra Reach Is Expensive

Media Response CurveMedia Response Curve

As dollars increase, the curve starts to As dollars increase, the curve starts to flatten until the last dollars produce flatten until the last dollars produce very little added response.very little added response.

As reach increases, dollars buy less As reach increases, dollars buy less reach and more frequency.reach and more frequency.

Res

pons

e

Media dollars

Medium A

Mixing media is a simple way to improve Mixing media is a simple way to improve response.response.

As response starts to weaken, the media As response starts to weaken, the media planner shifts to the next medium.planner shifts to the next medium.

Re

spo

nse

Media Dollars

Online

Television

Magazines

The Media MixThe Media Mix

In the media mix, television starts building In the media mix, television starts building reach cost-effectively.reach cost-effectively.

Adding a second medium will build more reach Adding a second medium will build more reach for less money.for less money.

It will duplicate television less than television It will duplicate television less than television will duplicate itself.will duplicate itself.

Build Reach More Cost- Build Reach More Cost- Effectively Without Effectively Without DuplicationDuplication

The Cost of Incremental The Cost of Incremental ReachReach

A 30 reach costs $15.00 Reach CPM

Five additional reach points - cost more than doubles to $33.00 Reach CPM

Five additional reach points cost $44.50 Reach CPM

30$15.40

$33.20

$44.50

40

35

Source: X*Pert Reach Optimization

Source: The Ephron Consultancy

Rea

ch %

$ Investment

Television1. After a certain reach point, each additional media dollar achieves less consumer response and builds reach at a much slower, and costlier rate

Magazines

Internet

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

CPM vs. Cost Per CPM vs. Cost Per Incremental Reach PointIncremental Reach Point

SummarySummary

When CPM’s reasonably represent media When CPM’s reasonably represent media value, spreading the dollars will usually value, spreading the dollars will usually produce a more cost-effective plan.produce a more cost-effective plan.

The unprecedented growth of the Internet The unprecedented growth of the Internet - fastest of any ad medium on record - has - fastest of any ad medium on record - has left many advertisers trailing in the left many advertisers trailing in the consumer’s dust.consumer’s dust.

Why should media dollars be spread as far Why should media dollars be spread as far as online? Because it’s where consumers as online? Because it’s where consumers are and it’s where the action is (and online are and it’s where the action is (and online costs less).costs less).

Add reach and increase efficiency.Add reach and increase efficiency.