In the news recently the Government suggested that the BBC should cut spending on big-name stars in order to reduce the cost of the TV licence. This contrasts with the business model of commercial TV – where the likes of ITV and Channel 4 generate their revenue by selling advertising, using pricing strategies to maximise their income. So how does this work on the other side of the coin? If you want to buy advertising space, how many adverts should you have and when should they be shown in order to maximise the number of people – within your target market – who see your advert? This week’s Figure it Out attempts looks to spend a £150,000 advertising budget on ITV as wisely as possible.
Firstly, let’s address the issue of cost. ITV provides a rough guide of the cost of adverts. This is dependent on region and time of day.
NB one transmission is defined as one 30 second advert. We want to place an advert that will reach all regions of the UK and therefore we will use the Total Costs in our calculations. The next step is to consider how many people watch TV at different points during the day. Using ratings data from BARB, approximate viewing numbers can be found for different time slots.
Using average viewing figures masks the variability in audience ratings, which is greatest in the Peak Time Slot, because the programmes shown are not always a regular series. Putting this to one side for the moment, the first thing we can do is look at the audience reached per pound spent, to show which slots have the best audience-to-cost ratio.
Based on this information alone, you may be inclined to spend your budget by showing your advert 17 times during the same late night movie – till you realise it’s likely your advert has been seen by the same 3.14 million people. The same logic applies to day time TV – many of the 900,000 audience stay watching as This Morning slides seamlessly into Loose Women. This suggests spacing out our adverts more evenly during the day. The counter argument would say that there is value in repetition. Many people use the break to make a drink, or put on the washing or, if you are like me, go and get a FAB ice lolly. So repetition increases the chances of it being seen. In addition, repetition reinforces the messages in our head, cementing that advert / brand in our memories. So where is the balance between the two? To keep things simple, we assume that will only show our advert a maximum of once per hour. This allows for some reinforcement with those viewers who watch several shows back to back, but also increases the chances of hitting a new audience. So, you have £150,000 budget to spend and you can only show your advert once per hour; how many adverts would you place in each time slot to maximise the number of people who see your advert? This problem can be solved using optimisation which takes your inputs and constraints, and uses mathematical techniques to give you the best solution. The results suggest:
The results show that within your budget you should place 9 adverts during the day, 1 in the early evening, 1 during the Soaps period and 2 in the late evening. It is not surprising that the optimiser didn’t pick any adverts in the Peak Time slot, given in low audience to cost ratio. Why would you, unless your target audience are all watching TV at that time. This leads me onto the next part of the analysis. I’m sure many of you that are reading this have been saying all the way through, “Yes, this is all well and good but surely it depends on what you are advertising and when your target market watches TV?”. So let’s see how this solution changes if we are aiming at two different demographics. • Product 1 – Rocket Stairlifts (“gets you upstairs before you forget why you were going there”). Target Market is the mature consumer who watches more TV during daytime and early evening • Product 2 – Hollow! Magazine (“all the celebs you’ve never heard of”). Target Market is the younger professional watching TV in peak time and late at night This changes our scheduling dramatically:
Product 1 – Rocket Stairlifts
Product 2 – Hollow! Magazine
As you can see, the scheduling of our adverts changes completely. This analysis can be developed in many directions – how does are target market propensity to buy affect our decision? Are we better off sponsoring a TV Show (like Harvey’s sponsorship of Coronation Street) than placing numerous adverts? Funnily enough, in no scenario has the optimisation picked the most expensive peak time slot. Maybe we need to go back and ask the Marketing Director for more money!