Amy Gershkoff: DMAW Marketing Advents - Next Up for Television: Competing on Analytics

Next Up for Television: Competing on Analytics

by Amy Gershkoff

December 2009, Direct Marketing Association of Washington "Marketing AdVents"

In 2007, Davenport and Harris wrote "Competing on Analytics," in which they make the case that analytics have permeated most aspects of successful decision-making in corporate America, from finance to production to distribution to operations to marketing.

The direct mail business became more data driven as we experienced exponential growth in the amount of data available about consumer’s interests and characteristics and faster computers were developed to make use of that data. Internet advertising also follows the analytics mantra: advertising campaigns rise and fall based on metrics like ‘click through rates’ and ‘cost per acquisition.’

But for all the innovation elsewhere in the business and marketing world, the television advertising sector has not caught the analytics bug. Television advertising is bought and sold today the same way it was in 1970: the single largest line item in most advertising campaigns is also the least data-driven.

It is particularly surprising that data has not played a starring role in the television advertising industry given the targeting challenges that have emerged. In 1970, an advertiser who bought 1000 gross rating points on one of the “Big Three” broadcast networks would reach roughly one third of their target audience an average of ten times. Cable was barely in existence.

Today, broadcast viewership is in steady decline and more than 900 cable channels each reach a different audience. The scene is complicated with satellite TV, Verizon FIOS, and DVRs. How to measure a television audience is a question without a straightforward answer. Targeting ads has become a complicated problem.

Yet the analytics tools to meet these challenges remain surprisingly limited. We lack tools for targeting television advertising on the front end, for measuring the audience of a television show as it is being watched, and for measuring the impact of the advertisement after it aired.

What lies ahead in 2010? Television advertising will finally board the analytics train. Consider these three emerging trends:

1. Better tools for audience measurement: Just as the analytics revolution in the direct mail industry was fueled by an explosion in the availability of commercial data, analytics in the television advertising industry will be fueled by an increase in the availability and quality of tools for audience measurement. One firm, for example, now offers tools to capture “near live” television viewing; in the coming years, we will likely see similar innovations in audience measurement.
2. Targeting tools: Few tools currently exist to target television ads to the viewers who are most likely to be responsive to the message. Nielsen ratings provide breakdowns by basic demographics like age and gender, and companies like Scarborough provide some nationwide demographic data on audience composition. But for regional or local businesses, or any company with a niche audience, the marketplace is void of targeting technologies. Changing Targets Media, whose software determines the optimal placement for advertisements, is at the forefront of what will become a rapidly expanding field.
3. Addressable TV: Imagine being able to serve Purina dog food ads just to households with dogs, and Pampers ads just to households with children under two. The technology to target a particular television ad to a particular household already exists, and is currently being tested in a few media markets. In the next few years, this technology will likely become standard, offering an unparalleled opportunity for analytics, both in targeting ads and measuring their impact.

In sum, soon advertisers will be able to target their television ads and measure their impact with the same level of precision as their direct mail and Internet campaigns. And that will force television advertising firms to ‘compete on analytics.’

--Dr. Amy Gershkoff is a founding partner of Changing Targets Media, a Washington, D.C. – based analytics firm founded in 2008. Already the firm has helped nearly two dozen campaigns be more efficient and effective with their advertising.