Sweeping CPG Study Finds Magazines Deliver Biggest Bang for Buck, Digital Video Lags

Multi-Year Nielsen Catalina Study Compares Returns Across Media With Some Surprising Results

By Jack Neff. Published on June 14, 2016.

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Nielsen Catalina Solutions comparison of average increase in dollar sales by media in study across 1,400 CPG campaigns. Credit: Nielsen Catalina Solutions

What medium delivers the biggest bang for the buck? A new study provides a definitive answer, at least for packaged goods, and it's probably not the one anyone expected.

Magazines deliver by far the best return on ad spending when compared to TV, digital display and video, mobile and cross-media campaigns, according to a study set to be presented today by Nielsen Catalina Solutions at the Advertising Research Foundation Audience Measurement 2016 Conference in New York. The medium delivering the lowest return in the study is digital video, arguably the hottest for CPG marketers and for much of the marketing world.

The study appears to be unprecedented in scope in terms of looking at norms for return on ad spending (ROAS) across multiple media -- albeit only for CPG. The conclusions are drawn from analysis of 1,400 research projects spanning more than a decade across 450 brands.

The projects have been commissioned since 2004 by a variety of media companies and brands, but unlike most such research wasn't backed by a single sponsor or industry. Nielsen Catalina is using the term ROAS rather than the more commonly used return on investment (ROI) to help indicate that the results measure only incremental sales impact per dollar of advertising spent, not profit impact.

Magazines delivered ROAS of $3.94 per dollar of media spent. Digital video delivered only $1.53. Other media explored in the study -- TV, digital display, mobile and cross-media campaigns -- were in the middle, clustered around $2.50 per dollar of media spending.

Leslie Wood, chief research officer, Nielsen Catalina Solutions Credit: Advertising Research Foundation

Nielsen Catalina Chief Research Officer Leslie Wood was quick to point out that the differences between magazines and digital video were all about pricing. Magazines had the lowest cost per thousand impressions (CPM) in the study, and digital video the highest. Magazine audiences in the study were bolstered by inclusion of secondary audiences -- the pass-along readership that occurs everywhere from doctors' offices to friends' homes.

"Everybody wants to be in digital video," Ms. Wood said. "There is very little inventory, so the price is high. It's the reverse in magazines, which are undervalued in the marketplace.
 

When Nielsen Catalina looked at incremental sales per household reached, performance of all the media was more closely clustered. Magazines produced 26 cents of incremental revenue per household reached vs. 23 cents for digital video. TV came out on top at 33 cents.

Digital display had the lowest sales lift per household reached at 19 cents and the lowest sales lift per thousand people reached at $16.95. But it was average in ROAS because it had the lowest cost. The study covered mainly premium inventory and little or none was bought programmatically.

That cost data for all media came directly from either media companies or brands, so it reflects actual spending, not estimates, Ms. Wood said.

Increase in sales per household in Nielsen Catalina Solutions study. Credit: Nielsen Catalina Solutions

In terms of sales impact per thousand consumers reached, mobile fared best. But that was based on the relatively low reach of mobile -- which on average reached only 2% of consumers in the study -- so it had almost none of the diminishing returns that come from reaching the same people multiple times, like other media, Ms. Wood said.

Nielsen Catalina bases its research on audience-measurement panels of Nielsen and other partners with sales data from shopper loyalty programs collected by Catalina -- matching the same households to measure what media they saw and what they bought.

The study only covers CPG, and deeper analysis suggests media effectiveness may differ for other categories, because it even differs within CPG categories and brands. Big, high-market-share brands purchased frequently had the highest returns on media spending. Brands with smaller market shares or purchased infrequently had lower returns.

Some of the online display studies compiled for the research date to 2004, while measurement of other media types is more recent, with online video since 2007, TV since 2008, magazines since 2011 and cross-media studies since 2013.

To test whether effectiveness of TV, magazines or digital media had changed over time, Nielsen also compared media year by year -- meaning it looked at studies across all media only for 2013, 2014 and 2015 -- and found no meaningful trends in effectiveness, Ms. Wood said. Overall ROAS is lower in the NCS database since 2011, but that has to do more with the composition of brands and media types in the studies -- for example more small brands and more campaigns with digital video dragging down the average -- than with decline in overall media effectiveness, she said.

The study had no way of looking at the impact of creative effectiveness separately from media placement. But NCS did look at impact of different creative types, with ads featuring promotional appeals or coupons generally delivering higher returns than other types of ads.

Ms. Wood expects lively debate as various media groups look to turn the findings to their advantage. The data may suggest that magazines are undervalued and digital video overvalued. But will marketers defy trends by shifting funds back from one of the hottest media of recent years to one that's seen steady declines?

"If what I do changes behavior, I'd be thrilled," Ms. Wood said. "That's certainly the takeaway, that there are opportunities here to be looked at."

Much of the money that's been chasing digital video and driving up its CPMs has been driven by the search to find millennial and Gen Z audiences that have gotten harder to reach with conventional TV or magazines. But regardless of the demographics, the Nielsen Catalina data suggest there's plenty of sales impact to be had from older media.

One of the more surprising findings to Ms. Wood was the resilience of TV.

"What's interesting to me is that this happens at the scale that these media have," she said. TV has "dramatically higher reach" than the other media, averaging 57% of audiences in the Nielsen Catalina study vs. an average of 35% for campaigns overall and less than 10% for digital media, including only 2% for mobile. "Reach is expensive," Ms. Wood said. "So it's interesting that no matter how high its reach is, linear TV does a tremendous job of driving sales."

The study is in line with findings from another study released earlier this year by IRI and backed by Turner Broadcasting across 62 CPG brands representing $3 billion in annual media spending. IRI found TV return on investment has remained steady the past five years, despite challenges facing the medium, and that it generally was better than digital. As with Nielsen Catalina, IRI found big brands with high household penetration got by far the best return.

Increase in sales per thousand impressions in Nielsen Catalina Solutions study. Credit: Nielsen Catalina Solutions

ANCILLARY BUSINESS OPPORTUNITIES

 In almost every organization in which I have been involved, ancillary business opportunities have often provided, what I describe as, low hanging new revenue sources.

In most of our businesses, our primary focus is on the mainstream products and services our companies offer. These provide the bulk of any organization’s revenue growth. They are the mother nest business. We train our sales forces to doggedly pursue growth in these revenue centres. Our sales staff is rewarded on their success achieving their targets.  But what would happen if we stood occasionally and objectively looked at our operations and analyzed the operations of our clients with the objective of identifying what else we could be doing with the assets we already have to provide additional products and services to the client. Let the thought process move in every direction in search for new opportunities. You might be amazed at the revenue opportunities that exist which require very little additional investment and could represent significant high margin business.

I use several key parameters when prioritizing ancillary opportunities:

• Is there additional revenue to be made that we ordinarily would not have earned?
• Are we already knocking on the doors? 
• I recommend looking beyond just sales staff activity, examine all aspects of your operation. I recently was involved in discussions regarding a company that had service staff entering the offices of over 30,000 small, medium and large businesses on a monthly basis to fulfill their service requirements. This company was not in the delivery business but we did identify a number of opportunities where these service reps could be used to provide deliver services for other non-competitive companies.
• Is the additional investment minimal both in terms of money and human resources?
• Does the opportunity have the potential for synergies beyond just revenue?
• There may be circumstances where your organization can provide a service that may not directly generate revenue but strengthens your brand, competitive position, customer relationships or provides opportunities for you to generate new challenges for underutilized staff or management that you may be at risk of losing.

Here are some examples based on my experience that you may find helpful:

1.  When I was in charge of Trader Classified Media in Quebec, we published close to 75       classified advertising magazines, directories and associated websites that provided Quebec businesses and consumers with critical data on the used car, truck, recreational vehicle, motorcycle, boat and real estate markets. These publications and their websites were highly regarded sourcing tools or buying guides for anyone wanting to purchase previously owned items. The Trader products and services were the market leaders.

The business model was very simple. Gather photos and data on used inventory from consumers and dealers and publish it in appropriate publication or post it on the appropriate website. Every week, thousands of products were advertised. The company maintained some of the largest databases in Quebec on vehicles and real estate.

Some creative folks in the Quebec operation identified a unique opportunity to generate additional revenue using this data that they were already collecting. Trader negotiated with the government to be the government’s source of pricing data on used cars in the province. At that time, in Quebec, if you purchased a used car, when you went to the motor vehicle office to register the car and pay the sales tax, the government official would go a database to determine the “book” value of the vehicle and the tax would be based on that “book” value rather than the actual receipt received at time of purchase. Trader convinced the government that they were the leading authorities on used car prices and their database should be the one referenced by the government. The agreed upon arrangement was that the government agency would have an exclusive online access to a database that was setup and administered by Trader just for the government. The online database was constantly updated and it was accessed daily by several Quebec government departments.

The revenue generated from this online data management arrangement was significant and the margin was impressive for the following reasons:

• The data was already being collected due to the nature of Trader’s ongoing mainstream operations.
• There was very little additional administrative expense required to operate this ancillary business.
• The service was provided online so there were none of the usual publications costs involved.

Keeping in mind that this data was being used to determine the true market value of a used car or other vehicle, it was in the best interests of the used car dealers to ensure that whatever price they charged for the vehicle it was consistent with the price sourced by the government office when the buyer went to pay their sales tax. While the dealers could not have access to the actual online database, they were given the opportunity to subscribe to a service whereby each month they would receive a pricing directory which was basically a download of the database done every 30 days. Needless to say almost every used car dealer in Quebec subscribed to this print service. In addition and annual pricing directory was made available to consumers through retail stores.

Here was a case where the data was originally sold to Trader by the consumer or used car dealer through the purchase of an ad. The data was then resold to the government and again to the dealer as well as the consumer. When you think of it, from the perspective of those consumers and dealers who paid to advertise their vehicles in Trader’s publications, they were in effect rebuying the same data they had paid Trader to advertise.

2. The real estate market provided another lucrative opportunity. We published approximately 24 real estate titles in Quebec. The primary advertisers were real estate agents selling residential properties. The site we operated was called Visinet. This site was the third most visited site in Quebec after MLS and, I believe, ReMax. The main reason for the site’s popularity was the nature of its content. The site advertised real estate from any agent or agency that wanted to advertise. Unlike most other sites, such as Remax, our site was not restricted to carrying product being sold by one company. Consumers liked the site because they could search a large portion of the real estate market by visiting only one site.

The site attracted a large number of real estate agents of all sizes. Many of the real estate agents who advertised had limited, if any, web presence beyond their involvement with our site. While this was good for our business, we realized that eventually they would want to have their own web identity and when that happened they may reduce their commitment to our site. We therefore decided to offer web development and web hosting services to individual real estate agents. This business had a lot of benefits for us

• We managed to get additional revenue from the real estate professionals that we were already dealing with.
• We kept these agents “in the family” as we helped them develop their own web identities. This allowed us to continue to nurture existing relationships and identify value add opportunities.
• Even with their own websites, they tended to stay committed to us because we could constantly offer upgrades to their web capabilities that they could not afford to do independently.
• Their exposure on Visitnet drove traffic to their own site but they liked the synergy of having their business exposed on both sites.
• This made good business sense to us because we already had made the investment in web development and hosting assets. To do this work for the agents was not a huge strain or require significant additional cost. The real estate professionals selected their web design from templates we had pre-designed and hosting requires very little administration or cost. It provided us with opportunities to better utilize existing staff or add new staff that we could not have rationalized based on just our internal requirements.
• The value adds we were providing solidified our customer relationships.
• We created additional revenue opportunities for sales staff.

3.  I was the head of business development for a market leading conference management organization. They organized over 100 conferences per year. The attendees at their conferences were professionals mainly lawyers, investment bankers. While their events were well attended, they realized that in any given firm only 1 or 2 professionals would attend an event. Efforts to attract more attendees were unsuccessful.

The answer was to assemble the proceedings from each event into a publication. Wait a few weeks after the event was over and then make the publication available to others in firms that had sent a delegate to the event. The rationale was that those who attended the event would return to their offices and discuss the event. Ideally this would stimulate a demand for the information from the event. Delegates would be able to reap the benefits of the knowledge or information they acquired from the event for a week or two before the opportunity to acquire the proceedings was given to their colleagues. The proceedings were sold to the colleagues at about half the price of the event. The only people eligible to buy the proceedings were members of firms that had sent a delegate to the actual event.

This strategy served a number of purposes:

• It re-purposed the proceedings providing the opportunity to generate revenue beyond the event itself.
• The margin of the sale of the proceedings was high because the costs associated with preparing the publication were quite a bit less that organizing an event.
• The publication would be passed around within the respective firm and thus continue to promote not only the event but also the event organization. Basically the client was paying for the privilege to promote the event company.

 

 
4. I was COO with a new-media company that provided products and services to the “enterprise software development” community. Their website was an intriguing example of ancillary revenue generation. Those who contributed content to the site were paid based on a fee schedule that had fixed and variable elements. The company broke their content into categories (articles, news posts, interviews etc.) established a core value on each category (the company established a fixed fee for each type of content based on degree of effort....e.g. an article was worth more than an interview etc.). They paid that set amount plus a variable amount based on views of the specific piece. They would generate approximately 150 new pieces of original content/topics monthly. Their content just kept getting better and more relevant because they could continually monitor its popularity and the contributors were motivated to keep abreast of what were popular topics because it was in their best interests to give the readers more of what they wanted. The company also aggressively tagged all content (probably 4-5 tags per topic). The tagging allowed for cross referencing to items for sale such as online books (most of these books were custom written just for their audience), lead generation assets etc. They could target advertisers or product/service providers based on readership patterns. Client products or ads would be posted on pages where articles or other content appeared that contained words or phrases tagged to their product or service offering.

 
The company also published e-books. E-book titles were selected based on an analysis of the traffic. Since the site had a B2B focus, the content of the books tended to be need-to-know information.  The writers that created the online editorial content were the authors of the books. Management tracked a given writer’s popularity with readers and because of their tagging and tracking they could identify which of the writer’s subject categories were most popular.  The writer would then be contracted to write a book on a specific topic. The books were then sold as e-books or they could be purchased in print through Amazon. Companies that sold products or services that were relevant or related to a book’s content were invited to sponsor the book if they wished. The sponsorship deal could take 2 forms. One form was for the sponsoring company to pay a sponsoring fee. The other arrangement would be for the company sponsoring the e-book to have it made available as a free download but the e-book customer was required to register for the download and the company sponsoring the e-book got the registration. The client company paid the site operator for the leads that were generated.

By exploiting every possible ancillary revenue opportunity. This company site generated  several millions of dollars relying very little on traditional advertising revenue.



By: Richard Peters
http://ca.linkedin.com/in/richardpeters2/