Making the Cut How to smartly stretch your marketing dollars during a recession

Making the Cut How to smartly stretch your marketing dollars during a recession

Howard Shimmel, Senior Vice President, Client Insights, The Nielsen Company

SUMMARY: Marketers across industries are being charged with cutting back their marketing schedules to fit leaner budgets. However the dilemma for most is deciding what media hits the cutting room floor. Nielsen’s recession analysis demonstrates how a marketer at a movie studio or any industry can offset much of the potential reach/effective reach declines that would be caused by declining marketing budgets due to the recession.

Marketers have come into 2009 with several challenges heavy on their mind. However, the economy by far is the most pressing concern across industries. Marketers are scrambling for ways to maintain their advertising presence with consumers, while addressing diminished marketing budgets. In this uncertain climate, information that helps an advertiser understand what media best reach their actual brand targets—not traditional media age/sex buying demos—are critical assets in a marketer’s arsenal.

Marketers have an opportunity to change their mix, optimizing their use of the most effective networks and programs…

Tough times, tough decisions

With a clear understanding of what networks and programs best reach their actual brand targets, marketers have an opportunity to change their mix, optimizing their use of the most effective networks and programs. These new schedules will not only meet management’s lower budget mandates, but may also diminish the impact these lower budgets have on their brand’s in-market presence.

What media makes the ‘Cut’

Nielsen conducted a recession analysis that replicated the challenges a marketer could likely face in today’s economic climate. While this particular analysis examined a media schedule from a marketer at a movie studio, this type of analysis could be applied to a marketer across various industries and categories.

The analysis started with a typical movie schedule that reflects 2009 economic realities. The schedule reflects the typical mix of media across broadcast network by daypart and across cable by network. The overall budget was $12 million. The schedule’s performance was evaluated against Adults 18-49 ‘Early Movie Attenders’. Reaching this group of Early Attenders is key to successfully opening a movie. For the target, this schedule achieved 742.8 Gross Rating Points (GRPs is the sum of ratings achieved by a specific media vehicle or schedule), 80.5% reach and a 59.8% effective (3+) reach.

Determine how a 20% cut of all media would impact the original marketing schedule…

Approach 1: The ‘Hatchet’ Cut

A simulation was conducted to determine how a 20% cut of all media would impact the original marketing schedule. A schedule consisting of 20% fewer dollars with the same allocation across networks and dayparts achieved 594.2 GRPs, 77.8% reach and 54.1% effective (3+) reach for Adults 18-49 Early Attenders.

While only minimally affecting the reach percentage achieved during the original schedule (- 2.68%), the cut dramatically impacts effective or 3+ reach, with a 10% difference between the two schedules. Reaching people three or more times is crucial to a campaign’s effectiveness, especially in a hypercompetitive category like the movie category where multiple movies are being advertised simultaneously. It is clear, without considering the effectiveness of different networks and dayparts on reaching key studio marketing targets, this approach could materially impact the effectiveness of their campaign.

Approach 2: The ‘Precision’ Cut

The Moviegoer recession analysis shows that there is a great amount of discrimination of how well different networks and programs reach Adults 18-49/Early Attenders, relative to their overall Adult 18-49 rating level.

The first tactical approach uses the Moviegoer recession analysis data to determine which networks to cut, and which ones—because of their effectiveness in reaching early attenders—should not be cut, while still achieving a 20% total budget cut. The better performing networks/dayparts were not cut at all, the networks/dayparts that performed poorly were cut by as much as 50%.

This new schedule achieved 671 GRPs, 79.0% reach and 56.1% effective reach, regaining back 52% of the potential GRP loss and 35% of the potential effective reach loss from the overall budget cut.

With the guidance of the analysis, this schedule adjustment allowed the marketer to achieve GRPs, reach and effective reach closer to what was delivered in the original schedule and above that achieved in the ‘Hatchet’ approach. This approach translates to incremental media GRP value of over $1.2 million dollars. This is significant relative to the total recession impacted budget of $9.6 million dollars.

This analysis allowed the marketer to make educated decisions about the media in their schedule. They are able to not only achieve their budget targets, but also offset some of the impact of the budget cut by reinvesting in more effective media.

Approach 3: The ‘Remix’ Cut

The second tactical approach went further, cutting less effective networks/dayparts more than in the ‘Precision’ Cut scenario and increasing budgets on the most effective networks/dayparts. This schedule performed similarly to the ‘Precision’ Cut scenario, and achieved a 708 GRPs, 79.0% reach and 56.4% effective reach:

With the ‘Remix’ Cut a marketer is able to offset 77% of the potential GRP loss, 42% of the potential reach decline and 41% of the potential effective reach decline that the ‘Hatchet’ Cut would yield, and generate a $1.8 million in incremental reach value.

Successful results

With diminishing budgets, it more important than ever for marketers to optimize their media mix by targeting the most effective networks and programs. As in this example, the marketer was successful in alleviating nearly 80% of the potential GRP loss due to the reduced budget. Importantly, they came within 1% of the reach of the original schedule using either the ‘Remix’ or the ‘Precision’ Cut, and made up 40% of the effective reach loss.