It’s easy to spend your marketing budget
Tv advertisements are the easiest way to spend your marketing budget. Even if you need to spend $10 million it’s easy with a TV advertisement. Just call an advertising agency and tell them you have $10 million to spend for advertising. They’ll take care of it in no time. But they wouldn’t have a job unless it was effective, right? Well I’m saying TV advertising is a waste of money.
Why TV advertising can work
A TV advertisement works only if there’s someone watching it. During the commercial breaks people run off to the refrigerator or the toilet. And those who stay at their couch don’t want to see the commercials. So, they’re not really paying attention. Every advertiser knows this and yet they spend millions of dollars into content no one wants to see.
The idea, as all the same people would point out, is to create familiarity. People intuitively believe a familiar product is superior to a strange one. So, when you go shopping and see a line of cereals you like the one you’ve seen before. This works even if you don’t remember seeing the ad. So, TV advertising can work because of the benefits of branding. And for a select few it’s effective (see a list later in this post).
The ROI of a TV advertisement
Calculating the ROI (Return On Investment) for advertising is difficult if not impossible.
Lets say you spend a million dollars for an ad. 10 million people watch TV when it’s aired. You only spent $0.1 per viewer! So, 10 million people buy your product and you make $1 profit from each purchase. You just made a profit of $9 million! A 900% ROI! Unfortunately that’s not realistic and everybody knows it. Often only a few percent of the people watching are potential customers (why have I seen a thousand tampon commercials?). And only a few percent of those will actually buy your product. Here’s how it changes the calculation:
- You spend $1 million for an advertisement
- 10 million people see you ad
- 5% of them are potential customers
- 5% of the potential customers buy your product
- You make $1 for each purchase
- 25.000 people buy your product so you make $25.000
- You lose $975.000
- Your ROI is -97.5% on your fancy TV advertisement
The 5% may be too pessimistic so lets make it more promising. Lets say 20% of the people who actually see your ad are potential customers. And 20% of them buy your product. Your ROI is still -60%. You lost $0.6 million. To break even the percentages should be over 30%. For some products like cereals that’s possible, but if there are 5 cereal commercials back to back they can’t all get 35% conversion.
When should you use TV advertising
As I said earlier there are situations where TV advertising can create a good ROI. But some of these conditions always need to be met:
- A TV show has a specific viewer demographic. And it’s identical to your customer demographic. So, if you sell fly fishing equipment it might be a good idea to advertise during a fly fishing TV show. But only if the viewers actually buy new fly fishing equipment from you because of the advertisement.
- Your profit margin is large enough to cover a small conversion percentage. Real estate agencies use TV advertising quite often. They can get a good ROI because even a single sale is worth a lot to them.
- A strong brand is especially valuable in your industry. The marketers of car manufacturer’s now how valuable it is to have a strong brand. And that’s how they can justify a pitiful ROI.
- A TV advertisement is the only way to reach your potential customers. A cereal company is an example of this. Many enough people buy cereals to justify an expensive ad campaign. And more importantly cereals is a repeat purchase; people can buy cereals many times a month.
- You want to win a marketing award in the TV advertisement category. If you do win you’ll be able to tell your boss and/or your potential customers that you won an award. So creating TV advertisements for your boss/clients is a really good idea if you’re in the business of creating TV advertisements :)
None of the examples above are actually rational
As compelling as the examples may sound, they’re not thought through. It’s true the ROI could be positive (you make a profit from your investment). But you’re still wasting your money! Or at least you should think about a few more aspects.
- The fly fishing equipment company would get a significantly better ROI by advertising in fly fishing magazines and in internet forums. They could create a content marketing campaign that would reach more people interested in their products. And they would reach their target audience at the time when they’re looking for information.
- Some major real estate agencies have already stopped using TV advertisements because of the poor ROI. They’ve realized they get a better ROI if they concentrate their marketing on the internet. They use traditional advertising methods with content marketing methods. And most importantly they reach their potential customers at the exact time when they’re looking for a home. One company I know of uses ads that say, “Click to see the most viewed home at *your city/country*”. I’m sure most people don’t want that house, but they’ll remember the website and go there when they’re actually looking for a home.
- I have to admit that car manufacturers need a strong brand and a TV advertisement is a good way to accomplish that. I’d still spend much of the marketing budget in content marketing. People look for information about cars on the internet. If you’re the car manufacturer who answers the questions your potential customers have, you gain their trust. And if you really want to be on TV then be in the TV show when people are watching their heroes. Product placement is already becoming a part of the writing process of a TV series. That’s because smart marketers understand the value of it.
- An average cereal company can’t really use content marketing because no one looks for information about cereals. But if you’re selling a healthy alternative you have more options. Websites, blogs, and forums about health, food, etc. would all be good places for advertising. Or you could also pay for a good placement in health food stores to create brand awareness in your niche target audience.
- If your goal is to win a TV advertising award you need to create a TV advertisement. Nothing to add to that…
So in short: spending your TV advertising budget in content marketing usually creates a better ROI. That’s because TV advertising can never be as focused and targeted as online marketing. But to be perfectly honest I do believe TV advertising isn’t always a waste of your money. But the odds are on my side: only a small percentage of the readers of this post can justify a TV advertising campaign worth $10 million. Or am I wrong?