A recently released study from IRI and Time Warner-owned Turner concludes that shifting just 10% of promotion spending to media advertising will increase marketing ROI by 10%-25%.
But how did such a reliance on promotions emerge? Blame the deep economic downturn of the late 2000s. This report seeks to reverse a reactionary shift from large-brand marketers to promotions and discounting, and the results are telling.
“Before the Great Recession, marketers worked on a handful of core principles: Differentiation builds brands; advertising enhances differentiation to build long-term, sustainable growth; and discounts provide an immediate incentive to consumers by signaling an opportunity to purchase below ‘market price.'”
Then, the Great Recession hit.
The result? “Consumers learned to shop smarter and, out of necessity, started leveraging all available sources of information to best align their needs with benefits offered by product choices with the best available price. In response, large-brand marketers relied more on promotions and discounting to sustain consumer engagement.”
Today, many of these smart shopping behaviors persist, the report authors note.
“Marketers’ heavy reliance on promotion and discounting is still very much in play,” they write. “Excessive (and growing) promotional spending has brands locked in a cycle of commoditization, and margins are being squeezed to near extinction. At the same time, media fragmentation continuously presents marketers with tough investment decisions that make it necessary for them to better understand the efficiencies and value propositions of their decisions.”
IRI and Turner partnered in mining marketing-mix studies across 62 brands representing $20 billion in sales and $3 billion in marketing spend across food, beverages, health care, beauty and home care aisles. The objective? To help marketers determine the most efficient marketing allocations and guide organizations to make marketing investments that provide short- and long-term growth.
Three key takeaways were generated from the study:
- Short-term ROI of media investments is comparable to that of standalone promotional efforts; however, when considering long-term ROI, the ROI of media investments is two to three times higher than promotion. Additionally, smart media executions further improve overall marketing ROI and enhance breakthrough, resonance and recall. This, in turn, strengthens brand equity, resuscitating margin and setting the stage for a consistent healthy brand future.
- The benefits of media are not limited to large brands. The benefits for large brands are well known, but smaller brands benefit too. Media provides opportunity to emphasize product benefits and other points of differentiation for smaller brands and, over time, smaller brands that invest right in media generate higher growth.
- An IRI/Turner simulation analysis shows that even a 10% shift in share of spending from promotions to media will substantially improve marketing ROI and support long-term growth. Marketers making this shift will reinforce brand equity, support shopper loyalty and drive consistent brand growth.
The results of this study expand on learnings from recent studies conducted by Turner and research leaders in the advanced marketing analytics space.
Turner’s work with a marketing analytics provider indicates that TV provides a direct and meaningful sales lift, not only by increasing awareness and consideration but also by increasing the effectiveness of other marketing vehicles further down the purchase funnel.
A study conducted with a global leader in data science and media technology shows how television advertising is a key driver of social media engagement for brands.
Finally, research in partnership with Turner, another television network and a leading cross-media research company emphasizes the importance of getting the right balance between TV and digital spend.
The conclusion: Brand sales decline when marketers significantly shift spend away from TV to digital.
RBR + TVBR OBSERVATION: We argue that this can also be applied to radio, too. With digital an advertiser’s attention magnet, CMOs and brand managers must realize that there is a necessary balance between traditional and new media that will make a campaign resonate and stand out. Snapchat and Facebook may be important reinforcement tools, but radio and TV are the relationship starters. Let’s not lose sight of this.
The report authors are Bhanu Bhardwaj, principal, IRI Media Center of Excellence, in the New York office of IRI; Olga Casabona, Senior Director of Client & Consumer Insights and head of Turner Incite Research, based in New York; Joy Joseph, principal and practice leader, IRI Strategic Analytics, in the New York office of IRI; and Howard Shimmel, chief research officer of Turner and based in New York.