What's next for TV advertising?

Editor's comment: Where is television advertising heading? With declining viewing figures, apparent loss of effectiveness and media fragmentation why does television continue to account for such a large share of marketers' budgets?

For some years the death of television advertising has been widely debated but the medium still claims a major share of many marketers’ budgets. It seems that almost every day there are stories about how television advertising is on the way out to be replaced “new media” such as the Internet or mobile advertising. Budgets for other media such as on-line or mobile are growing but this is often from a small base. Many campaigns are now built around a digital campaign with the aim of capturing consumer data to enable future 1-to-1 targeted promotions.

In the UK, expenditure on on-line advertising is set to pass that of television advertising by 2010 according to the Internet Advertising Bureau and PricewaterhouseCoopers.

Does this mean the end of the 30-second commercial though? The IAB/PricewaterhouseCoopers study indicates that some major advertisers still dedicate the bulk of their UK marketing communications budget to television. Procter & Gamble’s Web advertising accounted for just 1.2% of its total media budget in 2007 while Unilever allocated 9.8% and Tesco just 3%.

What we are seeing is a change in the nature of television advertising. Its role may be evolving but it remains an important part of the marketing mix. We may question why traditional television advertising may be struggling but also what is taking its place.

The decline of television advertising

There are a number of reasons why television advertising could be viewed as less important than some years ago. These include the following:

Loss of effectiveness and consumer trust.
Fragmentation of media.
Emergence of new media channels.
Quality of programming.
Changes in consumer behaviour.

Loss of effectiveness and consumer trust

This has become a major issue. In a recent study, the management consultancy McKinsey claimed that, by 2010, traditional television advertising will only be one-third as effective as in 1990. While this is partially due to higher than average TV cost inflation, there are also the significant issues of consumer trust and behaviour while watching television. The cost of reaching a dwindling number of viewers has been increasing rapidly making the cost per viewer far more expensive.

Many viewers switch off or “zap” (change channels) when there is a commercial break; some viewers are multi-tasking and undertaking other activities at the same time as watching television while others have reached message saturation and mentally “switch off”. Recent technological developments such as personal video recorders can even allow viewers to fast-forward automatically through the commercial breaks. It was reported that ITV has been seeking to restrict the speed at which this can be done.

However, when the issue of trust is considered, advertising ranks low and television advertising is particularly low. Many viewers simply do not believe what they are being told. Consequently, television advertising may be seen as less “trustworthy” than other forms of communications.

Furthermore, in the UK Ofcom is reported to be looking at relaxing the regulations relating to television advertising to allow longer and more frequent advertising breaks. It could be questioned whether this will help to grow the television marketplace or simply just add to more clutter or “noise”. Will it turn the television viewer away from the screen? How will more frequent advertising breaks affect the perceived quality of the programming or the viewing experience? Greater intrusion into the viewing experience may well have the effect of making viewers switch off in greater numbers.

Fragmentation of media

Television is not alone in experiencing media fragmentation and the Internet is, possibly, the ultimate in media fragmentation. This means that there are far more channels for the viewer to watch. When there was one or just a few commercial channels, the programmes could guarantee high levels of viewing and charge advertisers for the privilege of reaching them. Nowadays, with the occasional exception, the explosion in the number of commercial channels available through cable, satellite or digital terrestrial television gives viewers substantially more programme options and the viewing levels for programmes on the main channels are therefore much lower. A 30-second spot at 7.30 on a weekday evening reaches far fewer consumers than previously.

Emergence of new media channels

The media environment has certainly fragmented. Digital marketing is becoming more pervasive and is often able to engage consumers in a way that traditional media cannot. For example, social networking sites such as Bebo, Myspace and Facebook account for a large share of consumers’ time, hours that may have previously been spent watching television.

Mobile marketing is becoming more popular and advertising can effectively lower the cost of providing content in the same way that it has done in the past for television and press.

For some consumer types, new media such as social networking sites and mobile phones may be the only effective way to reach them.

US expenditure on alternative media reached $73.4 billion in 2007, a rise of 22% over the previous year, according to PQ Media. It is forecast to rise to account for over 26% of marketing budgets by 2009.

There are more options open to consumers and, as a result, more options available for advertisers. Traditional media have to compete in this new environment.

Quality of programming

The impact of programming is clearly a subjective issue. However, from a UK perspective, the quality of programming on ITV, the main commercial channel, has been widely cited as being in rapid decline. The channel has been criticised for endless reality shows and “talent” contests. The effect of this is that programmes seen by ITV as major audience grabbers have been scoring very low levels of viewership, at least in comparison with the higher levels of viewership enjoyed in the past.

A poor summer 2006 for ITV has led analysts to forecast that the channel will lose an additional £70 million of advertising revenue in addition to the £140 million fall already forecast for 2006. Unilever, a major television advertiser, has been reducing its television expenditure substantially.

Changes in consumer behaviour

The television no longer occupies the position at the centre of a family’s entertainment. Many homes will have televisions in different rooms with family members each watching their own programme. They could also be watching a DVD or video or playing a video game. Home entertainment may also be away from the television entirely with music and increasingly video, accessed over broadband Internet or mobile phone connections. Again, this is likely to be fragmented with the different family members having a one-to-one with the PC.

Furthermore, television advertising may not be the best way to reach young people. Teenagers and those in their twenties have grown up in a different environment where the use of Internet or mobile phone has always been present and television does not occupy the same position in their lives that it may have done for the baby boomers. In North America, the 18-26 age group spends more time on-line than watching TV according to Forrester Research. Furthermore, they are adopting new technology at a rapid rate, making the use of new media channels such as podcasts, blogs or mobile marketing increasingly viable and effective ways to communicate. Consequently, advertisers who are looking to reach younger people may still use television but it may no longer be the lead medium.

TV advertising is dead, long live TV advertising

So what does this mean for television advertising? Does the apparent move of viewers away from television and the loss of expenditure by major advertisers signal the end of commercial television? Not at all. The medium is evolving and is developing a different role within the marketing communications mix.

Exploit fragmentation

Firstly, while channel fragmentation might mean smaller audiences for advertisers, this could actually be viewed as something positive. The growth in the number of channels available to viewers means that it has become much easier for advertisers to target particular audiences. In fact, there may be a whole channel dedicated to that audience rather than having to find the appropriate programme. In addition, the proliferation of channels can make it easier for a marketer to advertise on television for the first time through the availability of lower cost options on the specialist channels.

The growth of interactivity

The biggest change to television since it was invented is currently underway with the switch from analogue to digital signals. While iTV is in its early stages of development, it provides added engagement by allowing the viewer to request more information about the product or service, perhaps by requesting a brochure or a more detailed overview of the product. Many brands have been experimenting in this area particularly through cable and satellite networks that allow a return path to the advertiser. Interactivity has the potential to open a dialogue between the marketer and the consumer. As more and more homes are equipped with digital television and the analogue signal is gradually phased out, interactive television is likely to become increasingly popular.

Greater viewer engagement

If television advertising and television content itself is able to engage the viewer more than previously then clearly this is one way to increase its effectiveness. This means moving away from a harder sales message to a softer and more subtle approach. There are a number of ways in which this is providing opportunities for advertisers.

Product placement is on the rise. PQ Research has estimated that global product placements were worth some $2.2 billion in 2005 and will pass $3 billion in 2006. Free placements are reported to be in decline. Product placement is not seen as advertising and thus does not carry the negative trust associations. It can show the product in context, perhaps being used by someone who has credibility with the audience. However, excessive use of product placement or over-exposure of the brand could provide damaging if there is an advertently commercial message. There needs to be a perceived level of objectivity for the placement to have any genuine effectiveness. Overt product promotion within programming is likely to have the effect of damaging the credibility of the programming. In addition, the BBC has been accused of allowing product placement and thus advertising by the back door. Clearly, this approach is not without its issues.

A stage further from product placement is the development of branded content. This is becoming more commonplace, not just on television but also in other media such as content-driven Web sites and customer magazines. Here the advertiser has control over the content and is able to guarantee the quality and that the brands are shown in the most appropriate environment. Kraft Foods, for example, has developed the Food & Family magazine concept that has evolved from the Kraft Interactive Kitchen Web site to television and magazine distribution.

Advertiser-funded programming is another possibility although this is an area that has been active for some time. Again, this enables the advertiser to have a higher level of control. Like product placement, if the commercial messages are too intrusive then the programme will lose credibility. However, a different approach to this is to develop a more generic programming style, for example, focusing on Italian cookery. While this could help to grow the overall market for Italian cookery ingredients, use of tactical advertising and promotion for the brand should be able to grow the advertiser’s business disproportionately.

We are currently seeing the growth of video on demand, indeed it is said to be clogging up the Internet as it has become so popular. Web sites such as YouTube or the BBC’s iPlayer allow consumers to view videos or television programmes when they wish. This is the start of viewing becoming more active and less passive even if it is necessarily interactive. It will be interesting to see how video on demand will offer opportunities for advertisers other than simply including a commercial at the start of a downloaded or streamed video clip.

Conclusion

The role of television in the marketing communications mix is clearly changing. The rising cost of using TV and the lower level of effectiveness have meant that it does not have the same position in the marketing communications mix that it may have done in the past. However, this does not mean that television advertising is on the way out. Quite the reverse. There are new ways in which the medium of television can be used to address new consumer and technology opportunities.

They way forward is to understand the key advantages of television and build these features into future marketing communications programmes. These may not necessarily be 30-second commercials but other audio-visual-driven programming that can be accessed in different ways by the consumer. Bombarding consumers with endless commercial messages will not only continue to undermine the programming but will also act to disenfranchise the consumer further.


	*Number 39: Winter 2008*
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About Martin Payne Marketing Communications Index	*What's Next for TV Advertising?* *by Martin Payne* Editor's comment: Where is television advertising heading? With declining viewing figures, apparent loss of effectiveness and media fragmentation why does television continue to account for such a large share of marketers' budgets? For some years the death of television advertising has been widely debated but the medium still claims a major share of many marketers’ budgets. It seems that almost every day there are stories about how television advertising is on the way out to be replaced “new media” such as the Internet or mobile advertising. Budgets for other media such as on-line or mobile are growing but this is often from a small base. Many campaigns are now built around a digital campaign with the aim of capturing consumer data to enable future 1-to-1 targeted promotions. In the UK, expenditure on on-line advertising is set to pass that of television advertising by 2010 according to the Internet Advertising Bureau and PricewaterhouseCoopers. Does this mean the end of the 30-second commercial though? The IAB/PricewaterhouseCoopers study indicates that some major advertisers still dedicate the bulk of their UK marketing communications budget to television. Procter & Gamble’s Web advertising accounted for just 1.2% of its total media budget in 2007 while Unilever allocated 9.8% and Tesco just 3%. What we are seeing is a change in the nature of television advertising. Its role may be evolving but it remains an important part of the marketing mix. We may question why traditional television advertising may be struggling but also what is taking its place. The decline of television advertising There are a number of reasons why television advertising could be viewed as less important than some years ago. These include the following: Loss of effectiveness and consumer trust. Fragmentation of media. Emergence of new media channels. Quality of programming. Changes in consumer behaviour. Loss of effectiveness and consumer trust This has become a major issue. In a recent study, the management consultancy McKinsey claimed that, by 2010, traditional television advertising will only be one-third as effective as in 1990. While this is partially due to higher than average TV cost inflation, there are also the significant issues of consumer trust and behaviour while watching television. The cost of reaching a dwindling number of viewers has been increasing rapidly making the cost per viewer far more expensive. Many viewers switch off or “zap” (change channels) when there is a commercial break; some viewers are multi-tasking and undertaking other activities at the same time as watching television while others have reached message saturation and mentally “switch off”. Recent technological developments such as personal video recorders can even allow viewers to fast-forward automatically through the commercial breaks. It was reported that ITV has been seeking to restrict the speed at which this can be done. However, when the issue of trust is considered, advertising ranks low and television advertising is particularly low. Many viewers simply do not believe what they are being told. Consequently, television advertising may be seen as less “trustworthy” than other forms of communications. Furthermore, in the UK Ofcom is reported to be looking at relaxing the regulations relating to television advertising to allow longer and more frequent advertising breaks. It could be questioned whether this will help to grow the television marketplace or simply just add to more clutter or “noise”. Will it turn the television viewer away from the screen? How will more frequent advertising breaks affect the perceived quality of the programming or the viewing experience? Greater intrusion into the viewing experience may well have the effect of making viewers switch off in greater numbers. Fragmentation of media Television is not alone in experiencing media fragmentation and the Internet is, possibly, the ultimate in media fragmentation. This means that there are far more channels for the viewer to watch. When there was one or just a few commercial channels, the programmes could guarantee high levels of viewing and charge advertisers for the privilege of reaching them. Nowadays, with the occasional exception, the explosion in the number of commercial channels available through cable, satellite or digital terrestrial television gives viewers substantially more programme options and the viewing levels for programmes on the main channels are therefore much lower. A 30-second spot at 7.30 on a weekday evening reaches far fewer consumers than previously. Emergence of new media channels The media environment has certainly fragmented. Digital marketing is becoming more pervasive and is often able to engage consumers in a way that traditional media cannot. For example, social networking sites such as Bebo, Myspace and Facebook account for a large share of consumers’ time, hours that may have previously been spent watching television. Mobile marketing is becoming more popular and advertising can effectively lower the cost of providing content in the same way that it has done in the past for television and press. For some consumer types, new media such as social networking sites and mobile phones may be the only effective way to reach them. US expenditure on alternative media reached $73.4 billion in 2007, a rise of 22% over the previous year, according to PQ Media. It is forecast to rise to account for over 26% of marketing budgets by 2009. There are more options open to consumers and, as a result, more options available for advertisers. Traditional media have to compete in this new environment. Quality of programming The impact of programming is clearly a subjective issue. However, from a UK perspective, the quality of programming on ITV, the main commercial channel, has been widely cited as being in rapid decline. The channel has been criticised for endless reality shows and “talent” contests. The effect of this is that programmes seen by ITV as major audience grabbers have been scoring very low levels of viewership, at least in comparison with the higher levels of viewership enjoyed in the past. A poor summer 2006 for ITV has led analysts to forecast that the channel will lose an additional £70 million of advertising revenue in addition to the £140 million fall already forecast for 2006. Unilever, a major television advertiser, has been reducing its television expenditure substantially. Changes in consumer behaviour The television no longer occupies the position at the centre of a family’s entertainment. Many homes will have televisions in different rooms with family members each watching their own programme. They could also be watching a DVD or video or playing a video game. Home entertainment may also be away from the television entirely with music and increasingly video, accessed over broadband Internet or mobile phone connections. Again, this is likely to be fragmented with the different family members having a one-to-one with the PC. Furthermore, television advertising may not be the best way to reach young people. Teenagers and those in their twenties have grown up in a different environment where the use of Internet or mobile phone has always been present and television does not occupy the same position in their lives that it may have done for the baby boomers. In North America, the 18-26 age group spends more time on-line than watching TV according to Forrester Research. Furthermore, they are adopting new technology at a rapid rate, making the use of new media channels such as podcasts, blogs or mobile marketing increasingly viable and effective ways to communicate. Consequently, advertisers who are looking to reach younger people may still use television but it may no longer be the lead medium. TV advertising is dead, long live TV advertising So what does this mean for television advertising? Does the apparent move of viewers away from television and the loss of expenditure by major advertisers signal the end of commercial television? Not at all. The medium is evolving and is developing a different role within the marketing communications mix. Exploit fragmentation Firstly, while channel fragmentation might mean smaller audiences for advertisers, this could actually be viewed as something positive. The growth in the number of channels available to viewers means that it has become much easier for advertisers to target particular audiences. In fact, there may be a whole channel dedicated to that audience rather than having to find the appropriate programme. In addition, the proliferation of channels can make it easier for a marketer to advertise on television for the first time through the availability of lower cost options on the specialist channels. The growth of interactivity The biggest change to television since it was invented is currently underway with the switch from analogue to digital signals. While iTV is in its early stages of development, it provides added engagement by allowing the viewer to request more information about the product or service, perhaps by requesting a brochure or a more detailed overview of the product. Many brands have been experimenting in this area particularly through cable and satellite networks that allow a return path to the advertiser. Interactivity has the potential to open a dialogue between the marketer and the consumer. As more and more homes are equipped with digital television and the analogue signal is gradually phased out, interactive television is likely to become increasingly popular. Greater viewer engagement If television advertising and television content itself is able to engage the viewer more than previously then clearly this is one way to increase its effectiveness. This means moving away from a harder sales message to a softer and more subtle approach. There are a number of ways in which this is providing opportunities for advertisers. Product placement is on the rise. PQ Research has estimated that global product placements were worth some $2.2 billion in 2005 and will pass $3 billion in 2006. Free placements are reported to be in decline. Product placement is not seen as advertising and thus does not carry the negative trust associations. It can show the product in context, perhaps being used by someone who has credibility with the audience. However, excessive use of product placement or over-exposure of the brand could provide damaging if there is an advertently commercial message. There needs to be a perceived level of objectivity for the placement to have any genuine effectiveness. Overt product promotion within programming is likely to have the effect of damaging the credibility of the programming. In addition, the BBC has been accused of allowing product placement and thus advertising by the back door. Clearly, this approach is not without its issues. A stage further from product placement is the development of branded content. This is becoming more commonplace, not just on television but also in other media such as content-driven Web sites and customer magazines. Here the advertiser has control over the content and is able to guarantee the quality and that the brands are shown in the most appropriate environment. Kraft Foods, for example, has developed the Food & Family magazine concept that has evolved from the Kraft Interactive Kitchen Web site to television and magazine distribution. Advertiser-funded programming is another possibility although this is an area that has been active for some time. Again, this enables the advertiser to have a higher level of control. Like product placement, if the commercial messages are too intrusive then the programme will lose credibility. However, a different approach to this is to develop a more generic programming style, for example, focusing on Italian cookery. While this could help to grow the overall market for Italian cookery ingredients, use of tactical advertising and promotion for the brand should be able to grow the advertiser’s business disproportionately. We are currently seeing the growth of video on demand, indeed it is said to be clogging up the Internet as it has become so popular. Web sites such as YouTube or the BBC’s iPlayer allow consumers to view videos or television programmes when they wish. This is the start of viewing becoming more active and less passive even if it is necessarily interactive. It will be interesting to see how video on demand will offer opportunities for advertisers other than simply including a commercial at the start of a downloaded or streamed video clip. Conclusion The role of television in the marketing communications mix is clearly changing. The rising cost of using TV and the lower level of effectiveness have meant that it does not have the same position in the marketing communications mix that it may have done in the past. However, this does not mean that television advertising is on the way out. Quite the reverse. There are new ways in which the medium of television can be used to address new consumer and technology opportunities. They way forward is to understand the key advantages of television and build these features into future marketing communications programmes. These may not necessarily be 30-second commercials but other audio-visual-driven programming that can be accessed in different ways by the consumer. Bombarding consumers with endless commercial messages will not only continue to undermine the programming but will also act to disenfranchise the consumer further.
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