Lessons for Effective Advertising in Uncertain Times

Summer Vallillee – Account Executive, AC Nielsen Analytic Consulting
Jessica Avery – Account Director, Client Consulting, Nielsen BASES
Presented to the CARF Workshop - Advertising In a Recession – April 6, 2008

With the increased cost of commodities and the rising value of the Canadian dollar putting the squeeze on Canadian manufacturing, it’s not a big surprise that advertisers will be forced to cut their advertising budgets to maintain product profitability.

It has been the Nielsen experience that continuing to advertise, especially on television for a FMCG, yields a higher long-term (3+ years) return on investment than other types of marketing efforts, including trade deals. According to Nielsen, advertising ROI also improves when TV advertising is combined with other marketing tools such as trade deals. While trade dealing may yield the highest ROI in the short term, the combination of the two marketing tactics can yield 18% greater profitability over the longer term. To cut TV advertising just to reduce short-term marketing expenses can have negative results in the long run.

To demonstrate the alternative to ad cuts, Nielsen has developed a consumer marketing mix model called the Spectra consumer grid. The model relates product consumption index by lifestyle cluster to a responsiveness index to various media. The multiplication of these two indices yields an ROI index, which Nielsen suggests is a better way to define advertising to target audiences than by looking at demographics alone. For example:

Nielsen also says that ROI can be optimized further by selecting specific TV programs that index higher against the targeted lifestyle groups, rather than simply placing ads in programs that have the largest overall audience.

To maximize advertising ROI, Nielsen suggests that advertisers first determine the strength of an idea through consumer research. Then, when advertising funds are limited during times of recession, marketers can choose to spend according to strength and allot the stronger concepts the biggest slice of the budget. Findings also show the importance of creating good copy around an idea and ensuring that the message is relevant to the Canadian market rather than simply picking up advertising from the US. Nielsen routinely finds that either due to consumer preferences or Canadian regulations, messaging that works well in the US does not necessarily perform well in Canada.

Nielsen also tracks information from consumers about new product awareness and they have found that after in-store, the best vehicle for promoting awareness is TV. Consumers also react best when they receive messaging from multiple sources so it is essential to determine what the best mix of communications channels are for optimizing awareness. This part of the process is where consumer metrics come into play as guideposts for choosing the advertising options that will be most effective for a specific product.

Through research, Nielsen has identified multiple measures that can help understand consumer reaction to an initiative so ROI can be optimized by applying only the advertising approaches shown to have the strongest appeal and utilizing the most focused, most credible advertising concepts possible.

In summary, Nielsen offers the following advice for dealing with advertising in a recession:
• Don’t rush to cut media spending. Staying the course pays off in the long term. If the brand is small, times of economic recession is a good time to get aggressive.
• Understand response by consumer group as well as consumption by consumer group in order to maximize ROI.
• Spend proportionately to the quality of the idea.
• Consider the simplicity, credibility and focus of the advertising message. The consumer measures can guide the use of media channels and specific vehicles to maximize ROI.