More Bang for Your TV Buck
Trends that will define DRTV media buying in 2006
Direct response television (DRTV) advertising is anticipated to pull down about $150.1 billion in sales in 2005, according to “U.S. Direct Marketing Today: Economic Impact,” the Direct Marketing Association’s recently released study of the nation’s direct marketing landscape. Conducted with support from forecasting firm Global Insight, the study also predicts a compounded annual growth rate of 6.4 percent for DRTV ad expenditures between 2005 and 2009; in this same time period, compounded annual sales growth is projected at the same 6.4 percent rate.
Compared to direct mail’s expected ad expenditure growth rate (5.3 percent), DRTV is gaining ground as a more valuable lead-generation and sales channel. But when stacked up against both the ad spend and sales growth rates for Internet marketing (18.3 percent/12.6 percent) and e-mail marketing (19 percent/12.6 percent), DRTV still is working to find its place in the direct marketer’s media mix. A few challenges to continued growth are the increasing adoption of technologies that allow viewers to skip commercials and the intricacy of finding cost-effective air time.
To get a handle on the trends affecting the DRTV media-buying space and solutions for making the most of this medium, Target Marketing Editor in Chief Hallie Mummert spoke with Peter Koeppel, president of Koeppel Direct, a Dallas-based direct response media buying agency that specializes in short-form and long-form DRTV.
Target Marketing: What factors are affecting available inventory and media costs for DRTV marketers?
Peter Koeppel: During the fourth quarter, short-form rates typically increase when retailers and brand advertisers selling holiday items buy up inventory at higher rates to meet sales goals during this key sales period. This tends to decrease lower cost inventory available for DRTV advertisers and increases DRTV rates.
This year the rate increases for short form are similar to last year on a national level. Since there were not many local elections this year, and with car dealers cutting back on advertising due to slumping sales, local broadcast TV rates stayed reasonable in the fourth quarter.
With DRTV short-form media buying, it’s a tricky balancing act between securing the lowest rates and attaining a reasonable level of clearance. If you submit rates that are too low, your clearance could be low, and if your rates are too high, your show might not pay out. Good DRTV media buyers know how to balance these two aspects of their buys to optimize results.
Long-form rates did not increase much from the third to the fourth quarter [in 2005], so we have seen improved response, which translates into a more profitable ROI for our clients.
TM: What is the penetration of personal video recorders (PVRs) doing to how companies buy DRTV spots?
PK: We haven’t yet changed the way we buy DRTV to counteract the penetration of PVRs, since the penetration is still relatively low. It’s estimated there are currently only around 6 million households with PVRs, so the effects aren’t apparent yet. However, by 2010 DVR penetration is expected to reach 40 percent of TV households. This will have a significant impact on the way people watch TV, and could result in a large segment of the viewing audience zapping through commercials.
I’ve seen some recent research that viewers of cable news and sports channels have the highest percentage of “live” viewers, so buying more of this type of programming is a way of counteracting higher PVR usage.
TM: What strategies should companies employ to find cost-effective time slots for their DRTV campaigns?
PK: Employ an experienced DRTV media buyer. [These professionals] understand the value of inventory, they have leverage with the networks/stations due to the volume of time they buy, they know the networks/stations/dayparts that perform best, and [they] know how to effectively track and optimize their buys by moving money to higher performing media and dropping less responsive media vehicles.
TM: Are certain formats more flexible on inventory and cost than others?
PK: With short-form DRTV, there’s definitely more 60-second inventory available than 120-second inventory. There’s generally a set amount of inventory available for infomercials, so this limits the available inventory during periods of higher demand during the fourth and first quarters.
National cable has traditionally been the primary TV medium for DRTV advertisers. However, short-form cable rates have increased as a result of more general advertisers moving into the medium. The growth of satellite TV has provided additional inventory for both short-form and long-form DRTV advertisers. In addition, we have seen more DRTV advertisers buying syndicated and network TV.
TM: What other DRTV options do firms have besides traditional spots?
PK: Many DRTV marketers are running their commercials on their Web sites and including an 800 number. This is a good way for someone with a limited budget to advertise.
TM: What role will the Internet play in shaping the future of DRTV?
PK: Currently, anywhere between 15 percent to 50 percent of the DRTV purchases are coming from the Internet. Half the people watching TV are simultaneously online, and more than half of the online audience now has access to high-speed Internet connections. This has fueled the growth of DRTV sales on the Internet. It also has allowed for streaming video of TV commercials on the Web. This has helped to reinforce the DRTV message online, which has translated into more online business for DRTV advertisers.
TM: What coming trends do you foresee in DRTV?
PK: I expect video on demand (VOD) to become a big growth area for DRTV marketers. This will allow consumers interested in finding out more about a particular product or service to view a longer format commercial, somewhere between a short- and long-form DRTV spot length. Comcast and others are aggressively moving forward with VOD programs.
Due to the fragmentation of the viewing audience, I expect to see the industry start to air commercials in new mediums such as cell phones, iPods, gaming devices, etc., to more efficiently reach various segments of the population.
Peter Koeppel can be reached at (972) 732-6110 or at firstname.lastname@example.org