New Research: $1 Drop in TV Advertising = $3 Drop in Sales

Fri Dec 23, 2016

Kathy Crosett

CPG firms have always allocated a significant portion of their media budgets to TV. Under watchingtvpressure to reduce costs, some of these marketers shifted away from TV in recent years. A study conducted by TiVo  Research and 84.51°, commissioned by A+E Networks and Turner, finds a direct correlation between a cut in TV ad spending and a drop in product sales.

The TiVo study focused on 15 brands which lowered their TV ad spend. The brands ranged from beverages to candy to household products. The framework of the study involved measuring the drop in TV ad spend and the subsequent decline in household reach for ad campaigns purchased by these brands. For all brands in the study, the reduced ad spending brought reach below the 3-5 touch times a week which is considered the optimal number for making a connection with an audience.

On average, each brand decreased its TV ad spend by $3.1 million. This drop resulted in an $8.6 million decrease in sales. Put another way, a $1 drop in advertising led to a $3 drop in sales.

It’s difficult to control for and measure all of the factors that impact sales in a study like this. While 11 brands experienced sales drops, 4 of the brands did not. Researchers note they took factors like seasonality and price into account. They also explained that outside sources show these brands did not make other changes to advertising during this study period. However, other factors like creativity and new product launches by competitors are difficult to take into account.

While it’s possible that competitor activity could have had some impact on brand sales, it seems likely that cutting TV ad budgets is strongly correlated to a drop in sales. Researchers are encouraging CPG companies to consider their entire media mix as they try to expand reach. Brands might be able to improve the outcomes of their ad spend by allocating funds to different networks and day parts.

If you’re selling local TV ad space, your clients should know about the results of this study. Cutting TV ad spending to save money makes little sense if sales drop by a larger amount. The real issue for maximizing returns from TV campaigns could be getting the creative efforts just right and buying the right day parts.

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About Kathy Crosett

Kathy is the Research Director for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel.

View all posts by Kathy Crosett
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