STUDY FINDS HALF OF SPOT TV BUYS ARE WASTED MONEY: RESULTS OF ARF PROBE ENCOURAGE MARKETERS TO USE NEW TECHNIQUES

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Nearly half the $14 billion spent annually in spot TV is wasted, and only about one-fourth is actually well-placed, according to the new Adworks 2 study of TV advertising's impact on sales.

If the only determinant in buying TV time is a brand's recognition, or its brand development index, an advertiser will be right only about half the time, said the authors of the study, unveiled at the annual conference of the Advertising Research Foundation last week.

"You might as well flip a coin," said Gian Fulgoni, CEO of Information Resources Inc., which did the study with MMA/ Carat.

BDI MARKET BUYS

Preliminary results of the study found using the brand development index to pick spot markets means spending 43% of ad dollars in high BDI markets with low response rates. Only 24% of buys result in a high response.

There is no relationship between high BDI and sales response, except in some markets where there is already extreme brand penetration, said Mr. Fulgoni.

With more sophisticated measurement techniques available thanks to developments in scanner data and other media, there's no reason an advertiser can't better allocate buys, he said.

The study also found prime time is the most effective TV daypart for advertisers across the board, although the study's presenters cautioned there are caveats.

Brands receiving more than a third of their ad schedule on prime time were more effective than others, said Ed Dittus, CEO of MMA/Carat. However, he warned there were some variations by brand in effectiveness.

SPENDING THRESHOLD

Adworks 2 found that brands getting 31% or more of a TV buy in prime time were 67% more effective in generating sales response than those spending a smaller portion in that daypart, said Mr. Dittus. The study also found brands spending less than 10%, 11% to 20% and 21% to 30% had nearly equal results in sales response, suggesting a threshold of necessary spending.

There was an opposite relationship between temporary price reductions and sales response. Brands with 20% or more in temporary sales reductions per week saw an average drop of 63% in their sales response to advertising, and once again there appeared to be a threshold effect below that point.

The study also found no relationship between the share of TV ad voice and the brands' sales effectiveness or between base price elasticity and TV sales, although presenters warned of variations by brand.

The Adworks 2 study -- a follow-up to a 1990 survey -- analyzed 104 weeks of sales performance for more than 1,500 brands in over 200 categories through 50 markets nationwide. The database integrates sales, prices and promotions from IRI's InfoScan service and information on TV advertising collected in Nielsen Media Research's Monitor Plus service.

RESEARCH BUDGETS GROW

A recently completed industry trends study by ARF and the American Marketing Association showed the average market research budgets among package-goods marketers grew 78% between 1995 and 1997, and budgets among non-package-goods companies grew 97% during the same time period.

Marketing research is becoming more complicated and technology-driven as it increasingly uses tools such as scanner data, people meters, credit/debit transactions and Internet data capture, Joseph E. Laird Jr., managing director of Veronis, Suhler & Associates, told the meeting.

Although marketers are more focused on customer databases and database marketing, he said, basic list segmentation and geodemographic data are becoming commodities so more analytical systems are necessary to provide value.

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