Planning advertising spend to maximise 'grown up stuff' profit

Overview

The ‘grown up stuff’ super -category covers the fundamentals and necessities you’d associate with adult life. It includes tickets for trains and planes, utility providers and other services such as breakdown cover or online delivery. It comprises travel and transport, finance, energy, and utilities, motors, government and the public sector, offline services such as breakdown cover and online services such as delivery and business services.

Clients in this category invested around £3.8 billion in media in 2017. Traditionally TV-led, with print newsbrands as the
primary secondary support, brands allocated 44% of adspend to digital channels in 2017. While this might appear to make sense, given that much interaction has moved online, this high digital investment is adversely affecting campaign profitability.

Benchmarketing’s analysis shows that newsbrands are an effective secondary medium to TV and that campaign profitability could be enhanced by a rise in both print and digital newsbrands’ share of budget.

To maximise campaign PROI for brands in the ‘grown up stuff’ super-category, it is recommended that at least 7% of the total media budget is allocated to print newspapers and 4% to digital newsbrands.

Analysis shows that multimedia campaigns using a wide variety of media are most successful at generating maximum PROI.

However, clients are losing out on £318 million potential profit through underinvesting in newsbrands, particularly print.

Adspend patterns

The total share of spend allocated to digital display, video and search in the ‘grown up stuff’ super-category was nearly 44% in 2017. Print newsbrands have been the channel most affected by the move to online media, losing over seven share points since 2013. Other established media have lost less share, with OOH and cinema making marginal gains.

Newsbrands’ share of advertising expenditure has fallen steadily over the past five years, from 15.1% of the total spend in 2013 to just over 7% in 2017.

This is much steeper than the change in weekly readership of print newsbrands, which was 25 million in 2017 versus 28 million in 2013, according to PAMCo data.

Spend in digital newsbrands has hovered around the 2-2.5% of total media spend mark over the last five years, despite a huge growth in audience.

Campaign PROI: print

High cost, less frequently purchased brands, such as those typically found in the ‘grown up stuff ’ super-category, need to be alert to maximising profit returns on media spend. PROI analysis shows that for every £1 spent, the total short to medium-term campaign pay back is £1.04 in this super-category at current spend levels. While this shows some profitability, it could be higher as the analysis shows that brands in this category are currently investing at sub-optimal levels in print newsbrands.

Average print spend currently sits at 5.2% of overall media budgets, so it falls into the lowest third (tertile) of cases analysed. Considerably higher campaign profitability can be realised if print newsbrand spend is between 17.8% and 48% of the total campaign investment. When print newsbrands are included at this level, the PROI multiplier for the campaign is 1.52.

However, that would involve quite a revolution in spend allocation, more than three times the current average. Almost as good a profit return per £1 invested, £1.37, can be realised by increasing investment to the levels of the middle tertile – between 6.2% and 17.8% of overall campaign investment.

Campaign PROI: digital

For the first time the profitability of adding digital newsbrands to campaigns specifically can be quantified.

The findings show that average digital newsbrand spend currently sits at 2% of overall media budgets, so it falls into the lowest third of cases analysed. There are indications that adjusting digital newsbrands’ share upwards into the middle tertile helps increase overall campaign profits. Campaigns that allocate between 2.5% and 5.4% of their overall media budget to digital newsbrands generate the highest pay back levels of £1.34 for every £1 spent.

The profit gap

The current average 5.2% investment in print newsbrands elicits a campaign profit of £205 million. If the average rose to at least 8% to optimise overall short to medium-term campaign profit levels, the additional profit released could be as much as £211 million.

For digital newsbrands, the recommendation is to double current share of overall media spend to 4%. This would elicit potential additional profit of £107 million.

Where should the money come from?

To understand how budgets in the ‘grown up stuff ’ super-category can be effectively realigned, Benchmarketing looked at two separate pieces of further analysis in addition to PROI calculations – adstock and response curves.

Adstock is strongest for established media channels in the ‘grown up stuff’ super-category. Higher adstocks are typically associated with a long-term branding message. Print newsbrands have a good carry-over of 59%, which reflects their ability to deliver brand building as well as response campaigns.

Response curve analysis indicates that TV should not be cut to fund other media – it is the most scaleable medium, delivering incremental profits far longer than any other channel. Digital display is currently receiving a disproportionate level of spend in light of its response curve.

This suggests that the 31% of ‘grown up stuff ’ media expenditure currently invested in digital display is subject to diminishing returns.

The recommendation is therefore to lower online budgets to allow for a greater proportion of digital newsbrand display and to increase print newsbrands’ share to at least 7% of total campaign budget.

Grown up stuff charts

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