Want to Improve Your Business Revenue? Buy More TV Ads

July 22, 2015 Jason Lynch
There is one surefire way for companies to increase their business performance: up their TV ad spending.

A new study from the Video Advertising Bureau looked at the correlation between TV investment (based on Nielsen-measured national cable and broadcast media) and key financial indicators. It focused on 100 large parent companies with significant media spending in nine advertising categories: automotive, CPG, entertainment, financial, pharma, restaurants, retail, travel and telco. Sixty of those companies increased their TV spending between 2011 and 2014, while the other 40 spent less.

"2011 is really the point when we get out of the down economy, so we really didn't want to compare anything against hard-core recession years," said Jason Wiese, vp, strategic insights, VAB. "And we liked the spread of four years, because we really thought that would take out any sort of yearly anomaly that might have happened for certain companies."

The findings: Almost all of the companies that increased their TV spending over the four years also saw substantial growth in revenue, stock price and earnings per share. Meanwhile, the companies whose TV spending decreased underperformed the averages of the 100 companies.
Those increasing their spending (by an average of 40 percent) on TV—including Apple, Coca-Cola, Marriott, Comcast and United Airlines—saw a 26 percent increase in revenue over the same period. Those companies also had stock prices that overindexed the S&P 500 with earnings per share increasing an average of 38 percent.

In contrast, the 40 companies that decreased their spending over the four-year period (down 15 percent, on average)—including General Mills, Sony, Disney, Home Depot and Mattel—had revenue increases of 7 percent, while their average stock prices underindexed the S&P 500. Earnings per share were up 5 percent.

The VAB said it wasn't surprised by its findings. "We go out and meet with clients and agencies and advertisers all the time, and we always hear the same thing, which is, 'As soon as I put television on, I see my business results go up. As soon as I take television off, I see them go down,'" said Danielle DeLauro, svp, strategic insights. "What we were excited about was the fact that we could quantify this and give it out to clients and agencies and advertisers for them to be able to look at and to use."

The study was inspired by "this ongoing question in the marketplace that sat there and said, 'Are there business results, correlations between the myths of TV and ad-tech spend, where we can see a result?'" said VAB president and CEO Sean Cunningham. "And what we quickly ran into was, not on the ad-tech side. There isn't a third-party source that can help us with that. We would have liked to have done that, but we've got a wealth of third-party data on the TV side. And we said, 'Let's take the TV side of it.'"

The VAB report is one of several studies released this summer as the television industry tries to re-establish its dominance at a time when some advertisers are beginning to shift spending to digital. Turner Broadcasting and Horizon Media concluded TV is still the most effective advertising medium, while CBS said TV trumps digital in spending and reach

"If you look across all these studies, they were all conducted differently, so you can throw out the idea that it was a certain methodology or a certain group of networks or it was a certain category," said DeLauro. "There was nothing the same about any of the studies that have been done, and I think what that shows is no matter what way you look at it—across the breadth of categories, across clients, across networks—you see the same thing, which is as soon as you advertise on TV, you see a positive effect." 

Going forward, said DeLauro, "we hope this inspires marketers to take a step back and look at these simple ways of driving and looking at this correlation. All we're trying to do here is inspire conversation."

You can access the full VAB report here.

Source: AdWeek

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