It’s not surprising that TV spending continues to dominate the DTC advertising space, but the fact that marketers may be leaving precious dollars on the table certainly is. Accurately linking marketing performance to sales is critically important, and marketers often measure and optimize their campaigns in terms of ROI (though still not often enough). However, it turns out that looking at ROI on its own does not always tell the whole story. There are additional data-driven metrics that provide deeper insights on how to best maximize profit and meet strategic objectives.
With increased budget scrutiny, it is more important than ever for marketers to evaluate campaign ROI along with other strategic questions about their TV investments:
- What is the optimal investment level to drive positive outcomes?
- What is the estimated impact of decreasing or increasing the budget?
- And, ultimately, where is the saturation point for TV investment (in other words, what is the optimal investment level for maximizing profit)?
Recent innovations in analytics and data availability have empowered marketers to use data to answer these questions. The result is that marketers can now optimize the performance of their largest marketing investment with greater accuracy than ever before.
Crossix helps marketers find optimal investment levels for TV advertising by measuring the actual relationship between TV exposure and patient health behavior. Using this relationship, we can then run powerful, forward-looking simulations to estimate campaign performance at varying investment levels. These simulations weigh the effectiveness of TV exposures at every frequency to estimate what the campaign impact will be as exposure frequencies shift with changes in investment.
With this level of granularity, marketers can now better understand how performance will change with spending adjustments and find the optimal investment levels based on expected profit and ROI.
Scenarios with Varying TV Investment
In a past campaign analysis we performed for a client, the brand’s initial investment level was not near the saturation point, or the point at which additional advertising spend will not generate enough results to justify the cost. We saw that decreased investment would translate to decreased profit, and there was room to drive additional profit with additional investment.
We also determined that the campaign would not reach its saturation point until the current budget was increased by 100 percent. However, the ability to drive incremental profit would decline after a 25 percent increase in spend, indicating that it isn’t always desirable to reach a saturation point.
ROI and Profit by TV Investment Level
Through our analyses, it was noteworthy to find that reaching a saturation point can sometimes be suboptimal because there is often a tradeoff between maximizing ROI and maximizing profit. For the same client, we measured the brand’s ROI and profit levels. We found that for their campaign, profit would be maximized at an investment level 300 percent higher than the level where ROI peaks. ROI is typically maximized at a much lower investment level than is needed to maximize profit.
Ultimately, marketers must jointly consider ROI, profit and other sales goals to determine the true optimal investment level for a campaign. What is the new patient acquisition or sales target? And, what is the ROI that makes sense to achieve it? A forward-looking, data-driven approach powered by linking marketing exposure to health behavior is necessary to arm marketers with the insights to effectively optimize campaigns while balancing these strategic priorities.
Have you uncovered your sweet spot? Find out with Crossix.
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