Media Buying & Planning Guide: What? Me, Worry?1 Oct, 2011 By: Nicole Urso Response
Direct response media buyers could have bemoaned cable television’s record upfront season. October is typically challenging, as price increases come with new fall programming, but this year national cable networks earned $9.3 billion in upfront sales, a 16-percent increase compared to last year, according to the Cabletelevision Advertising Bureau, and for the first time outpaced broadcast networks, which sold about $9.1 billion. Yet media buyers remain optimistic and talk about the upcoming presidential election and Summer Olympics like business as usual.
In Response’s semi-annual Media Buying & Planning Guide — this round focused on the media agencies’ perspective — DR buyers are not only prepared to face potentially stronger competition from general advertisers, price increases, and a possible double-dip recession, they are taking it in stride with a positive attitude and almost advantageous outlook.
“The effects to the DRTV space will not be that bad,” says Scott Kowalchek, president and CEO of Direct Avenue. “The upfronts will not hurt, the elections will only prohibit some buys into specific broadcast markets, and the Olympics are only on for a short period of time. If the media is tight in those areas, there are many other areas to place our clients that we can get to perform for them and their campaigns.”
Upfront & Optimistic
Experienced media buyers who have weathered the recession and experienced past presidential elections, Olympic broadcasts and inventory invasions from well-funded general advertisers, echo Kowalchek’s optimism.
“Most stations don’t feel that the upfront impacts the local inventory that much,” says Nancy Kupp, associate media director at Hawthorne Direct. “Whenever there is a strong upfront season, stations add as many programs as they can to accommodate the 30-second spot demand, which happens every fourth quarter to one extent or another. We’ll lose some Monday-through-Friday daytime and late night, but this year shouldn’t be out of the normal range.”
In Response’s May installment of the Media Buying & Planning Guide, which focused on the cable and broadcast selling perspective, short-form pricing continued to increase, but long-form was slow to catch up, so rather than selling it at deeply discounted rates, some networks took it back to redistribute as short-form inventory.
“Upfront pressures really only affect short-form as it relates to available inventory,” says Rob Medved, CEO of Cannella Response Television, and member of the Response Editorial Advisory Board. “However, strong enough spot markets can sometimes force the recapture of long-form space so networks can capitalize on running content and selling off the general as we have seen in the past 12 months.”
Heading into the fourth quarter and into the first half of 2012, Kupp expects to see more general advertisers, especially in the automotive category, trying to make up for their losses caused by Japan’s devastating tsunami last year.
“There is also a lot of spending out of the telephone-utilities category, such as Comcast, Verizon and now AT&T,” says Kupp. “DR buyers don’t expect to be affected too much. There will still be inventory. It will just be tightening up across the board. The top 10 markets, on average, are expecting an 8-percent to 10-percent increase in rates for November and December.”
To put the upfront season into perspective, Dick Wechsler, president and CEO of Lockard & Wechsler, believes that the rate increases bring general advertising prices back to levels seen prior to the 2008 to 2009 recession, and there is an advantage to the DR industry.
“A strong upfront means that lots of money has already been committed,” says Wechsler. “That means that there should be lighter activity in the scatter market, and that’s good for DR advertisers. I suspect that general advertisers will begin to take their options and give back inventory going into first- and second-quarter 2012. Second quarter is when we’ll feel the pinch, because the general market will begin to buy back into the market, placing significant pressure on it and driving prices to unrealistic levels. This is the same thing that happened in 2009 and 2010 — and it will repeat itself.”
Bring It On
The 2012 presidential election and Summer Olympics will create competition for media buyers as primetime ad inventory is depleted and general advertisers migrate to where there’s availability.
“There will not be a limit on corporate spending in 2012, so it’s fairly safe to assume that there will be a lot of issue money being spent on top of the candidate dollars,” says Kupp. However, she explains, it’s tough to predict where and when political spending will hit because some markets receive political dollars from neighboring states.
“The elections remain a wildcard,” says Wechsler. “Locally, they affect the market for about six weeks, depending on primaries and the national election in November. Nationally, the Republican and Democratic conventions will eat up lots of cable news inventory. And the Summer Olympics will eat up tons of inventory across the NBC Universal networks. So, third quarter, which is traditionally a strong time for DRTV, may be challenged by limited inventory.”
The 2012 Olympics, which will be held in London and aired on NBC and its family of cable networks, begin July 27 and end Aug. 12. With a fixed schedule and limited duration, media buyers can plan ahead and set expectations for their clients.
“If we are buying an NBC affiliate on a regular basis, regular programming will go away during the two-week Olympic timeframe and will limit what can be purchased,” says Kupp. “Expect inventory on other stations in a market to tighten as those advertisers who choose to avoid NBC during those two weeks move their dollars to those stations. Some advertisers may choose to go dark completely. The broadcast schedule hasn’t been released yet, but the live coverage will probably be in the early morning times and replayed in prime time. We’ll be preempted out of weekday paid time, mostly on cable, and less availability will be open during the three weekends spanning the Olympic schedule.”
Another challenge that media buyers may have to contend with next year is the ongoing recession, which softens response rates from weary consumers hesitant to spend.
“The one wildcard is the possibility of a double-dip recession, which could free up some inventory for DR,” says Peter Koeppel, president of Koeppel Direct, and a member of the Response Editorial Advisory Board. “However, this could be offset by consumers cutting back on spending if the economic situation does not improve. The election will definitely have an impact regardless, since the candidates, PACs, companies, etc., are expected to spend at record levels this election year. The overall impact could result in fewer sales of DR products. On the other hand, there may be pockets of opportunity throughout the coming year. For example, I just heard from a TV rep that a major cellular provider just cancelled all local schedules, which could open up some new DR inventory.”
Medved also maintains a positive perspective about next year and points out that the upcoming events may present experienced media buyers an advantage.
“The Olympics and elections often have a two-fold effect,” says Medved. “While they create competition for idle eyeballs, the overall net effect is often positive for DR. The seasoned media agencies hold the historic evidence of when and where to run in those climates.”
For now, consumer confidence appears to be picking up after a long period of tepid purchasing power, and media buyers hope that the trend carries into the holidays and the new year.
“In late summer, response rates are very strong and new campaigns are testing well,” says Wechsler. “We’ve seen more new products test successfully than in years. However, if consumer confidence collapses with the economy, new products will test poorly and existing campaigns will contract. It seems that higher-priced infomercial campaigns are always hit harder and earlier than lower priced short-form campaigns during these contractions.”
Bras & Knives
An emerging competition has also shaped up among a new category of As Seen On TV products.
“Everyone’s talking about the bra war,” says Stacy Durand, president of Media Design Group and Revenue Frontier. “It’s interesting because it’s a garment, although it does fall into the beauty category.”
There’s the Genie Bra by Tristar Products, the Ahh Bra by Bare Necessities, and the Slim ’n Lift Aire Bra by Thane, to name just a few.
The good news, Durand explains, is that there are no one-hit wonders driving up rates for DRTV products. “With short-form, you compete against the big advertisers, and in long-form you compete against each other. But as long as no new products come in with a super hit, then I don’t expect any big pop in prices for the fourth quarter.”
Historically popular DRTV product categories continue to dominate with no major surprises.
“Diet, exercise, health and beauty still account for about half of long-form revenue, with household and business opportunities also taking a significant piece of the pie,” says Medved. “Business opportunities have seen a strong comeback in the last six months after a bit of a lapse. Short-form, from a traditional hard-goods perspective, still encompasses $19.95 household, kitchen and simple, problem-solution products that drive to retail.”
Premium cutlery and cookware perform well in the housewares category.
“We’ve experienced tremendous success with knives and pots and pans,” says Wechsler. “Go figure — just when you thought everyone had more knives and pans than they could ever use, a new one with a twist, like ceramic, catches fire. Also, products that provide convenience, like EZ Moves, and real practical innovation, like Magic Mesh, have been really strong performers.”
Practical problem solvers and items that help save money with home improvements and affordable at-home beauty regimens are also popular picks among consumers. Eggies, Furniture Fix and Fast Brite have performed well in short-form, according to Koeppel, and no! no!, Steam Pocket Mop and Wen have been successful in the long-form marketplace.
“Lead-gen campaigns for senior Medicare products, educational institutions and insurance products are strong performers,” says Koeppel. “Also, business opportunity campaigns tend to perform better during economic downturns.”
Despite the economy, consumers still invest in products that make them look and feel good, like a good supportive bra.
“Vanity products are doing quite well, which is surprising,” says Mike Horner, COO and owner of AOR Direct. “The current economic climate would seem to indicate a shift toward more practical purchasing, but beauty and personal care product sales remain remarkably strong.”
TV & Radio
If competitive pricing pushes DRTV rates too high, media experts point to hybrid campaigns that include radio advertising.
“If cable and broadcast are too expensive, targeted zoning with local cable can be very inexpensive and should be looked at,” says Kupp. “There is also an array of digital stations that are inexpensive. Radio is also less expensive, depending on the station. You can usually negotiate packages that include bonuses and target specific audiences by format.”
According to Kantar Media, 2010 DR radio media billings earned about $49.3 million, a 16.5-percent increase from the prior year, and surpassed the $10 million mark every quarter (Response, June).
“It’s important to stay on top of all mediums in order to assess where the best deals are and to know what is performing best at any given time,” says Koeppel. “In the TV market, that might mean satellite, syndication and unwired networks if cable and broadcast are overpriced. Online advertising should be a component of most DR campaigns, and the percentage of DR media dollars invested in online efforts continues to grow, because of the cost effectiveness and ROI that can be attained through targeted online campaigns. Radio can also be effective for certain types of campaigns and should be considered as part of the overall media mix since there are often good deals to be found in the radio marketplace.”
Horner also recommends radio as an effective way to drive sales if the offer is compelling.
“For products where free trial offers and very low entry-price points are just not possible, calculated television buys combined with aggressive per-inquiry strategies are still the best way to go for viable campaigns,” says Horner. “That being said, marketers will need to develop strategies to increase their online, social and mobile marketing footprint in order for television spending to be truly profitable. Screen fragmentation is too great to rely on just one medium.”
For some media buyers, however, DRTV still reigns supreme.
“We work in the TV space only, and since there are so many areas to buy media, we are not concerned about our clients not hitting their numbers,” says Kowalchek.
When it comes to finding great media bargains, Durand says that it’s not all about price.
“We negotiate based on results,” says Durand. “Everything is based on performance, and if the media doesn’t perform, we won’t pay higher rates. It’s about understanding media and not worrying about seasonality.” ■