Updated: Dec 10, 2020
Let me take the liberty of borrowing some thoughts from a newsletter shared by McKinsey & Company titled “Five questions to answer before you finalize your media plan ”
McKinsey published this paper in the context of ravaging pandemic, I found it very relevant even otherwise. I am giving below some points which I believe are quite relevant from a communication planner’s point of view and is sharing 3 relevant questions here.
Are you spending the right amount for your business ambitions?
The first problem that companies need to solve is not how much to spend, but how much they should spend. That depends on whether there is opportunity to grow market share or a threat of losing share that could be addressed with better media spend.
Benchmarking overall media spend as a percentage of revenue against industry peers is therefore a good starting position, though one few companies choose. There will naturally be wide variation between different sectors and companies of different sizes. But only with a gauge of how much competitors are spending can a company start to figure out whether ramping up or turning down its spend is the right approach on the basis of its growth ambitions.
Growth ambitions are not, of course, the only consideration. Competitor activity (for example, new product launches or promotions), the life cycle of products, and historic returns on media investments must all be factored in. So, too, must the company’s financial position. Together, they guide the company toward a baseline budget. Using this approach, one global CPG company concluded that it could meet its growth targets not by increasing the budget but by reallocating it between brands.
While useful, this benchmarking exercise is just a starting point and needs to be refined. Using up-to-date market research, trend analysis, market conditions, and consumer insights into brands and products, marketing leaders can develop a deeper understanding of which customers are truly persuadable and addressable in 2021.
2. Do you have the analytics available to fine-tune your spend? During these unusual times, it’s important to build flexibility into media plans. Precision budgeting, in fact, builds in regular adjustments based on monthly reviews. Regular reviews of performance—effect of spend on audience targeting and personalization, for example—allow marketers to pull back spend if its marginal contribution starts diminishing, or to maintain and even increase spend if its contribution is rising. Alignment on spending between marketing and finance is also easier to achieve if there is room for ongoing review and reallocation.
To make such quick adjustments, however, companies need to accelerate their analytics capabilities to update models in days and weeks, not months. Those models should assign the value of media not just to e-commerce sales but to sales made through all channels, including in stores and call centers.
3. Are you spending enough on addressable channels? The traditional media-planning process has generally been to set the national TV plan first, buying slots up front for key sports and other big-audience events, before turning to other channels to fill gaps in the funnel. TV spend is, of course, a crucial pillar of a media- spend plan. However, the “TV first” mindset still proliferates, creating significant blind spots in media-spend performance models.
This shift to more addressable channels creates a huge measurement challenge. TV-metrics methodologies based on reach and frequency are not transferable to addressable media. In addition, video marketplaces are highly fragmented and becoming more so, further complicating the measurement challenge. Since there are no ready- made solutions available to address this issue, advertisers are building into their plans ways to build capabilities that can provide a more comprehensive and accurate way of gauging the impact of their spend on brand building. Some are also considering how to work with boutique firms that have these capabilities already in place.