Which Media Channel Drives the Best ROI and why?
When planning a media campaign, it is important to choose a mix of channels that will provide the greatest return on investment (ROI). The more sales driven by each unit spend on a channel, the more successful that channel has been at driving ROI.
It is known from market mix modelling that channels vary in their average ROI, from the chart below we can see:
- TV is most likely to pay back.
- TV has the highest average ROI of £4.20, but also the greatest range of outcomes
- Online Display has an average ROI of £0.90 and therefore below payback
It is of course important to know which channels perform best, but it is also interesting to know why there are differences in the performance of media channels.
There are four main factors that help to explain the ROI of a media channel:
- Engagement – Some channels are naturally more engaging due to the medium used. For example, a TV advert makes use of the visual and sound element, allowing for very engaging creatives. Compare this to a Print advert which is more limited by its medium and therefore naturally less engaging than TV.
We know that the more engaging the advert the more memorable and more likely customers will act on the advert.
- Targetability – This refers to how well marketers are able to advertise to their chosen customer base using the chosen channel. Online channels tend to have greater targetability than offline due to their ability to choose to show adverts to very specific demographics.
It is also possible to retarget customers who have already seen an advert from the same company which is very useful when it comes to selling large ticket items such as flight tickets.
Greater targetability boosts ROI as it means less spend is wasted on people who see the advert but were never likely to purchase the advertised product. That being said, the requirement of targetability depends on the product, some products appeal to broad demographics and therefore advertising doesn’t need to be targeted in these cases.
- Adstock – The adstock effect also known as the ‘memory’ effect of media differs between channels. Channels such as TV tend to have a higher adstock because the adverts tend to be more memorable in comparison to channels such as Online display which tends to have a lower adstock due to the adverts on that channel not being as engaging.
- Reach – The amount of views/impressions that are generated by an advert depend on the channel used. Advertising on channels with huge audiences helps ensure that your advert is seen by many people.Some channels are more limited in terms of the amount of people using the channel and this can lead to diminishing returns as the advert is seen by the same people many times.
These four factors help to explain the difference in sales uplift per pound spent when comparing across different media channels. We can use this knowledge to help aid us when deciding on the optimal media channel mix to use.
At this point it is important to note that a channel’s ROI shouldn’t be its only measure of success. Some channels are used for particular purposes, i.e. driving Brand Awareness and therefore despite having a lower ROI it might still have its place in an optimal media mix. It’s common that net profit is what should be maximized and this results in a lower channel ROI as illustrated below for TV:
In conclusion: There are four main factors that determine the ROI of a media channel. These are engagement, targetability, adstock (memory effect) and reach. From the many case studies that we have from measuring clients’ media performance we know that TV is the best performing channel as it has the highest average ROI at £4.20. Although ROI is a good measure to compare media channels, it isn’t the key metric that clients should be chasing. Instead it tends to be best from a business point of view to maximise net profit.
If you are looking to maximise the performance of your media then get in touch to see how our optimisations can increase the profit generated by your media activity.
The Brightblue team have decades of experience helping clients understand media efficiency by truly digging into the drivers of sales and revenue. We have experience across automotive, retail, travel, entertainment, telecoms, FMCG, white goods, financial services, health and many other sectors. Our unique way of modelling the entire client journey truly helps marketeers understand what they can do to shine in their organisation by driving business and making a real difference to their bottom line. Get in touch if you have any questions on this article or any of the ways Brightblue can help.