Q2: 07 Newsletter

The Changing Demographics of TV and Interactive

With the decline in the effectiveness in television advertising, brand executive teams are looking with increased scrutiny at marketing budgets. They aren’t lowering expectations, however. Rather, they look to grow and capture market share. They look to find new customers and invent loyalists. They succeed in a tighter environment by demanding more marketing accountability, advertising efficiency and pinpoint targeting.

Combined with this, there is a paradigm shift underway in consumer consumption of media. Gen Yers are the first generation to spend more time online compared to viewing television, 28 to 24 percent, respectively. Gen Xers also are quickly eroding TV. And yet the lion's share of advertising dollars in the U.S. — 67 percent — still goes to television, yet only 6 percent goes online, according to Nielsen AdAcross.

“The 30-second spot is declining and declining rapidly; the impact of TV is declining.” —CJ Fraleigh  Former Executive Director of Advertising &  Corporate Marketing, General Motors

The Bygone Era of TV Advertising

This disparity opens an opportunity for companies to expand their market by targeting the growing base of Internet focused customers — younger adopters who interact with your brand for longer sustainability — by weighting media purchases toward digital.

The act of watching television appears to be undergoing a transition from its former dominance as an immersive, “must-see” medium to background, on-demand entertainment. Digital video recorders have achieved 52 percent market penetration for cable users and 38 percent for satellite TV subscribers, according to the Carmel Group.

The advent of DVRs is killing the efficiency of TV placement, according to a 2007 study by Millward Brown. More than half of DVR watchers, 60 percent, fast-forwarded through ads. Of the remainder, only 21 percent paid attention to the ads, compared to 30 percent for live TV. Recall for TV and DVR viewers was 18 percent and 19 percent respectively. In other words, less than 1/5th of these viewers remembered the ads.

The study points the finger at varying levels of distraction during television viewing. More than 40 percent of all the ad watchers did something else during the ads. A McKinsey media study in 2006 had similar findings:

• 23% decline in TV ads viewed overall
• 9% loss of attention due to multi-tasking
• 37% decrease in message impact
• 15% decrease in broadcast buying power

Surgical Precision of Internet

This bleak data about the state of television advertising contrasts with the effectiveness and efficiency of Internet marketing.

In the same Millward Brown study, viewers of online ads were more able — 93 percent — to link the correct brand to a commercial than their TV and DVR counterparts — 70 percent. Online ad recall was 77 percent, compared to less than 20 percent for TV and DVR.

The sea-change has attracted the notice of chief marketing officers of the biggest consumer brands:

“We just don’t feel we’re going to get the impact and sustainability by just doing a TV ad. We are trying to look for better ways to reach consumers.” —John Hayes  CMO  American Express

“There must be — and is — life beyond the 30-second spot… We must accept the fact that there is no ‘mass’ in ‘mass media’ any more, and leverage more targeted approaches.” —Jim Stengel  CMO  Proctor and Gamble

“The time has come for us to agree that mass-media marketing is over. Our brand means different things to different people.” —Larry Light  Former CMO  McDonald’s

Use Demographics to Go Digital

While many younger groups have grown up online, all demographic groups are moving online in increasing numbers. Ad revenues follow eyeballs, as they say, and 2006 total Internet ad revenues grew 26 percent year-over-year to $19.5 billion, according to PriceWaterhouseCooper/ Internet Advertising Bureau. eMarketer projects online ad revenue will more than double to $36.5 billion by 2011.

But to intelligently target the correct demographic requires some research into a company’s specific customer base, as well as knowledge of the general demographic trends.

A 2006 Forrester report segmented online activities with age groups. It shows that all age groups are online in big ways, but their participation style varies. Younger age groups are very social and like to put content online, be it video, blogs, forum posts, or through social sites like Facebook and MySpace. Older age groups also participate online, either by commenting about published content or discussing in forums.

With the efficiencies of an online campaign, savvy digital agencies can create unique, targeted experiences for each type of user. This level of engagement will increase the amount of time spent interacting with the brand, and logically, brand recall and affiliation.