50% of all media plans are underinvested by 50%, jeopardizing ROI
While poor ROI might cause brands to pull back on spending, research by Nielsen suggests that media spend needs to be higher to cut through and generate revenue.
Advertisers are vastly under spending on media
Nielsen’s debut ROI report highlights what it calls the ‘50-50-50 gap’, where 50% of planned media (digital video, display, social and linear television) channel investments are too low for maximum payback; that planned spend is about 50% lower than optimal spend levels; and that if marketing teams committed the ideal amount of resources, their ROI could jump 50%.
Optimal spend levels, it says, are between 1% and 9% of a company’s revenue.
Nielsen analyzed 150,000 ROI reports alongside client media plans to reveal overspending isn’t as problematic as underspending. Digital video and display are the two least funded channels compared with their ROI, with 66% of digital video plans underinvested and 60% of display.
In cases of overspending, though, the report recommends changing the media mix rather than cutting spend.
The research comes as marketers receive conflicting advice on how to spend during the economic downtown. The government, for example, has called for marketing cuts, while the likes of P&G’s Marc Pritchard said to ‘double down’ and spend through the recession.
Beyond spend, Nielsen found that emerging media channels such as podcasting, influencer marketing and branded content can drive over 70% brand recall. Nielsen went as far as to say influencer marketing ROI is now comparable to mainstream media.
Despite huge gains to be made, brands are only spending a small amount as they have limited proof these channels work.
Elsewhere, the report found over one-third of ad spend on desktop and mobile isn’t targeting the right age and gender. Nielsen recommends advertisers “prioritize” measurement solutions that cover all platforms and devices.
“Brands can’t afford to waste valuable ads on the wrong audiences,” said Imran Hirani, its vice-president of media and advertiser analytics. “By investing wisely and having a balanced strategy of both upper-funnel and lower-funnel initiatives, brands can reach the right audiences and maximize their ROI.”