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Cutting TV ad budgets hits brand sales

News, 08 March 2016

NEW YORK: Cutting TV advertising budgets resulted in a greater reduction in sales for a majority of CPG brands in a new study released just ahead of the annual upfronts.

TiVo Research and 84.51°, a customer engagement consultancy, analysed the impact on 15 consumer packaged goods brands which had reduced their TV advertising spend on three different media properties – including A+E Networks and Turner – between 2013 and 2014.

The study found that for 11 of these brands, sales returns dropped by a combined $94m when TV spend was cut year-over-year.

That meant that for every dollar decline in ad spend, the 11 brands lost three times that amount in return – they spent an average of $3.1m less on TV advertising and lost an average of $8.6m in sales. The correlation was disproportionate in favour of higher TV spend.

The study showed that all 15 brands posted reach declines, but there were declines in reach and frequency for 11, which had led to the drop in sales/ROI.

More specifically, the average on-air brand was reaching only 25% of its purchasers in an average week in 2014, down from 35% in 2013. And each household was reached every 3.5 days, down from 2 days.

Mel Berning, President and Chief Revenue Officer at A+E Networks, suggested that some advertisers had shifted their TV budgets into digital "without fully understanding the effects and quantifying the value of those shifts".

For Turner, Chief Research Officer Howard Shimmel said the findings confirmed concerns that brands were shifting ad dollars from TV to digital. "We will work with TiVo Research to further address our secondary concern," he added: "how the ROI of digital compares to TV, and whether digital can make up for the loss in sales attributed to TV."

Data sourced from TiVo Reserch; additional content by Warc staff