An econometric analysis of advertising’s impact on smaller businesses provides a wealth of insight and practical advice for smaller businesses that want to move to the next level of growth.
The study, Supercharge: TV for small businesses, commissioned by Thinkbox, the marketing body for commercial TV in the UK, from marketing effectiveness specialist Data2Decisions, found that TV advertising creates 80 per cent of smaller businesses’ advertising-generated sales, despite accounting for a far smaller proportion of their advertising spend (66 per cent). In comparison, Data2Decisions found that other online/below the line channels (search / affiliate marketing / display / CRM), for example, account for 17 per cent of total advertising spend but generate 6 per cent of sales.
Data2Decisions conducted an econometric analysis of 78 brands and over 300 campaigns for small businesses, looking at the short-term and sustained business effects over three years. Small businesses are defined in the study as businesses whose brand size is under 1 per cent of the market leaders. This represents the smallest 10 per cent of brands in D2D’s total database.
TV creates the majority of ad-generated sales
Out of the 78 small brands analysed by Data2Decisions, 66 per cent of total spend was allocated to TV, but it returned 80 per cent of all ad-generated sales.
Use TV after other demand-generating channels have saturated
Some channels are effective at low levels of spend (such as search, CRM, display, and affiliate marketing), but they quickly saturate and stop delivering. TV’s share of ad spend will be lower when total spends are lower (c. 50 per cent of a total advertising budget of £100k), but Data2Decisions recommend that TV’s share of the budget should increase as total budgets increase. This is because diminishing returns on TV occur at much higher spend level than for other channels.
Focus on brand awareness first
Smaller businesses should use TV advertising for brand awareness to begin with, rather than for activation. TV’s activation effects typically improve by c. 14 per cent when they follow a brand awareness campaign.
For TV creative, first time advertisers should start with a 30 second or shorter ad length. The optimal ad length based on Data2Decision’s ROI findings is 20 seconds. However, this will differ depending on the complexity of the creative message.
Take seasonal advantage
Different categories should use different windows of opportunity within TV to take advantage of seasonal variation in TV pricing and seasonal sales effects. For example, the optimal months for FMCG are typically July / August, for Retail it is December, and for Finance it is February/March.
Start TV with a ‘burst’ strategy rather than a ‘drip’
To take advantage fully of the seasonal effect, advertisers should start with a ‘burst’ campaign at the most efficient time of year (rather than more smaller campaigns spread over a longer time period). As smaller businesses grow, Data2Decisions’ analysis showed that they should move from occasional bursts to a more continued TV presence throughout the year.
“Smaller businesses can trust that TV will deliver for them like nothing else,” stated Matt Hill, Director of Research and Planning, Thinkbox. “Based on actual business performance, this study shows the huge impact TV has on small business growth and offers valuable practical advice on how smaller businesses can get the most out of TV and enjoy its supercharging power.”
“The Supercharge study demonstrates that smaller businesses can confidently invest in TV – it was found to be the most effective channel to drive brand growth,” advised Katherine Munford, Managing Director, Data2Decisions. “The study also provides some simple guidelines on how smaller businesses can successfully implement TV to maximise return on media investment.”
TV advertising facts at a glance: