There is a passage from Lewis Carroll’s Alice in Wonderland which reads: “Would you tell me please which way I ought to go from here?” said Alice.
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where,” said Alice.
“Then it doesn’t much matter which way you go,” said the Cat.
Unlike Alice, most advertisers do know where they want to go with their advertising. They want value, communication, efficiency and effectiveness. Clients could, however, be forgiven for feeling as if they have fallen through a rabbit hole into a topsy turvy land when it comes to making sense of television airtime trading.
Understanding how their agency buys airtime and deciding whether the system should remain the same in the future is no mean feat, but the Incorporated Society of British Advertisers is asking its members to do this.
First, some background. If you are a television advertiser your agency will probably have told you of the substantial discount it has achieved off the station average price (SAP) cost per thousand. How is this magical average calculated? You divide all advertisers’ expenditure on airtime on ITV (the demand) by all the viewing of ITV by your target audience (supply). Then you compare this station average cost per thousand viewers with the cost per thousand you paid. Simple.
Except that different sales houses and agencies calculate SAP differently. And SAP is only useful for working out ITV prices. But the ITV SAP is still used as the benchmark for all channels.
In this system, virtually everyone gets a discount. Discounts vary hugely, not only by spend and negotiation power, but also by channel and what time the ad appears. A guaranteed share of spend does not guarantee an audience.
The real lunacy of it all is that SAP is not even the real average price paid for a particular audience. While one side of the calculation depends on the viewing by a specific audience, the other side is about money spent on advertising regardless of who the audience is.
Using SAP discount as a primary measure of performance and value hides the true cost of reaching your audience and makes no guarantee about delivering a given weight of advertising for a particular sum of money.
In an inflationary market – one where advertiser demand increases faster than audience supply – this is a nightmare. This is because with the current system the only thing that is guaranteed is the discount, not the absolute price. So there is no brake on the increase of cost nor a safety net to stop weights of advertising falling lower than planned for the advertiser.
So how do you move from Wonderland back to the real world? Focus on absolute price not just discount; get involved in evaluating the relative value – as opposed to the discount – of the different channels and the parts of the day your ad appears. You should also encourage any strategy, including fixed price, which guarantees communication delivery as opposed to discount alone. In short, unlike Alice, care very much indeed about where you are going with your television budgets.