‘The Bottom Line’ and ‘Planning for Profit’ were conducted by Benchmarketing, part of Omnicom Media Group, led by the respected effectiveness expert Sally Dickerson. It comprised a meta-analysis of the data from 1,012 econometric models built between 2011 and 2020.
The lost profit is calculated first by examining the current percentage of budget spent on news brands and the resulting profit return on investment for the whole campaign. We then calculate the optimum percentage of budget to be allocated to news brands in order to maximise profitability, and by comparing this with the actual budget delivered, we estimate the profit lost as a result of sub-optimal media allocation.
*Profit return on investment is the revenue generated by advertising campaigns divided by the profit margin for each client over the short to medium-term. It takes into account the media investment and the cost of goods or services, so provides a much clearer guide to advertising payback than simply looking at the revenue generated.
Why does the research focus on profit return on investment?
Profit return on investment takes into account the media investment and the cost of goods or services, so provides a much clearer guide to advertising payback than simply looking at the revenue generated.
A key feature of this research lies in the concentration on total campaign PROI, as opposed to individual channel PROI. The most important thing is to prove the effectiveness of media on a total campaign level because this is what drives results and core business objectives.
It’s important to note that profit calculations have already accounted for all media and cost of goods, so any PROI figure of over 1.00 is paying back on top of the initial investment in
the short term.
In this research, we’re concentrating on short to medium-term profit generation. This is increasingly the way that advertising is measured so it’s important to be able to prove
the profitability of media channels in the short-term. This in turn will mean considerably higher long-term profit. Benchmarketing’s estimate of the long-term effect is twice the short to medium-term PROI.
Were the results impacted by the pandemic?
Yes, the results were impacted by the pandemic (see chart). We saw an improvement in 2018 and 2019, and then a setback during the pandemic, which was expected. However, even with the pandemic, the profit gap has narrowed and the outlook going forward is positive.
Why isn’t all the category data out now?
We are releasing the category data over the next few months, however, should a brand be interested in the implications for a particular category, we can supply that. The profit calculator also provides an easy ready reckoner for brands to work out their optimal investment in news brands as part of an overall media mix.
What are the categories?
This study was designed to provide maximum benefit and the widest possible application. Benchmarketing looked at 30 individual categories, analysing characteristics such as purchase behaviour as well as how consumers behaved in relation to response to advertising investment, in order to develop five ‘super-categories’ as distinct segments. These categories cover an impressive nine in 10 of advertised brands in the UK advertising market. This means there are enough cases in a sector to enable robust and actionable conclusions. In addition to the super-categories, there is also in-depth category analysis for four individual categories – motors, finance, supermarkets and retail. As a result of this work, the vast majority of UK advertisers will be able to determine optimal spend in news brands.
Which categories are underspending?
Prior to the pandemic, there were categories where a lot of brands were spending in news brands at the optimal level to drive total campaign PROI. Supermarkets is a good example, and they have continued to spend significantly in news brands throughout the pandemic.
Retail and finance are also continuing to spend in news brands and despite the challenges of the pandemic, we’ve seen increased demand for technology and the infrastructure required to work from home.
Conversely, categories covering more incidental/disposable purchases, such as takeaway coffee, eating out and so on have seen a decline. These categories typically have lower profit margins.
Why aren’t you forecasting past 2025?
Forecasting a long way ahead needs a reasonable level of data stability to give confidence in the outputs. We’ve seen a lot of variability in advertising expenditure over the last couple of years, so we are being cautious, and only looking a few years ahead. As we gather more post-pandemic data, we will be able to look beyond 2025.
What are the current investment levels in news brands v pre-pandemic?
Ad investment in national news brands rose to more than £1 billion in 2019 with three quarters of successive growth, driven by a 38% increase in digital ad spend in the three years prior, according to AA/Warc. As the industry bounces back, spend in national news brands is forecast to grow by 12.3% by the end of this year, with digital up 18.2% in 2021.