Monday, September 29, 2008

How Advertisers Can Afford To Create Emotional, Brand-Building Commercials As The Fragmentation of The Viewing Audience Continues

Today, the average national thirty-second brand advertisement costs about $380,000 to produce. This according to the AICP.

While this fee could be justified when the viewing audience was 30 million, digital technologies now allow for unprecedented targeting. While it’s true that targeting will serve to improve advertising’s effectiveness through relevancy, the question remains whether advertisers will be able to afford to continue to create brand advertising to reach these niche audiences.

Would you pay $380,000 for a commercial that would be viewed by only 20,000? You see the problem.

Current Solutions
To date, advertisers are doing one of three things.
1. Re-purposing the thirty-second brand spot they’ve created for mass consumption in the hope that it will be equally as effective on a more intimate and personal stage.
2. Informing their agency that they will have to produce work that is just as good with only a quarter of the production budget to work with.
3. Asking the consumer to create the commercial for them.

As all of these solutions seem inadequate at best, we wondered if there wasn’t another way in which advertisers could afford to create great brand advertising for the smaller viewing audiences inherent in the on-demand world.

Now we know that commercials can be, and are being, created for $100.00. And those who create those kinds of commercials believe they work just fine. There will always be someone who will do something for less. But, because it’s affordable doesn’t mean it’s good. And when it comes to good brand advertising, striking an emotional chord is a defining part of what separates the effective from the ineffective. (Just as understanding how emotion works is what separates a good agency’s advertising from something a consumer might create.)

Argue as you will, the fact is, adding emotion to a commercial costs money. Not only to pay for the talent you need to create it, but to add the elements – music, lighting, cinematography, acting, editing – that in the end, makes one spot work on a deeper, and, more effective level, than another.

Great brand advertising doesn’t just happen. Seldom is luck a factor.

So What If Agencies Were Paid For Creating Viewer Time-Spent Rather Than Commercials?

Under the traditional advertiser/agency compensation model, the advertiser pays the agency based on the amount of time spent to create and produce the commercial. It’s an hourly fee plus profit that adds up to a yearly-retainer calculated against projected work load. While certainly not perfect, paying an agency for their time spent working on the business was, deemed by most, to be better than the previous method, the commission system.

In the Digital Marketplace, this all has the chance to change. Advertisers will be able to measure, and therefore, pay their agencies according to how much time the viewer spent watching the commercial, rather than how much time the agency spent making it.

In other words, instead of paying for effort, advertisers will be able to pay for outcome.

Why Time-Spent? Isn't The Outcome I Want Sales?

Yes, it is. But remember, we're talking about brand advertising. Branding is about building a relationship over time. Unlike retail, branding is not about an immediate sale. Branding takes time because relationships are built through time-spent together. So, time is what we're proposing be measured. And, paid for. Not the time that one buys from the media. But the time that an agency creates.

Actually, the logic behind monetizing viewer time-spent, i.e. engagement and/or involvement in the commercial, is surprising straightforward. It doesn’t take a large leap of faith to believe that the longer a person is exposed to a brand message, the greater the branding impact is on that individual. That said, leaps of faith are seldom enough to instigate change in this industry. Which is why we are pleased to see that OMD recently verified the above in a study called “The Value Of An Engaged Viewer.”

According to the OMD study, engagement in a commercial message increases measurable advertising ROI by 15% to 20%. If engaging work is indeed worth more to the advertiser, shouldn’t it then also be worth more to the agency that created it?

Viewer Time-Spent (VTS) Compensation

Viewer time-spent can now be measured in over 35 million homes offline and over 59 million homes online. At the same time, it seems that the better creative agencies are starting to realize that continuing to be compensated on an hourly-fee basis means that they are leaving money on the table. Even when their work is brilliant, they get the paid the same amount as when their work is average. What they have been looking for is a way for good work, i.e. engaging/involving work, to be worth more than bad work.

A viewer time-spent compensation arrangement would offer an agency the chance to finally be paid based on their creative ability.

As for advertisers, who, according to Ad Age, rank holding their agencies accountable as their number one priority, a viewer time-spent compensation arrangement would offer them a way to do just that.

At least in regards to their creative efforts.

Currently, the industry pays for media and for creative based on how many people will have the chance to see something. The entire industry revolves around the concept of possibility. This shouldn’t come as a surprise. After all, it is far more lucrative to be paid for the possibility of success, than it is for the actuality of results.

But today, with the ability to measure both how many saw the commercial and how long they were involved in it for, you would think advertisers would be interested in both sets of metrics. The former for holding media accountable. The latter for doing the same with creative. Engagement is, after all, a sum game. It takes both exposure to the message (media) as well as involvement in the message (creative) for a viewer to be truly engaged.

As for accountability, there’s one thing that hasn’t changed. The actuality of results is still the best way to increase the possibility of success. Now it just requires advertisers to change their definition of results to include viewer time-spent with their messaging.

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