Lesson 2 – Targeting
So you have decided to make and sell widgets and you have either a concept or prototype that you have done some Marketing Research on and the data tells you that concept acceptors (people who like your widget) skew to being Left handed male squirrels who wear glasses. What that means is that your concept may have had a purchase intent score of 5% responding (Probably Purchase/Definitely Purchase) for a general US representative audience, but when you isolate Left Handed male Squirrels who wear Glasses, that specific demographic had a 80% Probably Purchase/Definitely Purchase) score. This example is very exaggerated compared to real life, but it simplifies the discussion.
What this really means is that if you can find a Left Handed male squirrel who wears glasses you are like to be successful interesting him in your widget. There may be some other random people who will also buy your product but your Core Market consists of Left handed male squirrels who wear glasses.
Now you need to figure out how to find these consumers and advertise to them. This task may be made more difficult by the fact that Left handed male squirrels who wear glasses represent 2% of the US population. You could decide to simply advertise to a wide audience and trust that the Left handed male squirrels who wear glasses will see your ad and buy your product. SO you decide to place an ad with the broadcast that reaches the largest number of people, the Super Bowl. The media company (ie the network) comes back and says, that will be $3M please, and you are now in a pickle because you budgeted your advertising budget for the entire year to be around $250k.
This seemed easy – how can you fail, it’s the SUPER BOWL. Problem is that of the people who are watching your product, only 2% of them (the Left handed male squirrels who wear glasses) would ever be interested in your widget, the other 98% couldn’t care less. You are in essence wasting 98% of the ad impressions you would be paying for with a Super Bowl ad which means you are grossly over paying for the impressions that do matter. Homework question – so what kind of product would be best served by advertising on the Super Bowl?
As you contemplate your hopeless situation a salesman from Nutty Communications representing the Forestry Network suggests that you should advertise on his network. Your first response is that he must be crazy, only 2.5% of the population ever watch that network and that of that 2.5%, 0nly 2% would be in the target demo group. Your ad might reach 3 Left handed male squirrels who wear glasses in total. The rep then says, No no, The Forestry Network itself skews to an audience made up of Left handed male squirrels who wear glasses. In fact 75% of their audience are Left handed male squirrels who wear glasses. In the end most (not all) of the population of Left handed male squirrels who wear glasses watch The Forestry Network. The Network aligns nearly perfectly with your targeted audience. A media buy here, is going to be very efficient as it wastes very few impressions and is much more likely to fit your limited budget.
Ultimately that is the dance between advertiser and media publisher, the advertiser is trying to find media that best matches the targeted demo’s or attitudes that are likely to be interested in his product and the media publisher is trying to sell space to advertisers whose products are fits for his space. If there is a moral hazard here, it is with the publisher or media property owner who has inventory (slots to run ads or side pods to fill) but not enough advertisers who fit the “best fit” description may sell the space simply to unload it even if the advertiser is not a good match. The advertiser needs to do their research on the media property in question.
In the old days of 4 tv stations per market, size mattered most for audience ratings, individual shows may have skewed, but the overall rating was the most important thing. In the current environment of media fragmentation (billions of channels) and efficiency (limiting the % of wasted impressions) Skew matters nearly as much as total audience. If a media property skews towards matching a product category whose producer’s have advertising budget to spend, it may be a gold mine even if it never cranks out more and a single Nielson ratings point. In fact there are networks created for no other reason than to serve specific advertiser needs, the Home Improvement channel is one such example.
One additional thing to consider here is the range appeal of the advertiser’s product and its unit margin. This essentially gets us to an understanding of what the advertising budget is likely to be for that advertiser. That budget determines where the advertiser is going to be shopping for media: A $3M superbowl ad or a $1000, surplus inventory placement.
I have commented on the skews and sizes of audience for different motor racing properties in the past. Nascar has the widest appeal, but comes with the highest price point ($22M a car). Sports cars has the most severe, yet advantageous skew towards a very High Net worth audience and both have made it work to their advantage. IndyCar has been stuck in between not skewing enough to draw ultra premium brands to the fold, but not broad enough to be a portfolio tool for a broad based product advertiser. It has been my impression that in the Past IRL leadership had the goal of increasing the skew, but current leadership, Randy Bernard, is making growing the overall number his #1 goal.
It certainly is a change in strategy, one worthy of some commentary, but Its late, I’m tired and this was really meant to be an informative piece, not an opinion piece. I’ll leave that to you as a home work essay to work on. Have a good evening and keep counting down the days, the smell of ethanol will be upon us soon.