Is analysis based only on Reach sufficient for properly judging
the value of ad media?

Effectiveness of Advertising
The Value of Ad Media
Article No. 3 (by Hideaki Koizumi)

As I mentioned on my last article, to some extent, we can judge the value of ad media using a simple CPM calculation. But I am reminded of a famous saying by Theodore Levitt, Professor Emeritus at Harvard Business School, "Consumers want a hole drilled to the diameter of five millimeters, not a drill bit the diameter of five millimeters." Similar to this, advertisers want to increase their product sales (or improve their company's image) with ads, not high 'Reach'. Unfortunately, most of the data prepared by syndicated research companies is based on Reach of media. In short, it is obvious that comparing the value of a medium only by CPM is not the proper way, even though CPM is calculated using target data. Still, sales of some products, like confections, are in proportion to their awareness. In this case, TV ads are more effective to build consumer awareness with less cost than other media. But there are some products which special features that entice consumers to purchase. In these cases, magazines or newspapers will be better media than TV. Not only in Japan, but also in Western countries, it has been thought of as taboo for media planners to only analyze the correlation between product sales and ad expenditure, since there are many other factors involved, such as price, distribution, competitor ads, etc. But is it not worth thinking about the correlation of just those two? Several decades ago, it was probably impossible to analyze this. But now, advanced computer technologies and more developed techniques, such as 'neural networks', have made it possible to predict future data (not with 100% accuracy, but very close to reality) from existing data for some product categories. Here is a SPI case study for a Western liquor brand; market share of the product was influenced by price, TV Spots and promotional store inserts, with contribution rates of -0.548', 0.143 and 0.389, respectively. In this case, price was the most influential factor. In other words, if the price increases, market share will decline. More importantly, we could tell that the store inserts had much more influence on market share for the brand than TV ads. With this finding, the advertiser moved some of its TV ad budget to the budget for store inserts and increased its market share. If we had used just CPM analysis in this case, we probably would have concluded with the wrong finding, such as TV ads are more effective than store inserts. In the end, if you really consider the brand, it should be obvious that CPM analysis, which is based just on Reach, is insufficient for properly judging the value of ad media.

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