How to Budget for Addressable TV

TV ad targetability and budgets

The ad industry often debates the relevance of TV as if it were going away next week. Let me reassure you. It won’t. Any major advertiser will tell you that TV advertising plays an important role in their strategy. In fact, many advertisers will gladly spend more budget on TV as developments in TV technology satisfy more of their wish list, such as addressable advertising.

You can find the specifics of the current state of addressable TV in another of my posts. But I’ll reiterate something I wrote then, that while addressable TV hasn’t reached full maturity, it has momentum. I’m confident that within the coming months and years, addressable TV will become the norm, rather than the exception.

With new possibilities in TV, advertisers will have to determine where to fit addressable TV into their ad budget. Below are a few ideas on how to approach this.

The Power of TV

Before I dive into TV budgets specifically, I want to talk about advertising budgets in general. The trend of recent years has been to move ad dollars out of wherever they might have been and put them into digital. I think the ad industry has become so enamored with the targetability of digital that we’ve neglected the most powerful advertising medium out there: TV.

In another post I explain how several large advertisers have shifted digital ad dollars back to TV, as the flaws of digital have become evident. Even the digital folks agree that TV represents a critical part of major marketing strategies. During the 2017 NYC TV Week, Google panelist Julie Sterling acknowledged that TV has scale, reach, premium content, and seamless ad insertion. She named this combo “the secret sauce of TV advertising.”

Need more convincing? How about the words of Rich Lehrfeld, senior vice president of global brand marketing and communications at American Express. “When we run a heavy TV schedule, we see a lift in sales and product awareness,” Lehrfeld said. “We need to run two weeks for digital to get the reach of one day of broadcast.”

My point here is that TV is powerful. Without it, advertisers miss out on one of the most powerful mediums available to them. With it, advertisers can get the scale, reach, targetability, and transparency only TV can offer.

TV for Reach

Now speaking specifically about TV budgets, advertisers will have to decide how much to put into traditional spot advertising and how much to commit to addressable. My advice is to first consider what you want to accomplish with your ad dollars. A CPG advertiser, for example, may have a product that appeals to a very general audience. If the goal of the campaign is to garner general awareness, then targeting specific demographics might not be a top priority. In this instance linear can play a key role in building upper funnel awareness.

It’s the old “spray and pray” approach. You get fantastic reach. You don’t have to think too hard about who sees it because you want anyone to see it. It works great for some industries, products, and services, but not others.

Enter addressable TV.

TV for Targetability (Addressable TV)

For advertisers whose campaigns don’t match the example described above, I suggest you allocate your TV budget to addressable advertising.

“When it comes to driving returns, the tried, true, and comparatively unsexy realm of television advertising still can’t be beat,” Observer’s columnist Jeri Smith writes in an October 2017 article.

Well said, Jeri. Although I would like to add that new addressable capabilities make TV a very sexy ad option. Like I said before, addressable can match the targetability and transparency of digital while also offering the strengths of TV. And while linear TV ads help upper funnel marketing, addressable can help with lower funnel activity of getting sales today.

Addressable TV cuts out the waste notoriously associated with traditional TV spots. Advertisers can target demographics as accurately as digital. The beautiful thing about reaching only the households you want, is that you don’t pay for the ones you don’t want.

Be warned, however, there may be a sticker shock. Addressable will have a higher price tag (CPMs) than traditional TV spots. With some simple math, though, you’ll find that advertisers will actually pay less per target audience impression and household than traditional TV spots. This higher price represents a targetability premium. In any ad medium (in digital especially), advertisers will always pay a higher CPM for increased addressability.

Plan then Purchase

The addressable market will continue to grow in scale and accuracy, and technology will bring rich data into the mix. Within a couple years, I suspect nearly every TV ad campaign will rely on addressable advertising in some way. My recommendation to advertisers is to start experimenting with addressable in its early stages. Start getting the most out of it now, but expect to budget heavily for it very soon. Remember, some campaigns may not require targeted ads, in which case traditional TV spots might meet your goals and needs. In other words, look at your plans before committing to a campaign budget.

Brittany Sudlow
Brittany Sudlow
Demand Marketing Manager
Brittany has years of both marketing and sales experience. Her marketing experience has been focused on advertising, content, business development, and brand management. Outside of work, Brittany enjoys trying new food and watching football.