Traditional Cost per Impression and Nielsen Ratings Are they destined for a display at the Smithsonian?

By Dr. Byron Farquer, April, 2008

For many, irrelevant assumptions complicated by questionable sampling sizes, a lack of site-specific measurements and the fast changing face of technology is turning the advertising world upside down and causing those that buy and sell it to scratch their heads. For a few, disbelief is creating denial, for others, its creating vast opportunities.  

In a recent article by Frank S. Foster "Vegetable Soup Analogy Debunked: Should Television's Small Sample Be Sacked?" Mr. Foster uses a measurement analogy to illustrate the dangers of interpretations of effectiveness derived from micro-sampling. This process is further complicated by the fact that the sample group is not necessarily focused, nor filtered.

Its believed that Nielsen projects that there will be 112,800,000 television households in the U.S. market for the 2007-2008 television season, and its generally accepted that the effective size of the current national people meter panel is approximately 10,000, so Frank in generosity sets it at 20,000 for his analogy. Frank uses this data and the Nielsen system as a point of reference for his analogy. "To make my point" Frank starts out, "I will be generous and assume the effective sample will be 20,000 at some point, and that the number of television households will remain constant.20,000 out of 112,800,000 equates to 1 in 5,640 households. So how small does that make Nielsen's cup?  


When I was a child (Frank Foster), the biggest pot in my mother's home was a five-gallon soup kitchen pot. There are 16 cups to a gallon, so there must have been 80 cups in her soup kitchen pot. So Nielsen's "cup" isn't really a cup. There are 256 tablespoons in a gallon, so there must have been 1,280 tablespoons in my mother's soup kitchen pot. So Nielsen's "cup" isn't really a tablespoon. If there are 768 teaspoons in a gallon, there must have been 3,840 teaspoons of soup in the soup kitchen pot. But that means a teaspoon is still too big to use and Nielsen's "cup" is smaller than a teaspoon."  

He completes the analogy stating "According to Wikipedia, there are 60 "drops" in a teaspoon, so there must have been 230,400 drops in my mother's soup kitchen pot. Which means Nielsen's "cup" actually translates to 41 drops -- or approximately 2/3 of a teaspoon." From Frank Foster's analogy, one must question whether the Nielsen data sampling size is really relevant, AND no one in mass media is doing a really good job of documenting actual advertising ROI per television household, because they can't. You simply cannot effectively track which households viewed the ad AND reacted with a purchase (matching the ad dollars spent per household with actual product sales data per household). Herein lies the advertising rub. Since there is no direct viewer ROI measurement, you must infer the cause and effect of advertising and do so retrospectively (measure collective sales after the ad has played) without knowledge of which viewer actually made a specific purchase as a result of that ad, and when they did it. At a time when channels numbered less than 10, and viewers had little choice, the present broadcast, cost per impression and ratings system had more relevance. In today's world of DVR's, mega-channel digital and cable offerings and internet venues, advertising and its traditional measurement matrix may be doomed.

Digital Captive Audience Networks (viewing systems at the point of sale, or point of influence) are designed to contain highly focused ads directed at a pre-screened group of consumers. The act of screening is consumer- directed in that the consumer patronizes certain locations for certain needs at their time of highest influence. Auto repair customers are most receptive and ready to buy automotive related products and services while waiting for auto repair services as opposed to general channel surfing at dinnertime. This is not to say the surfing consumer isn't interested in automotive products and services, nor is it suggesting the standard network- broadcasted ad won't influence that consumer to purchase. However one can easily deduce that 100% of the viewers in the auto repair store have "auto related products and services" in a state of top-of-mind awareness, they are ready to purchase such items, and the masses of potential viewers not interested in these services are currently not present in the room (pre-screened). 

Interestingly, a Captive Audience Network (CAN) adds an additional dimension to the ad-justification process, site-specific measurable ROI. Since most CANs have the ability to deliver location-specific advertising and information, and track billing per location, the advertiser can match ad cost per location with sales per location. Product manufactures have often been limited relying on indirect measurements to justify advertising budgets when utilizing traditional advertising resources including radio, print and television media. In a recent pilot test project with a national CAN provider, emebaVet, a pharmaceutical manufacturer received both site-specific ad costs and product sales data. In this example an advertising cost of $800 purchased longer than standard advertising segments which played multiple times a day in a veterinary practice setting. In this instance not only was site-specific ROI of interest to the advertiser, but up-sell capacity was also desired since essentially all clients exposed were present for veterinary services other than the test product which was also brand new to the industry, necessitating education in addition to exposure. The location sold its entire stock of vaccine prior to the 30 day ad test period completion, justifying the CAN's ability to influence buying behavior especially when education is required to instill value. Dwell time in captive audience settings make the education possible, where only infomercial based advertising in video media can offer similar length of exposure. The manufacturer, a leading human and veterinary pharmaceutical company, knows its profit margin and cost per unit and knows how many units are sold at this test location since it invoices that specific address/purchaser. Being able to "marry" the ad cost per site and the profit/unit sales data per site is revolutionary and beneficial.

Here the sampling audience size is smaller than what might be expected in a traditional print, radio or television broadcast venue, however the entire audience is pre-selected for the product or service sector of interest. Non-pet owning, non-veterinary using consumers were not included nor exposed, and represent a group that is least likely to make a purchase. Including an additional 200,000 impressions of non-interested parties doesn't have a contributing influence effect, so traditionally sought large impression numbers don't work for CAN measurements. In CAN systems, the actual number of impressions are smaller, but markedly superior. Pre-selected, pre-qualified, and top-of-mind awareness at the time of ad presentation means getting the advertiser's message to the right group at the right time. 

For traditional media buys, large exposures are necessary to touch the actual sub-set of interested consumers. In traditional media buys, cost per impression needs to be very affordable since many of the impressions are worthless, and therefore of little or no interest to the advertiser. In CAN based advertising, cost per impression can be higher due to the pre-selected target group being smaller, however in today's CAN industry, the cost per ad may be far less than a traditional media ad. Despite the higher cost per impression, the total cost for the ad is often a fraction of a traditional media buy. With a reduction in total ad cost, a highly focused exposure of the ad, and an ability to directly measure site-specific ROI its understandable that efforts like the "Canoe Project" being developed by cable television companies in response to changes in advertising buy rates, are sprouting up in the industry. Site-specific ROI and direct to consumer marketing to pre-screened consumers, especially in captive audience settings, gives the advertiser a cost effective way to educate, tell it's story to instill value, and influence consumer buying at the optimum time, and those traditional advertising and media venues that lack this ability most certainly have justification for their growing concern.  
  

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