About half of marketers are not spending enough in a channel to obtain maximum return on investment, according to Nielsen’s first-ever ROI report.
The market measurement firm stated that, though underwhelming ROI from media plans may intuitively lead marketers to pull back on spending it sees as ineffective, the proper response for many would be to instead increase spending to “break through” and drive increased returns.
Nielsen puts forth the existence of a “50-50-50 gap”, which suggests that 50% of media plans are underinvested by a median of 50%, and that larger, more ideal budgets can lead to 50% increases in returns.
For instance, the study found that though social media delivered 1.7x the ROI of TV, it received less than one-third of the budget for TV ads.
Though this may be due to the nature of higher (and, with inflation, growing) TV ad prices compared to social media, the results nevertheless led Nielsen to recommend increasing spending on social media.
However, digital ads appeared to falter on targeting metrics, as only 63% of ads across desktop and mobile were considered by Nielsen to be on-target for age and gender in the US.
“[O]n the channels with the most exhaustive data coverage and quality, over one-third of adspend is off target,” reads the report.
Nielsen recommends media companies invest in improvement of cross-media measurement solutions.
A representative for Nielsen told The Media Leader that the study “determine[d] optimal ROI based on empirical observations and Nielsen’s Marketing Mix Modeling experience”, clarifying an increase in marginal utility for media plan spending “up to a certain point” before it “slowly decreases” as spending continues to grow.
Of course, Nielsen notes that optimal spend levels “will definitely vary” from one brand or advertiser to the next. Hence, the report shows how often brands are above, below, or at optimal spending for their individual situation by examining a number of factors that influence ROI such as marketing mix models, brand impact studies, and audience measurement.
When it comes to emerging media, Nielsen joins other studies in agreeing that podcast advertising, influencer marketing, and branded content is capable of delivering over 70% recall, and suggests that even though new media is difficult to reliably measure, spending larger amounts allows companies to more accurately test the effectiveness of new media.
The study also found just 36% of media channels fare above average on both revenue and brand metrics, and that “adding upper funnel marketing to existing lower and mid funnel marketing can grow overall ROI by 13-70%”.
Upper funnel advertising refers to brand-building communications that reach audiences before they are aware of your brand.
