What Are the Inventory and Pricing Options Included in TV Advertising Costs?
Are you considering shifting your brand’s digital dollars over to TV advertising? You should be! After all, cross-channel television is the most effective and cost-efficient medium for reaching target audiences at scale. But there are many different flavors of TV advertising, each with its own benefits and trade-offs. Which one’s right for your particular campaign? Here are some of the most popular options to help guide your strategy:
National or Local
National inventory lets you reach people in all U.S. markets via the same program and to target based on age, gender, household income and other key demographics, while local inventory only reaches an audience within a specific region or market.
Local inventory has a lower barrier to entry and can be useful for testing, but it does not support advanced targeting. Neither option presents a clear pricing advantage, since some local advertising is more expensive than some national, and vice versa.
For CTV campaigns, we can geotarget with extreme precision, which allows advertisers to serve specific creative to different localities. And the CTV barrier to entry is comparatively low since it’s CPM-based, so you don’t need a huge budget in order to test and learn.
Many advertisers new to TV will begin with a straightforward lift test approach in mind. The methodology may look something like this:
- Target three designated market areas, or DMAs, to receive TV ads bought locally, at premium CPMs.
- Identify three comparable DMAs to observe as control markets.
- Observe the impact of TV advertising in test DMAs during the campaign flight.
- Apply a “national CPM discount” when evaluating results to estimate the cost of media bought nationally.
- Build a national campaign plan based on learnings from the local DMA test.
This approach will not be right for every brand. It requires national distribution/shipping (or at least a significant majority of coverage), normalized demand across demographically disparate DMAs, and more. If your brand is highly regional, subject to local regulations, etc., it might not make sense to structure a campaign with the ultimate goal of national scale.
There’s also a chance that you’re sufficiently well distributed to make national TV a better buy. Typically, CPMs for local TV campaigns are five times higher than national. They often can be as much as 20 times higher. So from a CPM efficiency perspective, we recommend switching to national inventory if your brand has presence in the top DMAs (like Chicago, New York, etc.) as well as in 10-20% of the remaining DMAs.
For CTV campaigns, we can control the bids we place and geotargeted CPMs aren't necessarily any higher than non-targeted ones, though it may be harder to find your audience at scale only within a specific region.
CPMs on CTV are generally more expensive than linear CPMs, but there is far less waste. (This is due, in part, to a scarcity of inventory and a premium charged by publishers to reach more elusive audiences). We recommend taking a data-driven approach to budget allocation across national linear and CTV that is based on where your target audience is watching TV. We have developed a budget recommendation tool within our platform to help clients optimize their budget to deliver against their audience.
Direct Response or General Market
As the name suggests, direct response TV (DR for short) generally requires an offer and call-to-action in the creative itself. DR inventory is sold alongside general market inventory but typically includes a cancellation option that either the broadcaster or the advertiser can exercise. Because DR spots are pre-emptible (meaning not guaranteed to air), DR TV budgets often don’t “clear” (meaning they don’t actually air even though they were booked).
On average, less than 70% of traditional DR budgets clear. This means that even when a marketer wants to spend on TV media, they may not be able to, making plan delivery unpredictable. In addition, advertisers generally don’t get transparency into where their spots are placed and will be airing in advance of a campaign launching. Finally, since not all networks offer much, if any, DR inventory, it can be difficult to expand into new networks, even if your target audience is watching those other networks.
General market is guaranteed to air. That can make it more expensive (though not always), but it gives advertisers certainty that their spots will run as planned.
Ad Length: 60, 30 or 15 Seconds
Longer spots tend to have a higher conversion rate. Longer ad lengths also are more expensive, so you may want to prepare 60-second, 30-second and 15-second ads to determine the optimal trade off of conversion and cost. Recognizing this dynamic, many advertisers will start their campaigns with a 60- or 30-second ad to build awareness, and then transition to a 15-second ad, which serves as a reminder of your longer spot that consumers have seen before.
Download our Cross-Channel TV Playbook for a more detailed guide on how to unlock audiences on both linear and connected TV.