How PPM Could Rescue Radio

ROI modeling requires the better audience measurement system

March 9, 2009

-By Erwin Ephron

"The article talks about a few different things all at once, so hopefully you do not get distracted.
To start off, it discusses how the Portable People Meter (PPM) could save radio a lot of money, since people do not have to depend on diary (memory) recall at the end of the day. However, I also found an article from last year that sheds light on another angle of the PPM issue:- http://www.nydailynews.com/entertainment/tv/2008/07/15/2008-07-15_on_the_radio_is_ppm_accurate.html Also, apparently, advertisers are no longer depending on such measurements like CPMs but these days, are more interested in consumers’ direct response. As such, advertisers rely on the Marketing Mix Modeling. MMM focuses on direct “advertising-delivered profit.”
Since more often than not diary recalls tend to exaggerate with a bias toward leading stations, MMM together with PPM will help smaller stations because it will help show advertisers that they do have more listeners and hence show the relationship between their advertising and delivered profit. The combo will simply help to level out the playing field."



I'm not one to worry about the distant future. Remembering to pick up my laundry is challenge enough. Then Steven Spielberg casually mentioned civilization's inevitable move from a carbon to silicon base-his matter-of-fact way of saying when robots take over the Earth. By then, data is not only the new creative, he is the new creative director.

Man vs. Machine: There are many things machines do far better than people. In media, the robotic radio PPM compared to the all-too-human diary is a good example. The vagaries of the diary measurement may be costing radio millions each year in a simple but hidden way. Diary reporting is no longer adequate for how audience estimates are used to select media.

Marketing Mix Modeling: Today, many advertisers leap over conventional measurements like audience, demos and CPMs, and go directly to consumer response to make their media decisions. The tool of choice is complex Marketing Mix Modeling. Advertisers take the pieces of last year's brand marketing spend and match that to brand sales to see how they track.

For media, the deciding measure is its contribution to total brand sales, minus the cost of goods, divided by the cost of the medium. It is the equivalent of advertising-delivered profit before taxes or "Payback." You can't argue with the goal or the model. Both seem to work. It's the marketing input data that need attention, especially the radio data.

Why Radio Should Win: Years of marketing mix studies have uncovered two planning truths. All marketing expenditures show diminishing marginal response. Each additional dollar spent in a medium usually pays back less than the one before. This argues against media concentration and supports media mix. The second truth is each week added to a schedule usually pays back more than the week before. This recommends continuous advertising.


Full article:- http://www.adweek.com/aw/content_display/community/columns/other-columns/e3ia76af7fdae63c0c14db9dd68abc3454d