Quest for ROI Drives Media Spending: Veronis Suhler Stevenson
Total communication spending in 2006 will rise to $961.9 billion, up from $896.9 billion in 2005. And the quest for measurable return on investment is playing a large role in how dollars are allocated, whether spending is being increased or shifted from one medium to another.
During 2005, advertising spending rose 4.3%, to $197.6 million, in 2005, and will jump 6.4%, to $210.3 million, in 2006. Pure-play Internet advertising led the advertising market in terms of growth: Internet advertising spending rose 30.8%, to $11.09 billion, in 2005.
"Advertisers, as well as institutional clients, are increasingly requiring stronger return ROI measurements that aid them in justifying costs," notes Veronis Suhler Stevenson, a merchant bank that specializes in the media and communications industries, in its annual industry forecast. " Advertisers are focused more than ever on measurement and ROI, as they have become sensitive to consumer complaints about increased ad clutter due to marketers using all available opportunities to reach ever-more elusive audiences."
How this manifests itself varies depending on the industry segment examined. Within consumer magazines, spending increased 3.6% in 2005, to $23.4 billion. Going forward, in this category marketers' budgets will shift to electronic media that are better able to demonstrate ROI, according to Veronis Suhler. In 2005, e-media spending rose 30.7% to $302 million – a slowdown from recent years, but still representing strong growth.
Unlike their consumer publishing brethren, business to business media firms have been quicker to embrace e-media. In 2005, marketers spent $10.7 billion on B-to-B media, and of that, $1.87 billion was earmarked for e-media. This represents a 27% increase over 2004's level, and reflects "the medium's ability to offer relatively low prices, generate leads and measure ROI," according to Veronis Suhler.
"Print advertising, still the core revenue stream of many b-to-b media companies, continues to experience weakness as marketers divert funds to media outlets that provide a more immediate and measurable ROI," Veronis Suhler noted
One obvious beneficiary of the heightened attention being paid to ROI is the direct response marketing industry. In 2005, DM spending rose 7.1% to $144.95 billion.
"Despite the rising costs associated with direct mail [postage increases] and telemarketing [the rising cost of complying with the federal Do-Not-Call list], marketers are expected to continue to employ direct marketing tactics because of their ability to measure ROI and target specific audiences," according to Veronis Suhler. Spending on direct marketing is expected to increase 6.6% to $154.47 billion in 2006, and by 6% annually through 2010.
Veronis Suhler did not mention ROI considerations as a major factor in B-to-B promotions, but within consumer promotions measurability played a role. Overall spending within consumer promotions increased 3%, to $42.75 billion in 2005. Both marketers and retailers have focused on collecting data on the effectiveness of point-of-purchase displays, and retailers are investing in radio frequency identification systems to assist in this.
Within branded entertainment – a category that includes event marketing, event sponsorship and product placement – spending rose 16%, to $48.67 billion, in 2005. Event marketing, the largest segment within this category, saw its fortunes rise 17.6%, to $27.94 billion in 2005. According to Veronis Suhler, event marketing is the segment most likely to foster interactions with consumers that allow for measurable ROI.
