Planning for Profit study - why it's important

10 May 2018  |  Brian Jacobs 
Planning for Profit study - why it's important

Following the publication of a new study from Newsworks, Brian Jacobs explains why media planners should take note

Much of what we refer to within the media world as measuring the effectiveness of advertising is, in fact, nothing of the sort. Rather, we measure things that are comparatively easy to measure, like audience exposure, and convince ourselves that because something has been exposed it must have been noticed, and because it has been noticed it must have had an effect.

That’s a bit of a stretch with a lot of ‘ifs’ and ‘buts’, not to mention a great deal of faith in proxy measures, so it’s a pleasure and a relief when someone comes along with a mission to prove that yes, under the right conditions advertising does in fact work.

It’s also refreshing to be reminded of the obvious fact that advertisers advertise in order to deliver results – particularly profit. This may come as a shock to those who seem to think advertising is doing its job by delivering huge and largely meaningless metrics from digital media forms, but the fact remains that it’s up to all of us to prove that advertising does in fact build business.

And, that good advertising in the most appropriate environment works a lot better than bad advertising placed somewhere by someone, or more likely something, making choices based on the biggest numbers.

Which finally brings us to the latest work from our increasingly impressive media trade organisations. Recently we’ve had Radiocentre and Thinkbox, both widely praised for advancing the cause of advertising; now it’s Newsworks with their 'Planning for Profit' work.

Newsworks are hardly the new kid on the ad effectiveness block. They have a proud heritage delivering innovative work that helps us to understand media forms, stretching back to the organisation’s previous incarnation as The Newspaper Marketing Agency.

'Planning for Profit' fits with other trade body work in being based on a meta-analysis of previous econometric work, in this case carried out by the consultancy Benchmarketing. This re-examining of existing work allows Newsworks to explore hundreds of different analyses (684 models across a six-year period from 2011 to 2017) in a consistent manner.

Having such a broad base to draw on means that Newsworks are able to examine 30 different advertiser categories, as well as grouping them into what Benchmarketing describes as five ‘super-categories’ to allow for more detailed analysis.

This approach gets over the advertiser complaint of so much industry econometric work that ‘that’s all very well but it doesn’t apply to my category’. Odds are (P-for-P covers 86% of adspend), it does.

Newsworks has a natural interest in covering both print and digital versions of their members’ titles. Their objective is to build on work they’ve done previously on how audiences use different digital vehicles in different ways – understanding why consumers spend longer with some online forms than with others, and consequently how editorial context impacts commercial messaging.

This previous work, admirable though it is, stops short of building a business case for advertisers to use the medium. That’s what 'Planning for Profit' aims to address.

Newsworks’ conclusions are powerful. For each category they’ve examined the % of budget delivered to newsbrands, the profit return on investment (PROI) defined as: “the revenue generated by advertising campaigns divided by the profit margin for each client over the short to medium-term, [taking] into account the media investment and the cost of goods or services.”

From this they’ve calculated the optimum percentage of budget to be allocated to newsbrands in order to maximise profitability, and by comparing this with the actual budget delivered they’ve estimated the profit lost as a result of sub-optimal media allocation.

In the introduction the authors state: “The results in this report may surprise you. We certainly hope that they will prompt a reappraisal of newsbrands in the media mix”.

They’re being too modest as there’s a far broader take-out.

It is too easy these days to believe that all advertising is there to address short-term issues. After all, if the data exists to allow for a link between placing a message and seeing a result (whether that’s a click, a like, a retweet or whatever), so that a brand manager can spend ‘x’ and immediately see ‘y’, then what else does he need?

The answer of course is that advertising can and should do so much more. Profitable brands are just that – they’re brands, built over time, across multiple touch points and with layers of meaning that persuade people to spend money on them.

Once a brand loses its values, it reverts to being a product. Once Coca-Cola is deconstructed down to its component parts it loses the magic. It becomes fizzy coloured sweetened water, and not the drink of a generation, or the embodiment of refreshment.

Planning on Coca-Cola I was always taught to watch for and address any signs of any diminution in brand values. Coke as a brand has immense value (look at the balance sheet); Coke as a product has little.

Furthermore, Coke is it. Coke isn’t Pepsi. Brands differentiate; products generally don’t.

Brands are built – brands build profit. Marketing (and within that discipline, advertising) plays a fundamental role in building brands. This has now become such a mantra that it’s at risk of becoming devoid of meaning, almost as if just by saying it we’re doing it.

The work of Peter Field and Les Binet for the IPA has demonstrated time and time again how valuable brands are, and how we need to remember how to build them.

Newsworks and others have worked with Peter to add to and amplify his, and Les’ message. This message needs frequent repetition, not just throughout our industry (if we don’t believe advertising can build business then why should anyone else) but within boardrooms everywhere.

Frequency, we were always taught, is good. The whole industry should get behind Newsworks’ initiative and should applaud their rigour in demonstrating and promoting the business building benefits of advertising.

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