Brands' media spend needs to be between 1-9% of revenue; Overspending isn't as problematic as underspending: Nielsen

According to Nielsen's ROI report, new media like podcasts deliver 71% brand recall after ad exposure. Influencer marketing and branded content deliver 80% and 82% brand recall, respectively through ad exposure

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Brands' media spend needs to be between 1-9% of revenue; Overspending isn't as problematic as underspending: Nielsen

To understand how to allocate budgets to get maximised ROI, Nielsen has released its first-ever ROI report that analyses the database of nearly 150,000 observations of marketing ROI and database of client-supplied media plans.

Based on the findings of the report, Nielsen has identified three important lessons:

  1. Media spend needs to be between 1% and 9% of revenue to stay competitive

Globally, the average brand reinvests 3.8% of its revenues into advertising. But if an underdog wants to compete with the established players for share, it requires proportionally more resources to match their media spend in absolute terms. Conversely, if you’re a larger brand, you should skew to the lower end of the range. Asia-Pacific receives 15% less ROI for its ad spending than the global average.

  1. Overspending isn’t as problematic as underspending

In a study of media plans provided by clients of all sizes, about 25% of the channel-level investments were too high to maximise ROI—by a median amount of 32% extra spend. Cutting back the extra spend would certainly improve channel ROI—but only by a modest 4%. And in the process, brands would lose significant sales volume. Nielsen observed that 50% of planned media channel investments were too low to achieve maximum ROI. The median underinvestment level was 52%—a large gap that most brands won’t be able to close in a single planning cycle. But brands that close the gap can improve ROI by a median of 50.3%. In cases of overspending, brands should optimise their channel mix instead of slashing the budget.

  1. Underspending is rampant

Though many brands are already spending most of their budgets on TV, there are still many cases where brands are underinvested in the channel. And for display and video, over half of the plans show underinvestment, so marketers should pay close attention here. According to Nielsen, 66% of plans are underinvested in digital video, 60% in display, 43% in social and 31% in TV.

Exploring new media

When it comes to newer marketing opportunities like podcast advertising, branded content and influencer marketing, marketers want quantitative guidance. On one hand, marketers might be attracted to channels like podcasts because they often have less competitive advertising and ad clutter, allowing brands to stand out. On the other, marketers can be wary of investing their budget into new areas, even if the investments are smaller than those in traditional channels.

The podcast delivers 71% brand recall after ad exposure. Influencer marketing and branded content deliver 80% and 82% brand recall, respectively through ad exposure.

Podcast: While shorter TV spots are starting to edge out their lengthier counterparts, longer podcast ads are currently driving more impact.  Even shorter plugs can be effective because podcast listeners are especially likely to research advertised brands.

Influencer marketing and branded content: When the content is the ad, you have to evaluate the content in addition to the impact it has on brand metrics. By measuring consumers’ liking of the content, Nielsen has found that high-scoring content can drive big gains in purchase intent and deliver ROI that is comparable to more mainstream media. So what makes for good content? For starters, it needs to be engaging. That factor alone accounts for approximately half of the variation in how the content was received. And the importance of being interesting isn’t limited to “entertaining” content. It’s just as true for informational work. But being interesting doesn’t require being outrageous. In fact, staying on-brand to produce a good “brand fit” and appear “natural” is also critical to boosting purchase intent.

Full funnel marketing

Brands that added upper-funnel marketing efforts to existing mid-funnel campaigns were able to boost ROI by 70%. And those that added upper-funnel tactics to campaigns that covered the mid and lower funnel were able to boost ROI by 13%. The data is clear, however, creating a full (and functioning) funnel isn’t always straightforward. Media channels that drive short-term sales might not fare as well in driving brand impacts. In fact, those that do both well are rare: Globally, only 36% of channels perform above average for sales and brand building.

Generally, digital display, social and TV are strong for both sales and brand objectives about 60% of the time. Radio and out-of-home (OOH) deliver above-average results on at least one objective about half of the time. Because channels may be strong for only one objective, advertisers should measure both brand building and sales impacts to understand how specific parts of your media plans drive value.

Reach metrics are an early indicator of sales

Campaigns that optimised their reach consistently delivered a higher ROI. Having the ability to optimize these metrics while your campaign is still running will set you up for higher ROI once it’s done.

Nielsen ad exposure Brands' media spend influencer marketing Branded Content