Friday, February 5, 2010 at 6:49AM Buying a Super Bowl ad rolls the dice for new, small firms.
Want to roll the dice? Paying for an expensive Super Bowl ad does just that!
In a business sense, when a young, small firm decides to gamble on one or two Super Bowl commercials--at $2.5M to $2.9M a whack--it's a breath-taking situation. Not only are the stakes high for measurable success, the risk is compounded by the reality that small, relatively unknown firms are betting a huge part of their annual ad budgets on the decision!
Should a small firm play with the big boys?
Yesterday I showed how a Super Bowl commercial represents a huge premium cost of advertising relative to costs in another, comparable setting--on an average, adjusted CPM basis, it's twice what it is for a typical prime-time program! Should advertisers--especially small, new companies--be willing to pay this considerable premium? The answer to this involves some considerations most people don't think much about.
What that decision depends on are a couple of qualitative factors that the cost numbers may not reflect. Let's begin with the matter of deciding if the Super Bowl audience is of a better grade [i.e., more focused, targeted, homogeneous] than for, say, CSI, or 60 Minutes...or if your product is directly related to the needs, interests, or problems of football fans. More often than not, in truth, neither of these are the case.
Does the audience know your name?
Another consideration is whether or not the audience is going to pay special attention to the commercial. It could be argued is that with a Super Bowl placement, that just might be possible--a lot of people watch the Super Bowl...for the commercials--and, thus, making it a more valuable commercial "buy." However, that decision invites the question: How familiar with the company or product offering is the audience? If the audience is well-acquainted with the firm and the product, then a clever commercial can have a high-impact for viewers who are paying attention and who are familiar with the company and the product its offering--in effect, the commercial "makes sense."
But what about a new advertiser which the audience is not familiar with--can a commercial, say, shown only once [or even twice] for a mere 30 seconds really have any commercial impact to justify the cost of the $2.5M in the first place? Likely not and here's why.
Getting people to pay attention and then buy is not as easy--or fast--as it looks!
All consumers have to go through a series of intellectual and affective stages--in their hearts and hearts--beginning with a state of unawareness and--eventually--leading to product trial, repeated purchase and--ideally--brand loyalty. Typically the process of moving through this set of internal events [i.e., inside the consumer's head] can't occur except over an extended period of time associated with repeated messages and involvement associated with company and the brand "messages". Marketing guys call this the hierarchy of effects--but I'm getting a little technical when I say that!
So, if a relatively new [i.e. unknown] company decides to advertise on the Super Bowl one time--for a price tag of $2.5M--is that likely to trigger in enough people enough business to justify the cost? Probably not. On the other hand, if an established advertiser, say, Doritos chips has an intriguing commercial that prompts people to buy an extra bag or two, or buy a little more frequently for a period of 30 days or so, then Doritos would need only evoke a response out of a relatively small proportion of the audience to pay for the commercial and then, potentially, make a profit. Here's how that's calculated...
Lets say Doritos makes a 10-cents margin on each bag [at wholesale] they sell and a Super Bowl commercial has the effect on some people to buy more--say 3 more bags in the next 30 days. Then Doritos would need only about 8.3M people to be favorably affected by their ad to break-even on the cost of the commercial [and anything more than that would gravy!].
The commercial better be damn good--no, hypnotizing!
But say we're talking about a fundamentally brand-new, largely unknown advertiser buying commercial time from CBS for $2.5M--they'd have to have a very compelling...I mean really compelling...ad to just break even on the cost of the ad.
This year there'll be a new advertiser during the Super Bowl, Flo TV--they sell a nifty portable mobile device that lets you watch TV on the run. It sells for $250 [on Amazon.com] and costs about $200 a year for a subscription. If Flo TV received a net profit of, say, $65 for each unit sold [this is an estimate on my part to make the point...I don't really know what Flo TV makes on a per unit basis], they'd have to persuade about 38,500 people to go out and buy their device in the next thirty days to justify the premium costs of buying a Bowl commercial. [Actually, in truth, Flo TV is buying two commercial spots...so they're in to the better part of $5M of ad costs...which would make my illustration call for about 77,000 immediate buyers!]
Moving 77,000 people to buy with 60-seconds of information seems unlikely.
We'll never know, but the advertising guy in me says that this scenario is not expected to happen--it's simply too much to expect that a new, very unfamiliar product, a very unfamiliar company to trigger the events that will necessarily lead up to 77,000 people buying as a result of two Super Bowl ads! The price point is simply too high and the risk of spending such a tidy amount of money on the basis of information from two 30-second commercials--it's not in the cards for Flo TV to get the returns I am sure they are seeking, given how much they plan to spend!
[Don't get me wrong...I think that for Flo TV to advertise on television may be the perfect communications strategy--I just saying that to pay the Super Bowl premium is not a predictably smart decision!]
If you're interested, Suzanne Vranica writes about exactly this issue in a recent Wall Street Journal article. You may want to check it out--before you plunk down $2.5M for your new, promising start up company!
Enjoy Super Bowl XLIV and the commercials!
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Reader Comments (1)
I found this truly interesting from a non business persons perspective. Back to Jan 29, That was a good one. I did not know Dominoes was using that type of ads. Where are these ads?