By Paul Sage
Are you getting what you’re paying for?
Probably not. The world of local or “spot” TV advertising is unlike any other.
Let’s say you stop at the supermarket on the way home to buy a dozen eggs. You scurry to the back of the store, grab a carton of Grade A Large, and make your way to the checkout line. As you wait for the customer in front of you to finish checking, you open your carton and count only eleven eggs. Now it’s your turn at the cash register and you say to the clerk, “Excuse me, this carton is missing an egg. I have to get another one.” The clerk says to you, “No, you pay for twelve eggs but you only get eleven.”
© Kathleen Howell | Dreamstime.com
Not fair? Of course not. But that’s exactly how TV stations treat their advertisers (if they’re lucky). Only in the local media business is it acceptable to deliver as little as 90% of the purchase and “call it even.” Stations and agencies will often blame under delivery on volatility in available measurement techniques and unpredictability of viewing audiences. These are outdated excuses. There is enough data to accurately estimate audience delivery in advance.
What is Spot TV UD (Under Delivery)?
Spot TV UD (under delivery) is defined as the shortfall of actual TRPs delivered by a station versus TRPs guaranteed. Best practice is to assess this by individual broadcast quarter (i.e. each quarter is its own guarantee period, and delivery “offsets” are not allowed across quarters). Further, under delivery should be calculated at the individual station level. Market delivery is important in evaluating performance vs. communication objectives, but UD value owed is a transactional calculation tracked back to each station and quarter.
Which brings us to our SNOWBALL analogy.
Every quarter, two things happen:
- You incur new spot TV UD weight from the current quarter’s buy. You add snow to your snowball.
- You recover old UD weight in the form of UD restitution for under delivery in prior quarters. You melt your snowball.
The key is to melt your snowball faster than you add snow to it.
Each quarter’s media audit has what I call the Snowball Equation:
Old UD balance + New UD incurred – New UD restitution = New UD Balance.
For example, if your old UD Balance was $500,000 and you incurred $100,000 in new UD and recovered $200,000 in new UD restitution, your new UD balance is 5+1-2, or $400,000. Congratulations, you just melted your snowball by twenty percent!
Can I expect 100% delivery from every station, every quarter, in every DMA?
No, but you can probably get closer to 100% than you are now. As an advertiser, your buying guidelines and contracts with your agencies should define requirements for station delivery of TRPs (Target Rating Points) as well as expectations for recovery of under delivered weight.
Local TV stations should be held to a delivery standard commensurate with the precision of audience measurement in their DMA. Nielsen’s recent upgrades to more stable measurement and projection methodologies and higher samples in many markets only serve to solidify advertiser expectations.
|DMA Measurement Method||Spot TV/Cable Delivery Expectation||
|Local People Meter “LPM” (25 DMAs)||95-100%||Atlanta, Chicago, New York|
|Set “HH Meter” (31 DMAs)||95%||Austin, Cincinnati, Kansas City|
|Code Reader (14 DMAs)||90% *||Madison, Mobile, Reno|
|Diary (140 DMAs)||90%||Little Rock, Lubbock, Spokane|
* Code Reader is a passive listening technology that is new (as currency) in 2016, and thus requires an adjustment period for the marketplace. Assuming that this technology results in more stable ratings over time, advertisers may wish to migrate to higher delivery threshold expectations in the future.
Many advertisers are now negotiating and receiving 100% guarantees in LPM markets, with expectations relaxed in markets featuring less rigorous measurement technology, as detailed above. It should of course also be noted that some within the ad ecosystem are beginning to embrace ComScore (formerly Rentrak) local TV measurement, and over time delivery threshold expectations will be established based on that technology as well (to the extent that it is used as an agreed currency for some transactions).
It’s important to note that these thresholds allow for some level of instability in the measurement methodology. Everyone understands that current prevailing local TV audience measurement methodologies are inexact. That’s why an advertiser agrees to consider a buy fulfilled at 90% or 95% in the first place. If measurement were perfect, as an advertiser I would want $100 in TV audience for my $100 in cash. Every time. But because it isn’t perfect, I agree to $90 in value as a minimum in some markets. And as the measurement technology becomes more exact, my expectations increase, because ultimately I want what I paid for.
How do I minimize UD from the start?
Your first step is to minimize your potential local TV under delivery before your schedule airs. This is achieved through careful estimating and re-rating by spot media buyers who know their markets. Local TV under delivery will happen, but it’s better to manage your buys to leave fewer under delivered TRPs to recover later. A best-in-class benchmark is 3%. That is, your total under delivery should be not more than 3% of your total quarterly spend (this is a performance benchmark, across your entire buy). Buyers shouldn’t allow stations to inflate ratings, because that allows them to collect money now for value that the advertiser won’t receive until later (if at all). Nor should buyers inflate estimates in order to artificially lower purchased costs in a market. So step one is tight estimating.
Step two is in-flight stewardship. For heavier advertisers – particularly in larger markets with continuous measurement – it is possible to track program and station performance before the quarter (guarantee period ends). Agencies which are diligent about this give their advertisers a leg up, because they are able to push for additional weight in the current guarantee period, to minimize under delivery in the first place.
After a schedule airs and station invoices are reconciled, the schedule is “posted.” This means the schedule’s ratings are actualized according to the defined measurement methodology. Any shortfalls between actual ratings and the guaranteed ratings on an individual station are UD restitution owed.
How do I melt my snowball?
- Don’t let more time and TRPs slip away. You typically have two years (eight quarters) to recover spot TV UD, especially if your agency has not asked stations for restitution. Dormant UD balances more than two years old are not likely to be honored by local stations. A best practice is to recover all owed TRPs within one year, or by the end of the fourth broadcast quarter subsequent to the original paid schedule. For example, all TRPs owed for 3Q16 should be fully recovered by the end of 3Q17.
- Manage restitution station by station, quarter by quarter. Your agency should map out specific UD restitution with each station that owes TRPs. You should see specific plans and
goals for recovery – not vague “We’re working on it” promises, but real goals that detail how much will be recovered by when, and from which stations in each market. Every spot airing as restitution should be matched to a specific past quarter. Note that over‐restitution for one quarter does not offset a balance owed in a different quarter. Unlike National television where 100% audience guarantees are the norm, buyers have to actively seek out and track this restitution in local media. It should also be noted that negotiated spot TV UD schedules don’t always air in their entirety. Ask your agency for an accurate assessment, based on anticipated market conditions.
- Keep accurate records and issue proper instructions to stations. To provide transparency as well as best‐in‐class financial linkage of full value received per dollar spent, UD must be classified on a unique agency estimate and align with the original paid quarter for which the restitution is owed. While managing extra estimates may seem cumbersome to an agency, it also allows for the tracking that is necessary to accurately measure your spot TV UD balance (your snowball) and also your recovery time for each quarter.
Do I need to place a paid buy to receive spot TV UD restitution?
Most of the time, yes. A station is more likely to deliver UD restitution TRPs when it is being paid to run a new schedule. But there are times when a station that has chronically under delivered warrants special treatment. The old saying holds true here: everything is negotiable. Your agency should advise you if it’s in your best interest to minimize or eliminate spending with a station until it delivers ample UD restitution.
What about local cable buys or local radio?
Yes, the same concepts and rules above should apply. The measurement is different, and the specific expectations and deal points may be as well. The principle is the same, however. By all means, the specifics (thresholds, methodology, etc.) are part of a larger negotiation, but don’t believe that delivery guarantees can’t be achieved in these channels … because it’s happening. What was an “industry standard” twenty years ago may not apply anymore. Measurement improves. Standards change.
Now get out in the sun and melt your snowball.
UD restitution is hard work. Your agency can’t stop planning and buying for the quarters ahead, but it has to look at what has been left behind, too. The natural tendency is to put spot TV UD recovery off to another day. But don’t. It’s snowing out there, and there’s going to be a run on eggs at the supermarket.
If you found this post informative, you might also like “5 Things You Didn’t Know About Your Local Cable Ad Buys”.
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