Module 4 - Factors Influencing Cost

Question 1

What is a rate?

Answer 1

This is the cost to buy a 30” TVC. Each TV network creates a market rate card for the year ahead. The market rate card details the cost of a 30” spot for each half hour throughout the day from Sun-Sat.

Generally the rate card pricing is set by program or zone and is based on the estimated audience (number of people viewing) that the broadcast predicts for that program/zone.

The market rate card is the base rate card from which discounts are negotiated by agencies.

Question 2

There are 3 main approaches to TV rate card negotiations and agencies will use a combo of these, depending on the TV networks, the size of the agency, spend volume, demand for airtime and the type of client/s. What are these three approaches?

Answer 2

1. By Agency Group
2. By Agency
3. By Client

Question 3

What is the “By Agency Group” approach to TV negs?

Answer 3

Discount off market rate card is negged at an agency group level, creating an ‘Agency Group Rate Card’ - this rate card is then shared with the agencies in that group

Question 4

What is the “By Agency” approach to TV negs?

Answer 4

Discount off market rate card is negged at an agency level, creating an ‘Agency Rate Card’ - this is then shared with all clients in that agency

Question 5

What is the “By Client” approach to TV negs?

Answer 5

Discount off market rate card is negged at an individual client level to create a “Client Rate Card’ - this rate card is then exclusively used for that client only

Question 6

What are the three key factors influencing cost?

Answer 6

• Supply and demand - e.g. how many spots are available in a program
• Timing
• Content/environment

Question 7

What are some political factors that can influence TV advertising supply and demand?

Answer 7

• Political advertising - big campaigns and election advertising impacts demand for advertising inventory
• Government advertising policy - changes to media regulation or restricting advertising for a sector e.g. limiting advertising minutes or restrictions on gambling advertising placement
• Government policy - changes to policy that impacts the economy or business confidence; an example of this could be the Government considering adding an extra tax to Fast food companies
• Government inquiries - the recent banking inquiry saw the financial sector significantly reduce advertising spend

Question 8

What other factors can influence supply and demand?

Answer 8

• Economic - macro and micro economic factors like interest rates, exchange rates, inflation, the stock market and general consumer confidence affect supply and demand.
• Socio-cultural - e.g. school holidays
• Technological - new ways of producing goods/services, distributing goods/services and communicating with target markets

Question 9

The time of year you are advertising can impact the cost to advertise. The TV network rate card varies across the year, the rates: (3)

Answer 9

• Are lowest at the beginning of the year (Jan-Mar), excluding sport
• Rates progressively increase due to audience viewing/ratings increasing (winter)
• Highest during the final quarter, as demand for airtime increases i.e. the pre-Christmas period (October - December). This is due mainly to increased retail spending

Question 10

Another factor that can impact the cost of advertising is the day of week that you advertise on. Tell me more (3)

Answer 10

• The highest audience viewing days are at the front end of the week. This is when the networks schedule their highest rating and expensive inventory on these days (Sun-Wed)
• Viewing declines from Thurs-Sat as people tend to be more active outside the house and watch less TV. Program quality also tends to decrease (other than weekend sporting events which rate highly)
• CPM or cost efficiency is in line with the day of week viewing trend. The least cost efficient days are at the front half of the week.

Question 11

What is top and tail? (PIB)

Answer 11

When you have two ads and you want one to run first in break and the other to run las - this is most commonly used for two 15”, but you can do it for any duration combo.

Top and Tails can incur a premium for the special placement

Question 12

What are consecutive breaks?

Answer 12

Placing ads in consecutive ad breaks may also incur a premium. For example, if the program runs from 1930-2030, the first position could be an ad break at 19:40 and the second at 19:50

Question 13

All spot rates within the rate card are based off what duration?

Answer 13

30”

So 15” rate = 0.6 x the 30” rate

45” rate = 1.5 x the 30” rate

60” rate = 2 x the 30” rate

Question 14

In Australia, advertising minutes per hour is set to how many minutes?

Answer 14

13 minutes

Question 15

In Australia, advertising minutes per hour in sport is set to how many minutes?

Answer 15

8 to 9 minutes

Question 16

What are the penalties to rates based on lead times?

Answer 16

• 1-2 weeks prior to airing = potentially 40% more than if you purchased it 13 weeks out
• 3-4 weeks prior - could cost 30% more
• 5-7 weeks prior - could cost 20% more
• 8-10 weeks prior - could cost 10% more
• 11-13 weeks prior - 0-10 more

Question 17

What is a program set?

Answer 17

A program set is when the strategy outlines a required selection of programs based on the strategic direction for your campaign. This strategy is often used to improve the attention to your advertising, as there may be a synergy between the viewers mindset whilst watching the program and TVC, so this could lead to greater connection with the viewer.

The strategist will determine the specific program set based on a number of factors, including the campaign audience, the creative execution, the product category and the type of advertising message. Program sets could be based on:

• mood - light, comedy, serious
• time of day - before dinner, breakfast
• Path to purchase - a time when the viewer is more likely to act on the message they’ve just seen, by engaging further with the company message online

Question 18

When a specific program environment is chosen, it may cost more than if you bought a cross section of programmes based on an efficient CPM - true or false?

Answer 18

TRUE - this is because you are restricting your program selection and minimising the opportunity to buy at a specific CPM.