Do I spend the $50,000 on this TV commercial or not? Analyzing a TV commercial opportunity with simple metrics




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This is a question from a business acquaintance:

I’ve been approached by a network and their TV show about featuring our line in a commercial as part of an episode.

The rub is that they want a $50k “scheduling fee” from us in order to do the segment.

This would be a big bet for us, about 6-9 months of marketing budget and I’m trying to figure out if it’s worth entertaining.

The show will air twice nationally in the same time slot and our segment would be 5-6 minutes long featuring our products and telling a story about why people should care about the ingredients in their products (and highlighting our brand as a gold standard).

They also provided me with the attached deck which breaks down their viewership.

Overall, I’m trying to figure out if it’s worth it (or even potentially worth it) and you’re the only person I’ve met that’s done anything like this. 

This is my answer on analyzing a TV commercial:

My take is that as a small company, this kind of spend must yield measurable results in sales dollars. Branding value is hard to measure, especially when you are a small company. If you were in 30K+ retail outlets and doing 30mm a year in sales, then certainly, opportunities like this might represent great branding value. So, that said, I put on my direct marketing lens to see what kind of metrics I need to at least breakeven on my $50K spend.

This model should give you more guidance on how I would look at it (see file: MEDIA SPOT ROI).  To quickly explain, back into the 50K spend through the various response metrics that might be reasonable for your product category and your target customer. You can play with the input values yourself. In the end, this model tells you how many people need to be watching to get the response (i.e. orders).

I did not spend much time on the attachment you sent, but zeroed in on the viewership, which is $300K. With the metrics I am using in the attached model, you will get nowhere near that to get your money back.

But again, I don’t know your AOV (average order value) or CLTV customer lifetime value) or conversion metrics.

AOV is one order…not including follow-on orders… and CLTV is the value of your customer over time. In direct response analog media, I almost always use AOV and try to maximize that, rather than try to entice a new customer with an entry-level offer and hope to make more from them over time.

I’ve done analysis both ways with TV buyers and maximizing the AOV from a first time customer offers much better ROI.

For digital direct respons marketing, capturing an email address for long-term CLTV may make more sense, so in that case, maximizing AOV is not as important.

Based on this quick analysis, I think you should pass on this opportunity.

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I post what I see and do in consumer products. But I am just one person with my own perspective. I want your opinion and observations from your point of view. Please comment below so I and others can learn. Thank you!


About the Author:

I am a startup and growth company expert: sold 1, built 5, and crashed 2. I develop, launch and grow consumer products through uncommon methods that can lead to more sales – faster – and can make a company and its products more appealing to consumers and resellers, with less risk. More about me here.

2 Comments

  1. Doug Garnett November 8, 2017 at 1:28 pm - Reply

    As a TV expert, I’ve worked with countless companies who have been approached with deals like these. And I always recommend against them.

    First, it’s a big, expensive on-shot deal. Second, it merges production and media so you don’t know what you’re paying for. (Like the way car dealers like to mix your new car buy with buying your used car and fully confusing whether you’re getting a good deal or not.) Third, and most importantly, there are far, far better deals on TV time via the remnant markets (DRTV rate card).

    I’d add the above to your thoughts. And, suggest, that if anyone thinks TV is right for their products, then do it right. Don’t buy a package deal from a TV show, network, or cable company where the creative/production is included with media. If $50K is the number, then find a small, TV experienced agency who can work aggressively to make the most of your money and listen to what they’d recommend.

    For many innovative new products and startup companies, TV shouldn’t be summarily rejected – it does things that can happen no other way. Yet that also means if TV seems like it’s important it’s a strategic move – one to be given far more consideration than merely responding to an offer like this one.

    • Ed Soehnel November 8, 2017 at 3:48 pm - Reply

      Thx for the input, Doug! I agree with you and luv remnant TV, especially DR. DR TV can do tremendous things for product sales.

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