Should cheap low quality ads be charged more for their TV air time ?

Now that the US has finally got ratings for the commercial breaks (via minute by minute recording) the TV networks are all interested in maximising their ratings during the break (ie not losing too many viewers while the ads are on). Which is all good news for advertisers.

One of the things that affects viewing of the ad breaks is the quality of the ads. Low quality ads turn viewers away, and ruin things for all the other advertisers. Put around the other way, poor quality ads enjoy a bit of a ‘free ride’ on the audiences retained by the good quality ads. So should networks give discounts for higher quality, more entertaining advertisements ? And charge more for annoying and boring advertisements ?

Advertising agencies should encourage it, as it would be a further incentive for marketers to commission bigger budget advertisements. In fact it is potentially a win-win situation for everyone. Consumers get ads they actually want to watch. Advertisers get a financial incentive to produce these ads. And networks that feature higher quality ads should enjoy better ratings.

I’m hopeful that innovative networks will begin offering pricing along these lines and/or agencies or clients will start negotiating deals along these lines.

The power of familiarity

I few years ago Emma Macdonald and I published this work showing the power of familiarity. When we did this in the late 1990s there wasn’t a great deal of interest in heuristics, snap judgements, and gut feeling. But today psychologists and behavioural economists are gaining a great deal of attention for their work showing how reluctant consumers are undertake a lot of cognitive effort when buying.

I’ve often said it is wrong to call much buying “consumer decision making”, it’s more buying (doing) than decision making (thinking).

Macdonald, Emma and Byron Sharp (2000) “Brand Awareness Effects on Consumer Decision Making for a Common, Repeat Purchase Product: A Replication” Journal of Business Research, 48 (Number 1, April), 5-15.

Snake (oil) and loyalty ladders

Many market research houses now market a “loyalty ladder” or “loyalty pyramid” product. These dissect a brand’s customer base into 4-6 groups, starting with something like “no awareness” at the bottom and ending with something like “passionate loyals” at the top. This classification is usually based on behaviour (or claimed behaviour) such as share of category purchases devoted to the brand in question. Some add attitudinal statements into the customer classification. Others, like The Conversion Model, claim to be entirely attitidudinal.

All these do is reflect the brand’s relative popularity (i.e. market share) and random sampling error (which looms large when you have 4-6 groups).

Marketing Science has known for decades that loyal behaviours and attitudes follow a set statistical distribution, and so any brand’s true loyalty ladder can be accurately predicted simply from knowing its size compared to rivals. And if it has 100% relative share, then all customers will be at the top of the ladder, but not until then.

I suppose these ladders are attractive because intuitively marketers feel it’s their job to move people along this path, sorry up this ladder. Yet I notice that my practitioner colleagues rarely draw any practical insights from these ladder metrics, they provide more entertainment value (”that looks interesting”) than knowledge. Which is fine, because that’s all they are, an entertaining expensive way of presenting, and obscuring, loyalty metrics.

Differentiation vs Distinctiveness

Differentiation’s role in marketing strategy is rethought in this journal article (which builds on an earlier report for corporate members). It presents a small mountain of varied empirical evidence, including direct measures of perceived difference:

Romaniuk, Jenni, Byron Sharp, and Andrew Ehrenberg (2007), “Evidence concerning the importance of perceived brand differentiation,” Australasian Marketing Journal, Vol.15 (2), pages 42-54.

(Download journal version of differentiation)

Differentiation (a benefit or “reason to buy” for the consumer) and Distinctiveness (a brand looking like itself) are different things. This isn’t just semantics, as any lawyer or judge will tell you. Distinctiveness (branding) is legally defensible, while differentiation is not (other than time limited patent protection).