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    TV Advertising – Part II

    Part II – Cable Advertising

    Alright, we can keep this short and sweet since it’s only a part deux. We already know that with a strong advertising campaign on network TV, we can easily hover somewhere around that $.02/impression range (ie. $20 CPM). By comparison, a similar cable campaign will most certainly run you an increased [tooltip text=”Cost per mille”]CPM[/tooltip]. Perhaps $.035/impression. When would someone want to pay a higher CPM? Probably never. Better question: When would someone be willing to pay a higher CPM?

    Increased Control Over Geographic Coverage

    This is the single most important difference between network and cable advertising; the ability to limit and restrict the household and geographic regions that your ads are shown in. Assume for a second that you own a local retail store. It would make perfect sense that, based on the market for your product, there is a sharp diminishing returns to advertising to potential consumers farther away from your brick and mortar storefront. Consumers’ increased driving distance to your store (a barrier to conversion) should certainly play a role in considering your, an advertiser’s, willingness to advertise to that consumer. Cable advertising allows small grouping of zones, sometimes only a few miles in diameter. Focusing ad dollars on close, local consumers is often necessary when a product is easily bought from a host of competing stores in a market. Network advertising, by contrast, generally focuses on a geographical region that could encompass multiple towns or cities. For many small local business, this means a great deal of waste. As such, paying a higher CPM (let’s say in this case $35), may provide a more attractive [tooltip text=”Cost per conversion”]CPC[/tooltip].

    The Math

    Let’s create an example where we advertise at different distances (“radii”) from our fictional storefront: Conversion rate @ radius 0-X = 3% Conversion rate @ radius X-2X = 1.5% Conversion rate @ radius 2X-3X = .2% Assume diminished population density (ie. less people per sq. mile as we move further from the town/city epicenter) means population (0-X) = (X-2X) = (2X-3X) Campaign #2: Network Budget: $50,000 Target Zone: (0-3X) CPM: $20 ($50,000)/($.02) = 2,500,000 impressions (over 3 geographical areas, ~833,333 each) (833,333)(3% conversion rate) + (833,333)(1.5% conversion rate) + (833,333)(.2% conversion rate) = ~39,166 conversions Campaign #1: Cable Budget: $50,000 Target Zone: (0-X) CPM: $45 ($50,000)/($.035) = 1,428,571 impressions (over 1 geographical area) (1,428,571)(3% conversion rate) = ~42,857 conversions
    What does this tell us? In this example, CPM for cable is 75% more expensive–but even still, total conversions were just over 9% higher for the same advertising budget.

    When might Network advertising be more advantageous?

    Overlap is the key here. The CPM for network advertising is cheaper (in general). So it makes perfect sense that if you actually own retail locations in various hubs around the advertising region, you wont experience the diminishing conversion rates over distance. Does a given network program run their advertisements concurrently in 3 surrounding major cities? Yes. You’ve got a store in each one? Yes. This would be a perfect scenario to utilize network advertising over cable advertising. Situation #2 might be if your business is an off-location/onsite service business. Example: Your business rents large inflatable balloons to other businesses. Are you willing drive 2-3 hours to make deliveries? Yes? Again, advertising on a large scale with network will hit more people at a cheaper cost per impression.