While demand for traditional ads on network TV has flattened out this year, advertisers can't seem to get enough direct response commercials. In fact, DRTV is booming. According to figures from TNS Media Intelligence, spending on direct response TV ads is up 25 percent through the first five months of the year, to $1.2 billion.
Granted, that's a relatively small sum compared with the $54 billion worth of national TV ads placed last year, per PricewaterhouseCoopers. But DRTV is growing more quickly than traditional broadcast and cable TV, albeit off that much smaller base. Cable ad spending is up about 13 percent for the first half the year, according to Nielsen Monitor-Plus, about half the growth of DRTV. And the major networks showed a first-half decline: Ad spending on ABC, CBS and NBC was down 2 percent to $5.7 billion compared with the same period in 2004, according to figures released by the Broadcast Cable Financial Management Association.
And for the broadcast networks, the outlook for the second half of the year is not much better; the summer months are always slow, and most advertiser budgets in the network upfront market for ads placed in the fourth quarter are down 2-3 percent.
There are several reasons for the heightened interest in DRTV. In a business environment where marketers are obsessed with return on investment, direct response is a tailor-made device, as marketers can track phone calls and Web-site hits generated by the ads. Direct TV ads are also cheaper to air, usually 40-60 percent of the cost of traditional network ads, which have come under fire for being too pricey, as network audiences get smaller every year.
And creatively, marketers are increasingly finding ways to use DRTV to build brand awareness—traditionally the key role for mainstream 30-second spots—while simultaneously generating leads and sales, agency executives say. "It used to be you could have one or the other," said Susan Rowe, evp of integrated media at Aegis Group's Carat. "The pure direct marketers would tell you they didn't care about their brand, they were just looking at leads and response. Now they realize that branding adds to the life of a product and provides better cost per lead and response rates. And the brand guys are saying, if I can engage someone with my brand by getting them to a Web site or an 800 number, that is important."
Lynn Fantom, CEO of Interpublic Group's ID Media, agreed, noting that "these days there is a real blurring on the creative side between traditional brand advertising and direct response."
Packaged goods and financial services are two of the hottest DRTV categories, executives say. Greg D'Alba, COO of CNN Sales and Marketing, also cites technology, travel, insurance and pharmaceutical as sectors that have embraced DRTV in a big way. "You know it works if the advertisers come back and we have a 100 percent renewal rate for 2005" among 100-plus DRTV clients, said D'Alba.
Johnson & Johnson, Orbitz, L'Oréal and Pfizer are just a few of the companies that have recently begun using DRTV or have significantly increased their use of the medium, executives say, although none of the companies would speak specifically about their strategies for competitive reasons. "I have a lot of passion for DRTV," said Orbitz COO Michael Sands. He and other company officials declined to elaborate.
"A lot more traditional advertising clients are realizing that DRTV is no longer the Conway Twitty and Ginsu knife arena, and that you can use it to drive people to your Web site or retail location to test your product," said Jean Mansfield, svp and strategic planning director at Halogen Response Media, a unit of Publicis Groupe's Starcom MediaVest Group. "With our clients, we try to sell it not just as driving response but also as a branding tool, because it is still a television medium—you're getting eyeballs, and consumers don't distinguish between ads meant to drive response and those used for brand awareness."
As interest in ROI metrics has increased, agencies have been reorganizing units so that the direct response and online marketing arms operate together. Just two months ago, WPP Group's Mediaedge:cia combined its Wunderman direct response unit with search-marketing group Outrider and online unit Digital Edge to create MEC Interaction, which in North America is overseen by managing partner Alan Schanzer. "This business is all about finding cost-efficient ways to connect consumers to brands and products regardless of channel," said Schanzer. "We were all trying to accomplish the same goals for our clients," he said of the merged units. "Classically, the industry has done those things separately, but now we plan and analyze it together so we can better understand how the channels are influencing each other."
ID Media, formed three years ago with assets from Draft, Initiative and True North, was one of the first agencies to put digital and direct response disciplines in the same operating unit, said Fantom. "DRTV drives search," she said. "If you decide to cut your DRTV spend, you will hear a cry go up among the search people, because you won't get the search impressions. But if you're siloed, you won't hear that cry, and you won't understand [the drop in impressions]."
Bob Flood, evp and director of national electronic media at Publicis Groupe's Optimedia, said that "a number of advertisers have entered the DRTV space to start developing ROI initiatives." But, he cautioned, "with direct response there are limitations as well in terms of time period and program environment." In other words, don't expect to get a 1-800 ad in CBS's CSI on Thursday night at 50 percent off the published rate.