Marketers are underspending on their media plans at a risk to maximising return on investment (ROI), according to new findings.
Nielsen’s inaugural ROI report, which identified gaps in marketers’ budgets, channels and strategies that compromise ROI on media plans, found that the average brand reinvests 3.8% of its revenue in media – defined as digital display, search, digital video, social and TV – with spend across brands globally hitting between 1.4% and 9.2% of turnover.
Brands based in APAC were reinvesting a higher percentage than other regions (an average 4.6%), but despite a lower reinvestment (4.1%), brands in North America saw a much stronger payback than the rest of the world.
Underspending more problematic than overspending
But according to the findings – spanning nearly 150,000 observations of marketing ROI and NIelsen’s database of client-supplied media plans – around half of marketers are not spending enough in a channel to get maximum ROI.
While minimal returns can incite spending cuts, underspending can be more problematic than overspending, Nielsen said.
The report pinpointed media spend as needing to be between 1% and 9% of revenue to stay competitive, and highlighted the “50-50-50” gap.
Nielsen concluded that 50% of planned media spend by a median 50%, and if the ideal amount of resource was applied then ROI could jump 50%.
Digital video and display the most underinvested
The most underinvested campaigns were digital video and display, the data found. Six in 10 display campaigns received underinvestment and two-thirds of digital video campaigns were underspent on.
While almost a third (31%) of TV campaigns were underinvested, it was the channel least likely to see an underspend.
Nielsen said: “Ultimately, ROI will inform publisher pricing power. Publishers are not just competing against others in their channel, but also against other channels, so comparing channel ROIs can help set pricing strategy. The ROI Report uncovered that social media delivers 1.7x the ROI of TV, yet social media gets less than one-third of TV ad budgets.”
A separate analysis of more than 1,000 ‘new media’ campaigns including podcasts, influencer marketing and branded content showed that using these channels delivers on aided brand recall by at least 70%, with influencer marketing registering 80% and podcast 71%.