Grenades from Unilever

I will talk about how we at Unilever - and, I believe, others in our industry - currently view television as a medium, and then I will share some thoughts on what I think you ought to be doing so that you as an industry start to measure up to what I, as your customer, want to see.

Given our Anglo-Dutch heritage, a lot of people don’t know who or what a Unilever is, but hopefully you realize that I don’t represent some form of hand tool you buy at Canadian Tire. We are a 50-billion euro company and that makes us one of the largest packaged-goods companies in the world – and one of the largest advertisers in the world. We invest over 4 billion euros a year in advertising.

So here’s what I hope to cover off in my wake-up call. Firstly, I will talk about how we at Unilever – and, I believe, others in our industry – currently view television as a medium, and then I will share some thoughts on what I think you ought to be doing so that you as an industry start to measure up to what I, as your customer, want to see.

So let’s start with what we think about television today. I have a story to share with you:

A private in the Canadian Armed Forces was acting in a most peculiar way. He was driving around the base on an imaginary motorcycle. Right in front of his fellow soldiers and his superiors he would swing his leg over the non-existent bike, push down the imaginary starter pedal, rev it up in total silence and slowly drive off down the road.

After a few weeks the military brass became aware of this most bizarre behaviour. They were concerned and so they arranged an examination meeting with the young private before a panel of medical and psychiatric experts.

The private was called into the meeting room and he burst through the doors on his imaginary motorcycle, came to a stop, dismounted from what was thin air, took off his imaginary helmet, stood at attention and saluted. The panel, shocked at what they had just seen, conversed, quickly formed a consensus and announced to the private that, given his odd state of mind, he was being given a discharge from the service immediately. The papers were hastily signed, and handed over to him, whereupon he again saluted, spun and marched out of the room. Just before he headed through the doorway however, the chairman called out.

‘Hold it private,’ he said. ‘What about your motorcycle?’

‘Oh that old thing’ replied the private. ‘I don’t need it where I’m going.’

I mention this story as a way of suggesting that the need for TV, like the imaginary motorcycle, is diminishing, given where brands are now going.

At Unilever we have long since put an end to the practice of automatically recommending TV in brand media plans. This new attitude flows top down and bottom up. I would go as far as to say the desire to moderate the use of the TV medium has become part of Unilever’s corporate culture.

A big clue that the TV medium was about to get the once-over at Unilever took place about four years ago. Our chairmen launched a worldwide initiative called Communication Channel Planning or CCP for short. The top bosses felt the time had come to rethink how our brands communicate with our consumers because we weren’t getting an adequate return on that rather significant investment.

And it wasn’t coincidence that this rethink happened when it did. You might recall that four years ago, the business and consumer press was full of stories about new media technology, new channels, convergence, consolidations, fragmentation of viewing and segmentation of consumers. Since the media landscape was doing an 8+ on the Richter scale, we took a step back to rethink how we were operating in that landscape.

The CCP process is a very disciplined approach. It forces us to clearly target our consumers and then consider the most relevant way of communicating with them. And so CCP is a big reason why TV’s ‘imaginary motorcycle effect’ has taken place here at Unilever. Media planning now occurs within the context of all channels and I do mean all: sales promotion, sampling, direct-to-consumer messaging. Media planning is no longer isolated from all channel planning and TV planning is no longer isolated from all other media channels.

The result: Unilever is less reliant upon the TV medium. In 1999, TV chewed up over 90% of our total media expenditure. Now TV gets under 70%. And we’re not alone. The Procter & Gamble TV spend accounted for 83% of its total in 1999, now they’re at 72%. Nestle’s TV spend was at 77% in 1999 and their most recent TV share has dropped to 46%.

The point I’m making here is that the large packaged-goods TV advertisers, the advertisers your industry have relied upon for very significant hunks of revenue in the past, are spending a lot of energy discovering new channels within and without the traditional world of media. We’re becoming more comfortable with these new channels. And so it’s natural that we’re shifting more dollars their way.

Another reason why TV isn’t getting the automatic nod is the emergence of new media analytics working away in Unilever’s back room. TV’s effectiveness is being looked at long and hard. We have completed econometric studies on 12 separate brands here in Canada over the last three years and learned some interesting things.

We’ve found that we have some brands that naturally attract consumers who are more motivated by print media than broadcast media. We have also found that we have brands that, while being positively driven by the TV medium, can get by with less TV than we’ve employed in the past.

We have also conducted tests in conjunction with the magazine and newspaper mediums that demonstrated that, for some brands, TV plus print generates more of a sales lift than TV alone, budgets being equal. We’re involved in a TV/Internet and magazine/Internet test as I speak. If there’s a TV test proposition you would like to get involved in with Unilever I’d encourage you to call Rob Young or Fred Auchterlonie at HYPN, our Channel Planning Agency. They’d love to hear from you and I’d love to get the learning.

But you don’t need to track Unilever or P&G spend patterns to see that all is not well in TV land. We’ve all witnessed the explosion in TV channels. A lot of these new options are specialties and I won’t even get into the whole digital business. Specialties have gone from $0 to about $1 billion in ad revenue over the last 10 years.

But the flip side of this happy coin has been the stagnation and, in several years, the retreat, of ad revenues flowing to traditional TV operations since 1998. Think of the TV medium as a brand portfolio for a moment. Your portfolio doubled over the decade, but your shares stayed constant. When that happens in my business we end up with red ink instead of black.

It makes me wonder if your business has experienced some sharp profit declines because of share cannibalization. And that makes me wonder if you’re under pressure to downgrade programming cost and therefore downgrade program quality and therefore downgrade your ability to impact with your viewer. And if that’s the case, that’s bad news for my TV plan, my TV buy and my brand’s investments in the TV medium.

So that’s the recent history that I think explains why the TV medium is being left on the floor to some extent…like the imaginary motorcycle.

My imaginary motorcycle metaphor isn’t meant to be pejorative – dramatic perhaps – but not pejorative. The TV medium has been an important brand channel over the years. I am, however, alerting you to the fact that the TV medium is being left behind to some extent these days.

But this is not a preordained outcome, of course. Your industry is very large and powerful. You have immense resources. You can affect your relations with your advertiser customers and I would encourage you to do so in our case by contacting our channel agency or me.

I have a reputation. I have firm opinions and I speak my mind. I don’t want to disappoint, and so I’m going to lob six simple ‘grenades’ out amongst you. And then I’ll discuss each one of these six points in turn.

Here we go:

One

Canada’s TV industry spends about $30 million on audience measurement. That’s 1% of your ad revenue base. Half of that money is wasted…goes right down the drain. You can’t afford that kind of waste. You can stop wasting that money by lining your support up behind one audience measurement body…not two.

Two

You should line up behind the best audience measurement body which, in my opinion, is BBM.

Three

Once you’ve focused the $30 million dollars at BBM, stop measuring program audiences and start measuring commercial audiences.

Four

‘The other media don’t measure commercial audience, why should we?’ I don’t want to hear that. You have the technology. You have the resources. The other media don’t and can’t. Commercial audience is measured in other countries, namely the U.K. Do it because you can.

Five

PVRs are coming and you know it’s going to hurt. This nasty piece of technology should single-handedly motivate your industry to measure commercial-break audience. It will be the only way of determining how much damage is being done.

And finally…

Six

Clutter is a problem – a problem which is being swept under the rug. Again, commercial-audience measurement is the only way of determining what kind of damage is being done.

And now, let me back up each of these six points in turn:

The first point

Your $30-million audience-measurement cost per year. Your industry generates about $3 billion in ad revenue. Quick math suggests that 1% of your ad revenue is currently being spent on audience measurement. So half of the $30 million is wasted. Twin tracking might have made sense in Canada’s railway industry but it doesn’t make sense in Canada’s TV industry.

Second point

My company spends a lot of money with Nielsen on brand sales measurement. But the money you spend with Nielsen on the media research side of the business replicates BBM. We are all shareholders in BBM…advertisers, agencies and broadcasters. I’m no lefty but co-ops can work well in this country.

Third point

Commercial audience measurement. I cannot stress enough how important this issue is to my advertiser peers and me. Even though agencies and advertisers are represented at the BBM board table, and everyone listens politely to me during board meetings, you are the primary money contributors to BBM. Commercial-audience measurement will not happen until your industry makes it happen.

Technically, commercial-audience measurement exists right now. BBM captures all the numbers we need. It’s the political will to package the data, distribute the data and work with the data that is needed.

Look what’s happening in the U.K. in this area. Commercial audiences are the currency of record in the television business there. The commercial rating is based upon the minute in which the commercial starts airing. Commercials have unique ‘film numbers’ which allow both the buyer and seller to track the audiences generated by the airings. The need for third-party tracking services like Spot Watch has been eliminated.

And so, the hurdles facing commercial audience measurement are moderate and manageable.

The paperwork side of our TV buying-and-selling business is prehistoric. As we revolutionize our audience currency, we might as well throw in some electronic commercial invoicing, trafficking, sales submission, avail gathering and affidavit checking systems while we’re at it. And if your company is already well down the road developing new electronic systems, please, please, please build in the facility to manage commercial ratings.

Since all of this electronic commercial tracking is happening anyway, let’s get BBM to build expenditure by brand databases and make it freely available to everyone. We could all save some money that way as well.

Fourth point

This was the competitive issue point. Some TV voices will rise up. Obviously commercial audiences are smaller than program audiences. Why should the TV industry spend energy producing smaller numbers?

I’ll tell you why. Television is unique. You don’t need to make decisions based on what other media do or don’t do. Fact is, the print media are stuck with title readership because their measurement technology is not electronic. They can’t do it…. You can. Commercial-audience measurement would be a big, bold North American move. This would be a smart, customer-focused move. And I think you need to do it because of the…

Fifth point

PVRs have created a ‘fear of the unknown’ phenomenon. As PVR penetration increases, the fear grows. A most reasoned vision of the PVR threat to Canadian broadcasters was contained in Matthew Fraser’s Jan. 20 Financial Post column.

Fraser has observed growing consumer interest in this technology. Additional sales pressure is coming from Bell ExpressVu. U.S. executives consider PVRs to be a threat to the TV industry the way Napster was a threat to the music industry. The product placement TV show seems to be the only alternative business model. But here in Canada, you have nothing to sell unless you produce your own TV programs and we all know how profitable that will be. Fraser had more to say but it is all too depressing to repeat here.

Imagine this scenario: PVRs become less expensive. ExpressVu and Rogers are selling them like hotcakes. Penetration builds. The TV buyers are freaking out. They’re assuming an 80% commercial-skip rate. Audience estimates are being slashed. Your rates are crashing.

But let’s say the reality is that only 20% of PVR users are actually skipping commercials. And for some TV programs the skip rates are lower. How will we know what’s actually going on? Unless we have commercial-audience currency in place, we simply won’t know. It is better to be informed than to allow the worst-case scenario to take hold. Manage the transition to commercial ratings. Don’t let a threat to commercial ratings manage you.

And finally, the…

Sixth point

If the PVRs don’t get you, the clutter will.

Don’t think that clutter is an issue? Officially you are allowed 12 minutes of commercial time per hour in Canada. Last week my friends at the Association of Canadian Advertisers had an independent third-part auditor monitor some programming across the country to see what the combined total of commercial messaging minutes were per hour-long show (figures for half-hour shows were doubled for comparison), and in this I include station or network messaging. What did they find?

Vancouver – The View: 20:46

Ottawa – General Hospital: 22:19

Vancouver – Entertainment Tonight: 23:20

Toronto – General Hospital: 22:08

Calgary – Days of Our Lives: 21:21

Calgary – Wheel of Fortune: 20:18

Montreal – Histoire de Fil: 16:24

And that’s the result from a random selection within one week. It makes me wonder whether or not someone owes us a rebate!

Millward Brown’s Andy Farr published a very pertinent article on the subject of clutter in the September 2002 issue of the Perspectives newsletter. In this article, countries were ranked according to their degree of clutter, ranging from low TV commercial counts per week in Belgium to very high clutter counts in the U.S. and Japan. Advertising impact per TV GRP was calculated for each of those countries. Guess which country had the highest ad impact per GRP? Belgium! Guess which countries had the lowest impact per GRP? Japan and the U.S. Coincidence? I think not!

I bet audience drop-off between program and commercial is low in Belgium. I bet the drop-off is high in Japan and the U.S. So improve the clutter problem in Canada. Reduce audience drop-off. Increase the impact of your medium. But you can’t do it if you can’t measure it.

In summary, here’s what I’m saying:

You don’t have to spend more on audience measurement but you must spend smarter. You should focus spending on one measurement body, not two. We are all potential shareholders in BBM so we should support BBM. Then you must shift quickly to commercial-audience measurement once the measurement budgets have consolidated. BBM has the technology and the know-how. You even have the external forces of PVRs and clutter threatening your collective well-being which can produce unification of action.

And, oh by the way, one more reason to do it…your customers want it! Wakey, wakey, it’s time to start measuring up.