Undeniably one of the most asked questions in the run-up to a TV pilot is “What Cost-per-Visitor (CPV)” or “What Cost-per-Sale (CPS)” should we expect, and “what have you seen in other campaigns?” It is a completely normal and fair question. Even a modest $100K TV pilot is a sizeable bet for most marketing people. Furthermore (and particular in technology circles), TV suffers from a stigma of wasted spend, and therefore gets deeply scrutinized at either the CEO or board level. The answer is unfortunately not straightforward.

In the remnant TV market, advertisers typically place media buys on a weekly basis and have no guarantee of clearance. Furthermore, spots aired are seen by all viewers, as opposed to online ads in digital marketing in which random samples of viewers see different ads. This makes it difficult to execute a perfect creative test construct. What usually happens is that different creatives end up being distributed across different networks, and occasionally with different spend. Furthermore, with the introduction of new creatives in the mix, advertisers often encounter a scenario in which some creatives aired on certain networks, while the newer ones did not (or vice versa). The impact of network-rotation variability and imperfect creative split should therefore not to be ignored, as it can greatly affect the measured performance of creatives. This is what we refer to as ‘creative bias.’

In advertising, conversion is a step in the marketing funnel during which website (or app-store) visitors perform a desired action (e.g. they purchase a product, become subscribers, etc.). It is usually expressed a percentage. For example, a 5% conversion rate means that for every 100 website visits (or app downloads), 5 people will purchase a product. Because it directly shows how many people became customers as a result of being exposed to an ad, it allows for calculation of the customer acquisition cost (CAC), and every marketer therefore wants to measure it correctly.

To date, TV advertising campaigns have been bucketed in two groups: either direct response (DR) or brand. The general opinion was that campaigns must exclusively belong to one or the other. Many advertisers think that DR ads are meant to drive responses and cannot build brand, or vice versa. This is, however, an antiquated notion. DR and brand can live within the same campaign or creative, and each can be objectively measured.

To date, TV has mostly been measured through a baseline and lift model. It is a framework that works well for linear TV, since many people watch the same program and advertisements at the same time. As such, even if only a small fraction of viewers responded to the ad, the lift is still visible and noticeable above the baseline.

TV advertising used to be a “spray and pray” process. Advertisers would purchase very expensive spots based on intuition (for instance, buying networks and shows simply because they are popular) without knowing whether these spots would work for them. Media agencies did not offer continuous testing and measurement, so advertisers had to stick with the same choices (and financial commitments) and hope for the best.

In our earlier articles on marginal costs and incrementality, we talked about the importance of these concepts when comparing digital platforms to TV. We showed how marketers can evaluate their advertising campaigns at the margin and measure cannibalization to calculate the campaign’s true cost and perform an apples-to-apples comparison between digital and TV. Of course, after doing so, every marketer would rightfully ask the question—what’s next?

In the world of advertising, Facebook and TV are two similar customer acquisition channels, despite one being “online” and the other being “offline”. Both platforms allow advertisers to specifically target certain demographics and interests by selecting audiences (Facebook) or combining networks, rotations, and programs (TV).  When TV and Facebook are less targeted, they tend to compel people to buy products or services that they may not have identified or considered as a need.  In essence, they are both demand-generating, as opposed to Search Engine Marketing, which is demand-harvesting.

When marketers talk about the cost of advertising campaigns, they usually think of customer acquisition cost. It is a simple metric that can be obtained by dividing the total cost of advertising by the total number of acquired customers. For instance, if a marketer spent $100,000 on an advertising campaign and acquired 100,000 customers, the customer acquisition cost would be $1.