Transformation of advertising & marketing industry: Advertising Transformation Index

12 November 2002

Brenda Wortley, Advertising Media Forum (AMF)
Sue Bolton (AC Nielsen)

Refer Appendix 10.3: The Advertising Transformation Index - [PDF] 320 kb

Understanding spending trends in South African 'above-the-line' media

Introduction

• This paper attempts to uncover whether the current spending patterns in SA media unfairly discriminate against one race group versus another. Within this debate one must understand the economic imperative that drives marketing spending.
• From a marketing perspective all citizens cannot be considered equal, those communities that are deemed to deliver a greater return on investment will receive a disproportional level of spend.
• Only government may need to address all citizens equally.
• It must also be noted that advertisers do not set out to balance media spend in one media vehicle vs. another, advertisers buy target audiences and use a selection of media vehicles to achieve reach and frequency objectives.
• The pricing of media space and time is the business decision of each media owner, prices vary greatly and therefore the corresponding advertising investment is unlikely to ever be the same in two media vehicles.

Methodology

2001 Above-the-line spending excluding self-promotion, measured at full rate card prices has been looked at in this report. More specifically only the main 4 media types can be analysed in depth - namely Television, Radio, Magazines and Newspapers. Even within these media in-depth analyses not all factors are covered - for instance the recruitment and classified advertising in newspapers, promotional sponsorship activity within each medium are only partially tracked. The report overlays Nielsen Media Research Adex data with SAARF's AMPS audience research data.

Key findings

Measured media spending (excluding self promotion) was measured at R8.5 Billion in 2001, of this R7 billion can be analysed in this report.

Spending Patterns by Race group

• The combined 2001 spend in Television, radio, magazines and newspapers under-invested against Black, Coloured and Indian consumers by 23% (or an index of 77);
• Television by 12%, Radio by 20%, Newspapers by 18%, and magazines by 33%.
• This shows that a disproportionately higher spend went against white consumers, but as the vast majority of advertisers do not use race filters in their targeting, another dynamic must drive this spending pattern. It was commonly felt that the greater return on investment against affluent consumer sectors was the reason for the picture.

Spending Patterns by Universal LSM group

• 68% of the measured spend in Television, radio, magazines and newspapers combined goes against LSM 6-10, vs. 35% of the adult population fall into LSM 6-10. This corresponds to adspend against Households earning more than R3500 (gross combined earnings) per month.
• 60% of Television adspend goes against LSM 6-10 vs. 44% of the population watching Television in these same groups. 59% of radio adspend vs. 34% of the population, 68% of newspaper adspend vs. 61% of the population, 83% of magazine adspend vs. 55% of the population.
• This shows that the socio-economic status of households as measured by the LSMs only partially explains the adspending patterns. A stronger measure of economic buying power is required.

Government Spending

• Adex records R123 million spend for government in 2001. Critically the R32 million spent in outdoor cannot be included in the analysis nor the estimated R30 million on recruitment advertising. The remaining R87 million adspend has been analysed.
• The main Government media are Radio at R38 mil, Newspapers at R33 mil, outdoor at R32 mil and Television at R16 mil. Less than R1mil was measured against magazines.
• In the 2001 spending across the combined Television, radio, magazines, and newspapers, government under-invested against Black, Coloured and Indian citizens by 13%, specifically Television by 8%, Radio by 12%, Newspapers by 2% and magazines by 21%.
• Similarly 55% of government's spend went against LSM 6-10 vs. 35% of the population.

Spending within each media type

• This section of the report aims to look at which specific media vehicles get a greater share of advertising revenue relative to their share of audience within that medium; this is illustrated with a index score greater than 100. In contrast; the report looks at which media vehicles deliver far higher shares of audience compared to the ad-revenue they attract - illustrated by an index score less than 100.
• Within each media type it can be seen that the niche media aimed at affluent sectors generally attract higher adspend - it must also be said that they are priced at a premium thus to reach 1000 adults on 94.7will cost an advertiser R16.72 compared to Radio Ukhozi costing R2.64. 94.7 attracts 5 times greater share of adspend than its share of audience. Ukhozi on the other hand attracts less than half the share of adspend compared to its audience size.
• It must be said that the larger "mass" media vehicles seldom attract the same level of advertising - they are the most vulnerable to niche media taking both audiences and ad revenue.
• Within the radio sector there are 13 stations that achieve a greater share of the adspend than their audience shares. Yfm achieves an index of 114, i.e. achieving 14% greater share of adspend than their audience. Radio Metro, Kaya and another 17 stations receive a lower share of revenue than the share of audiences they deliver.
• In sectors such as magazines where over 70 titles are measured, half the titles achieve and index greater than 100 and half do not.

2002 Spending year-to-date

• A full analysis has not been done for this period. However looking at absolute adspend trends it appears as if many of the Black profiled media have enjoyed healthy increases in adspend.

Recommendations

1. The industry needs to repeat this report ideally, every 6 months, to track spending trends within the ATL sector. The ATI report could become the definitive guide to the industry as to whether certain titles receive their fair share of adspend.
2. We need to explore the economic dimension further. It has been proposed that the analysis be done at a category level whereby the spending against a category such as carbonated beverages is compared to the household expenditure levels against this category. This can be looked at in terms of language spoken at home i.e. we can look at what Zulu people spend and (thus their relative contribution) to the carbonated drinks category. This will address whether spending within categories addresses where the bulk of the sales come from.
3. Once two benchmark readings have been obtained the industry can then agree realistic objectives for the years to come. The funding of this extremely time consuming report and "policing" will obviously be critical.

- Brenda Wortley, Advertising Media Forum (AMF)
- Sue Bolton (AC Nielsen

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