The Average Brand Invests 3.8% of Revenues into Media. Is That Enough?

August 3, 2022

Media spend “needs to be between 1% and 9% of revenue to stay competitive,” declares Nielsen in its 2022 ROI Report [download page]. The average tends to be on the lower end of that range, with the analysis revealing that the median brand reinvests 3.8% of revenues into media.

Somewhat counterintuitively, the report indicates that low ROI from a marketing channel can be due to underinvestment, suggesting that if a channel is returning low ROI in some cases it’s better to increase investment than to cut it. In fact, Nielsen found in its analysis that half of planned media channel investments were too low to achieve the best possible ROI, with the average (median) level of underinvestment being 52%. The median growth opportunity from increasing investment to the optimal level was 50%.

By comparison, one-quarter of planned media channel investments are over-invested, though the ROI growth opportunity of reducing investments to the optimal level is a more muted 4%.

Under-investment seems to be most rampant in digital video, where two-thirds (66%) of plans are under-invested by a median level of 52%. However the ROI growth opportunity from boosting investment to the optimal level was highest for digital display (+59% opportunity), where 60% of media plans are under-invested by a median level of 62%.

By comparison, fewer than one-third (31%) of TV plans are under-invested, though there’s a strong growth opportunity (+53%) from increasing investments in TV to optimal levels.

Which Channels Deliver on Which Goals?

Separately, Nielsen’s report contains results from an analysis of more than 2,000 channel performance points across 150 Nielsen Marketing Mix studies. These findings are particularly interesting given how marketers are constantly trying to optimize their media allocations.

The headline takeaway from the study is that “only 36% of channels deliver for both revenue and brand metrics.” Digging deeper, and the report reveals that digital display, social media, and linear TV are the most likely to be above-average at delivering on both revenue and brand metrics, each at around 60% of the time. Moreover, each is above-average at delivering on at least one objective about 80% of the time.

By comparison, radio and out-of-home are above-average for at least one objective about half of the time. Radio tends to perform above-average more for sales than for brand objective, while it’s a more equal performance for out-of-home.

For more, download the study here.

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