DR Outlook and Trends to Watch for
in 2014 – US
By Rebecca Barr, Vice President, U.S. Media
Congratulations! You’ve survived another year and another hectic holiday season. Now it’s time to take a deep breath, settle in and get down to the business of making 2014 one of your best years ever. As we enter a new year, new opportunities greet us but so do new challenges. Not all challenges are bad – they’re just, well, challenging. And if you view them as opportunities, you can position yourself to be more proactive than reactive and much more prepared to face whatever 2014 brings you.
There are several marketplace obstacles to be aware of as we set sail on 2014. Some are known quantities – the Olympics, political and healthcare spending – while others are less specific and harder to quantify like market fragmentation.
Let’s start with the known obstacles. Looking ahead, 2014 will see a heavy upswing in marketplace activity beginning with the Winter Olympics and a heavy mid-term election schedule. Overall, four main issues will affect the marketplace in the coming year:
- Healthcare Reform
The new Health Insurance Marketplace helps the uninsured find health coverage, and varies from state to state. Some states like New Mexico and Kentucky have state healthcare exchanges while others like Texas, Illinois and Wisconsin do not. The activity is predominantly from large insurance companies such as Blue Cross Blue Shield, Allstate and GEICO. Because of the issues associated with the launch of heathcare.gov, the deadline for compliance is now March 31 and it is anticipated that insurance spending will continue to be present through Q1. The main impact to DRTV advertisers will be on the local market level particularly in daytime, early fringe and prime time with higher than normal rates and potentially low clearance.
- Winter Olympics from Sochi, Russia
The Winter Olympics will begin on Friday, February 7, 2014 and conclude on Sunday, February 23, 2014. NBC is the exclusive broadcast partner of the games, and they will broadcast 539 hours of coverage over 18 days equating to almost 30 hours of programming per day across NBC Network, NBC Sports Network, CNBC, MSNBC and USA. They will stream another 1,000 hours online.
While the Winter Olympics do not have the mass appeal of the summer games, they still pose a challenge in the marketplace – particularly if you rely on NBC properties for a portion of your media buy. This can be frustrating, especially in the spot markets since this is smack in the middle of the best quarter of the year for DR advertisers. If your campaign strategy is heavily centered on local spot media, you may need to plan an alternate strategy.
Even if your television campaign is cable-only and doesn’t rely on the NBC properties, be aware that some advertisers that spend heavily in Q1 will be forced into other areas of the marketplace. This will create tight conditions in areas you wouldn’t expect (think of squeezing a water balloon).
While shifting your budget to other properties during the Olympics is one option, heavying up in other months may be a good complementary strategy. If you plan to shift money to non-Olympic weeks, keep in mind that Q1 is typically strong from start to finish but each month’s performance erodes slightly as the quarter progresses. Knowing this, plan now to shift some of your February spending to what remains of January instead of waiting until March. January offers better efficiency than March and you won’t find yourself playing catch-up like some of your less prepared competitors.
- Mid-Term Elections
Mid-term elections refer to general elections that are held two years after the quadrennial (four-year) elections for the President (i.e., near the midpoint of the four-year presidential term). Federal offices that are up for election during the mid-terms are members of the U.S. Congress, including all 435 seats in the House of Representatives, and the full terms for 33 or 34 of the 100 seats in the Senate.
While the mid-term elections later this year will not result in ad dollars being spent as heavily as the 2012 presidential campaign, ongoing debate over healthcare will likely make this the most aggressive mid-term spend in history. In addition to candidate spending, the influx of money from Political Action Committees (PACs) and Super PACs will make this a larger-than-usual mid-term from a spending perspective. Expect the spending to begin before the political window opens.
If the third and fourth quarters are the high point of your marketing seasonality, there is little you can do to plan around the political window. You’ll have to work with your agency to determine what the time is worth to you. If you can afford to rearrange your budget and heavy up in other areas of the year, now is the time to adjust your plan. Don’t wait until you start getting blown out to make your first move.
- Medicare Open Enrollment
This applies to the annual period during which all people with Medicare can change their Medicare health plan and prescription drug coverage for 2015. Open enrollment begins mid-October and concludes in mid-December. Very heavy spending by large companies like Humana means a very tight marketplace for both long- and short-form DRTV beginning in late September and lasting until early December.
On the short-form front, you can partially sidestep this obstacle by shifting spending to areas which do not target the aging population. But, if your target also includes aging baby boomers, you’ll need to make hay while the sun shines during the first three quarters of the year.
In the long-form market, sidestepping isn’t quite as easy since there is a finite amount of time available and much of it is bought in support of open enrollment. Fortunately, the bulk of the spending occurs during what some long-form advertisers affectionately refer to as “Red October” so, unless you have a holiday-specific product, it is likely you are already planning much of your campaign prior to Q4.
Now, on to the less quantifiable issue facing us in 2014 and beyond: marketplace fragmentation (you can call it the new normal). Earlier, I noted that some challenges are actually opportunities. Marketplace fragmentation can be an opportunity for DRTV campaigns, but you can’t rely on old tactics (a stand-alone DRTV campaign with a toll-free number) and expect TV to be an efficient marketing channel. You must adapt your strategy to capitalize in this new world order.
You don’t have to be a cultural anthropologist to see the tectonic shift that has changed the media landscape in the digital age. How content is consumed is constantly changing. A year ago, I told you about the growing trends of second-screen viewing and cord fraying. Today, those are still growing trends but they’re also changing.
Second-screen viewing while watching TV has grown in the last year. It’s the rule, not the exception.
According to the latest Nielsen survey of connected device owners, nearly half of smartphone owners
(46%) and tablet owners (43%) said they use their devices as second screens while watching TV every day1.
The same study found that consumers are using the second screen partially as a distraction but also as a way to engage more with the content they’re viewing on TV: almost half of tablet owners look up information about what they’re watching2. In essence, the second screen is augmenting the viewing
experience, not stealing away viewers.
What does this mean for DR advertisers? It means all is not lost, but you can’t ignore the trend – you must leverage this learning by creating a cross-channel communications strategy.
People initially cut back (cord cut) on high-priced cable packages to save money but, even as the economy shows signs of life, some are choosing to remain severed. Others are opting for smaller packages and choosing an Over the Top (OTT) solution (cord fraying) like Netflix or Hulu to supplement their content options while keeping the cost low. A trend that began as a money-saving necessity during the economic downturn has become a mini-revolt against paid television providers. Old models for content distribution and payment for content delivery have led to discord between cable and satellite providers, as well as content distributors that continually result in station groups dropping off of a provider for a few days or weeks. When they kiss and make up over higher carriage fees, the end user gets stuck with the bill.
There are some glimmers of hope for paid television providers and TV advertisers as we enter the new year, however. Cable giants like Comcast and Time Warner Cable are proactively wooing cord cutters back with lower-priced cable packages (could the long sought-after, a-la-carte packages be far behind?). They are also offering options for mobile viewing and more robust video-on-demand (VOD). Good news for advertisers is the growth of disabled fast-forward in VOD which actually makes VOD a viable tool for DRTV.
Another saving grace for paid content providers and advertisers who depend on linear TV watching may ironically be social media (ah, our old friend: second-screen viewing). Some bent on cutting the cord have begrudgingly returned to a pay service like cable or satellite because watching episodes or finales of popular shows like Breaking Bad or Homeland even a day later means you have to avoid social networking sites like Twitter or Facebook. Have you tried to avoid social media or even the 24/7 news cycle? That requires a lot of covering of ears and la la la-ing or the plea for your friends to refrain from discussing a show on Facebook because you haven’t watched it yet. Fortunately, for me, I have a memory that allows me to purge certain details about Breaking Bad now so when I finally get around to binge-watching it in a year or two, I won’t remember what happened. Others are not so, um, fortunate and some of those who previously cut the cord have returned.
While it is true your direct marketing campaign can no longer survive on TV alone, do not fear! Not to oversimplify, this will not be easy but it is doable.
One mistake we’ve seen clients make time and again is assuming TV “doesn’t work anymore”; it’s
expensive and doesn’t deliver the same low-cost volume as some of their digital channels. What ultimately happens is the budget gets slashed and two weeks later comes the panicked call because response has fallen off by a percentage greater than the amount cut from the TV budget. Why? Because TV fuels a lot of other channels that also fail to stand on their own.
There are still as many – if not more – people seeking content to consume. They just aren’t tuning into TV in a conventional way. It’s your job to find them, engage them and count the money.
1,2 Action Figures: How Second Screens are Transforming TV Viewing, Nielsen Newswire, June 17, 2013.