Category: Contributors

TV ad buying today spans a medley of the new and tried-and-true, falling into three main categories: traditional TV, digital video and addressable TV. Each has its own set of values on either side of the buying equation. The good news is that you can weigh each according to your specific needs and combine approaches to fit your goals. 

Traditional TV 

Traditional TV orders are what linear programming has been transacted on since TV’s inception. Agencies typically buy most of the TV advertising on behalf of advertisers, defining who they want to target based on age and gender surrogates. In the past, nearly 60%-80% of national ad spots were sold at the spring upfronts; inventory is also purchased in scatter during the TV season, as well as locally. But in recent years, the age-old system of TV buying is in flux.  

National TV ads are sold manually through broadcast, cable and syndicate networks, while local TV ads are sold through the local broadcast and cable operators. Traditional TV orders are transacted on a standard currency basis using GRPs (gross rating points) and impressions. It’s a common misconception that GRPs are no longer relevant in an addressable or digital video world, when in fact they are key to understanding reach and frequency and are used to negotiate price. Impressions are used in traditional TV for both delivery and billing. As long as advertisers care about reach and frequency as well as exposures, then GRPs and impressions will be a part of the TV ad buy for many decades ahead. That is why both impressions and GRPs are being used more and more by advertisers when measuring and comparing campaign performance across traditional, digital video and addressable alike.  

The upside of the traditional TV buy for buyers is that they can reach wide audiences with one order in a very trusted, transparent and safe environment. On the downside, audiences are determined based on age and gender proxies, which means that many of the impressions are going to viewers who are not in an advertiser’s refined target. Traditional TV orders are also largely manually placed and sealed with a handshake rather than heaps of paperwork. This is a long-standing practice that has earned its place driven by trust.  

Digital Video 

Digital video gained significant traction in the early 2000’s and grew up with different values and processes. Digital video ads are dynamically inserted across essentially unlimited digital properties, some of which are premium and viewed as a valued TV set, based on refined audiences. Delivery is flexible and completed in real-time using various serving technologies, and validation of delivery is based on impressions. 

Digital video is primarily bought and sold using DSPs and SSPs in an automated fashion. Digital video can be highly accountable, but lacks a single trusted syndicated measurement source allowing for comparison across the sea of available options. Because there is no syndicated measurement today that allows for a full view of the marketplace, there is no real currency.  

If the traditional TV order is the handshake, digital video insertion order (IO) is the signature on the dotted line. A digital video IO is more formal than what is typically done on the TV side. Despite its name, the digital video IO does not come with the automation we typically associate with the term “digital.” Instead, it requires manual negotiation and careful consideration of things like ad tax, fraud and viewability due to the number of players in between the content source and the end consumer.  Most importantly, the IO acts as the terms and conditions for all parties and ultimately keeps everyone honest. 

Addressable TV 

Even with the above options, the market is looking for better ways to leverage technology and data to deliver more value to programmers, marketers and consumers on large portions of inventory. Marketers have expressed two key messages as a result of COVID-19 conditions on their investments: more accountability and more flexibility. 

Addressable TV has been in the beginning stages of evolution for many years and is finally at a tipping point where potentially large portions of premium TV content can apply advancements in technology and measurement to meet the marketplace needs. At this critical point, the ecosystem needs ways to combine the best of traditional TV and digital video to bring to market the best of both worlds. 

Before diving into how addressable TV is transacted, it’s important to first clarify what we mean by “addressable TV.” Addressable TV is the ability to define an audience and only have those audiences see the advertisement regardless of the way that content is received. Addressable TV is being deployed in several ways, including using a set-top box to refine cable network programming that is watched with a pay TV subscription, using smart TVs to refine broadcast and cable network programming in any way a smart TV displays this content, whether over the air, via MVPD, or even via streaming and OTT options. 

With addressable TV technology being deployed for linear and on-demand viewing options, the sell and buy sides will aggressively seek options to unify all of their options. Sell-side players are looking to optimize yield and track performance in-flight instead of after a campaign is over. This not only makes their inventory more appealing to buyers, but also much easier to manage and maximize yield against a constrained inventory source. Buy-side players are looking to understand where their most desired audiences are consuming content across the array of viewing options and the best way to reach them simply, transparently and in the most economical way to meet their objectives. 

Overall, addressable TV offers more accountability, granularity, more targeted audience buying, the potential for more automated inventory management tools and automated yield optimization. 

Sell/Buy Side Implications by Ad Buy Type

In the end, there is no right answer when it comes to the TV ad buy. It all comes down to a simple math problem: How are you going to make more money? Both the sell side and buy side are trying to move products (commercial inventory and branded products respectively) and both need to determine the right mix of TV. The answer may be different for everyone. All three ad buys options have implications on the total available pool of impressions and yield, so you need to choose what’s right for you. 

By embracing the new and changing TV order options, you can build the best version for yourself and ensure you are not missing out on the opportunities of innovation that could truly redefine the way you consider TV in the years ahead.

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China’s rebound from COVID-19 has been unique. It came faster and with more demonstrable economic tailwinds for the economy than other markets. But it has also been a bellwether that has helped point to consumer behaviors elsewhere that have inevitably followed China’s lead. An example is the rebalancing of retail playing out around the world.

Pandemic-led shifts to further online adoption and an increased focus on neighborhood and small-format stores have become an ongoing normal. Though different to other markets, China helps us understand consumer attitudes and responses as they head into 2021 with the prospect of COVID-19 vaccine distributions at scale.

Historically, China has demonstrated a mature omnichannel shopping base, with consumers that are already years ahead of the majority of other markets in online shopping. In third-quarter 2020, online sales in China grew by 27% for the year to date, while physical store sales declined by 4%. The declines at physical stores were largely due to COVID-19-related closures, and there has been some recovery in the remainder of the year. China has four main city tiers, based on inputs such as population size, growth levels, location and infrastructure. Tier 1 cities (including Shanghai, Beijing and Guangzhou) and tier 2 cities (including Chongqing, Tianjin and Dalian) saw the highest closure rates, while tier 3 and 4 cities were less impacted. Online has continued on its growth trajectory.

“Due to Chinese New Year (late January), population outflow and strict pandemic control policies, upper-tier cities experienced heavier impact during the height of the pandemic, and only 50%-60% of stores were still open for business,” said Tina Ding, Chief Commercial Officer, CPG, Nielsen China. “But due to market resilience and robust foundations, by August, around 80% of stores reopened, signaling both a rebound in physical and some fascinating new developments in the e-commerce space.”

In addition to sales growth, online shopping in China saw huge category expansion among shoppers during the onset of COVID-19. While e-commerce growth in China prior to the pandemic was primarily led by personal care categories, consumers began purchasing in categories like dairy, staple foods, beverage and liquor. For example, online growth for dairy has surged from 34% to 55% for the year to date October 2020, versus the same time a year ago and staple foods jumped from 30% to 48% growth for the same period.

An adjacent trend that rapidly accelerated in China during COVID-19 was online to offline (O2O) shopping. Offering the best of both worlds, consumers purchase items online and have their items selected, (often by third parties) and delivered within a short delivery time of one-two hours. During the initial days of the epidemic, consumers valued the convenience and safety of these services, and the O2O growth rate jumped up to 20% from January to March. Between March and June, although COVID-19 was under control and consumers could return to normal, O2O growth continued at a rate of 6%.

“The rapid adoption of online to offline shopping has driven an element of physical store fragmentation seen in China. Given that O2O transactions are executed in physical stores, O2O purchases—a majority of which are made in small format stores, are captured within physical in-store purchases. These O2O sales are contributing to the growth being seen in small format channels.” said Ding. “O2O was already a fast emerging trend in China prior to COVID-19, but it has definitely accelerated its usage. At the same time in 2019, consumers were more likely to shop in person before, but now their loyalty is driven by the outlets and brands that make themselves available for purchase in an O2O environment. In this world, convenience, proximity and safe access are key things that matter to consumers.”

But amid the growth has been upheaval in the physical retail sector. Some stores that were once the biggest contributors to total sales in the industry are now seeing sales declines, while those that may have been previously viewed as “under achievers” are over-performing against previous benchmarks. 

The concentration, or number of stores, that account for 80% of FMCG sales, often referred to as “golden stores” changed in China between February and September. More than half (56%) of the stores in this universe of golden stores changed from the same period last year. Thirty-three percent of stores are new golden stores and 23% of stores that used to be golden are no longer. The rotation of golden stores in and out is even greater in small-format channels, with Minimarket (58%) and Convenience (42%) seeing higher changeover than Supermarkets (37%) and Hypermarkets (20%).

Within the 33% of new golden stores, 71% are brand new entrants (that did not operate before COVID-19).  26% of these brand new entrants  have jumped straight into top performing stores.  The scale of the changes is unprecedented and will have far-reaching implications for retailers and brands. Similar trends have played out in Paris and London.

Retailers and brands that have resisted adapting to COVID-19-shifted spending, perhaps hoping for a return to old habits, now find themselves lagging behind faster-moving competitors that adjusted for the ongoing change.

Those that have embraced the change in shopping preferences and pivoted their offerings to suit new consumer needs are already gaining traction. Areas they have addressed include distribution efficiencies, sales force optimization, innovation planning, assortment and pricing.

For more on how consumer behavior is evolving throughout this global pandemic, visit Nielsen’s content hub for the latest insights.

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CPG retailers and manufacturers: Say farewell to the record sales growth the industry has experienced this year. Year-over-year sales comparisons continue to track above pre-COVID-19 conditions in most markets, but the huge sales spikes we saw in March, April and May are unlikely to be repeated in 2021.

With the dissemination of vaccines in the months ahead, and as expectations of more normal behaviors edge closer, we expect that a larger portion of consumer spending will shift from grocery to out-of-home spend in sectors that have suffered—bars, restaurants and travel.

But even that expanded spending will be influenced by recessionary conditions in most countries where COVID-19 leaves a trail of high unemployment, lower levels of confidence and economies that will take years to fully recover.

Retailers and manufacturers that set stock price records in 2020 will be hard-pressed to see similar gains in 2021. The CPG industry will be forced to focus on quick recalibrations of relevance in a world where consumers have shopped differently; through the course of the year, Nielsen charted changes in the importance of store locations and also tracked the historic growth in online purchasing.

2021 will involve a new playing field, but industry players can still maximize growth by setting the right goals and resolutions.

1. Segment strategies for the sliding scale of consumers

Socio-economic consequences will continue to weigh heavily on spending decisions, and the impact across consumer groups won’t be equal. Four consumption patterns that emerged as a result of COVID-19—resets in basket, rationale, affordability and homebody mentality—are heightening disparities between constrained spenders and insulated spenders. And we’re seeing even further splintering in holiday spending habits based on the extent of social and physical restrictions that individual consumers are experiencing.

In 2021, constrained spenders will continue seeking out cheaper alternatives to the product options they would normally buy, opting for more value offerings and private label products, at least for their everyday staples. Tiering products and pricing will become increasingly important as the year progresses.

Meanwhile, brands and retailers have an opportunity to continue to deliver on the needs of consumers whose incomes remain unchanged by the pandemic and may even have more disposable income in 2021 after deferring the travel, dining and entertainment costs they anticipated in 2020. From higher-priced, sustainability-focused products for insulated consumers who are reinvigorated to follow eco-friendly practices, to premium specialty goods for those who want to treat themselves and others, 2021 presents opportunities for sustainability and premiumization.

2. Recalibrate assortment as consumers shift shopping routes

With consumers exiting commercial and city hubs to suburban and rural ‘residential workplaces,’ they’re shifting where they shop for groceries. Many will not return to pre-COVID commuting habits.

Retailers and manufacturers are adapting to low foot traffic in urban hubs (a strategic focus, historically) and surges in more suburban, or even rural, areas. Brands will need to focus on maximizing their presence in these newly popular stores in lower-density locations, while retailers may be forced to consider closing or downsizing some stores in higher-density locations and revamping others that now have more demand. 

Further complexity comes with these shifted shopping habits. Consumers shopping closer to home or in less-familiar locations are confronted with layouts and ranges of products that may be different from what they are used to. Savvy brands can view shop-shifting as a fresh start—a golden chance to recalibrate their assortment and packaging to meet the new needs of consumers who may be willing to ditch their loyalty to their usual brand choices in favor of an alternative. As a consequence, savvy retailers will re-evaluate their range and store formats to address this shift.

Brands and retailers will need to be joined at the hip.

3. Recommit to pandemic-fueled innovation

History shows that brands that maintain focus and continue to innovate in difficult economic times emerge stronger. But these are tough decisions. On the one hand, brands feel the impetus to appeal to more fragmented consumer demands across a much wider spectrum of price tiers, particularly as we see more polarization between constrained and insulated consumers. On the other hand, many brands are also reckoning with decisions taken earlier in the pandemic to pare back the number of SKUs they produce to address supply chain pressures and rapid shifts in consumer habits. Healthy innovation inside of SKU optimization will be critical.

And as the world moves towards a more normal state as 2021 progresses, brands will still continue to win with health- and efficacy-focused product innovations. Through the months of COVID-19, there have been clear signals from consumers that they want complete transparency on what is in the products they buy and what the benefits are.

Downsizing pack sizes will also win with many constrained consumers, as those who would normally be able to save money by buying larger, more economical pack sizes may be forced to actually buy smaller pack sizes as and when they can afford them. Cash flow issues for constrained consumers will be top of mind.

For more insulated consumers, food products that claim to have natural and high-quality ingredients will continue to appeal on the premium end of the pricing scale.

Retailers must be prepared for this dichotomy; while a reduction in SKUs has made it easier for them to manage their own inventory cycles, making room for the innovations that meet consumer needs is paramount.

4. Reinvigorate consumer impulse at the shelf with promotions

With supply chains normalizing, promotional sales in many markets are on the path toward pre-COVID levels. With tighter wallets, consumers will look for low prices and product promotions as a way to save, even from brands they wouldn’t normally purchase, at least in categories they determine to be low risk when making such adjustments.

Savvy brick-and-mortar retailers have an opportunity to reach more insulated, impetuous shoppers through ‘buy more, save more’ promotions, last-minute add-on products at discounted prices and free, packaged samples to encourage secondary purchases. They can also collaborate with manufacturers to extend the length of sales periods and continuously remind consumers of when and where they can anticipate a big promotional event.

5. Win locally, without neglecting multinational

When we envisioned a 2020 before COVID-19, we predicted that “manufacturers will produce locally to win globally”—a forecast that became an urgent reality as the disease led to upended supply chains, and consumers (in the early days of the disease) favored local products or products that had travelled through fewer sets of hands.

We expect that this gravity shift towards locally sourced products will continue to stick, though likely at lower levels. Much of this loyalty to local will be driven by desires to continue to support local suppliers who helped bridge the supply chain gaps during the days of heavy pandemic pantry stocking.

Conversely, trade policies will continue to play a role in what consumers buy, and how much it costs. For example, with a change in the administration in the U.S., it is likely that some protectionist policies will be reviewed. The outcomes of such changes, also playing out elsewhere in the world, will impact local pricing, demand and availability considerations for retailers.

6. Treat omnichannel as omnipresent

In the challenging physical store environment of 2020, consumers wanted little more than to find what they needed and to leave the store. But online, with more time and no health concerns, they became more open to finding deals. The expanding pool of omnishoppers—particularly constrained consumers—will keep leveraging online channels as an essential way to research, compare prices and hunt for the right deals before deciding whether to leave home to make the purchase at a physical store, buy it online or click and collect their purchase.

Retailers would be wise to capitalize on their omnichannel capabilities as more shoppers compare products online in an effort to find the best deal before they make a purchase decision that may ultimately still be fulfilled offline. Recognizing there are many consumers who are new to online grocery shopping will be important in this context. Those who can deliver positive and successful user experiences will win online and offline.

Emerging technology will enhance omnichannel growth opportunities. Most prominently, retailers and brands have room to capitalize on shoppable livestreams, which is gaining popularity as a new shopping platform that is supported by innovative online channels and the accelerated shift toward online consumption. Also, mobile applications and augmented reality-based shopping will continue to grow in importance this year as consumers demand alternative shopping experiences at home.

Setting resolutions should underpin the start of any new year, but 2021 truly demands it.

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