Marketing Association Amsterdam · Video Marketing

Why do companies still spend money on TV advertising?

TV commercials are the most common, but also one of the most expensive forms of advertising. They vary from very annoying, like the Zalando delivery boy commercial, to the very funny Bol.com Sinterklaas commercials. Both types seem to work.

However, when thinking about all the commercials that have really appealed to you in your whole life, it is very likely you can come up with a maximum of 15 commercials, of which you may only remember half of the actual brands that were promoted in that commercial.

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Do benefits outweigh the costs?

More and more, I am wondering if TV commercials can still be considered effective or efficient. Do their benefits still outweigh their relatively high costs?

Of course, people are still encountering a tremendous brand and sales rise after the broadcast of a commercial. However, more and more people are watching on-demand television now, where we can fast-forward the program any time we want.

And the rise of Netflix and other popular paid digital TV services are not really stimulating us to watch commercials.

Local television stations typically charge $200 to $1,500 for a 30-second commercial. National commercials produced by an advertising agency cost far more, averaging $342,000 for a 30-second spot in 2008, according to the American Association of Advertising Agencies.

In extreme cases, for example during Super Bowl, companies have to pay an average of $3.5 million for a 30-second spot.

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Cheaper (and better?) alternatives

With social media platforms like Facebook, companies can even advertise for free to their own followers! And when spreading their message to non-followers, they pay still way less than for an average TV ad.

Another advantage of Facebook is that ads can be targeted to the right audience very easily. When you look for a flight to Barcelona, chances are very high that you are confronted with KLM ads about flights to Barcelona the next coming days. And honestly, for me this really works out: I am being remembered that I still need to book that flight – so let’s visit the KLM website!

Also other online websites make increasingly use of online paid advertising. Even though lots of people use ad-blockers, which harm the effectiveness of these ads, the reach is still very high. So, let’s use online advertising instead of old-fashioned TV commercials…

… you might think.
But, results from a research study by TechnologyAdvice and Unbounce suggest that online advertising is worthless as 38% of respondents said they don’t pay attention to ads online and 79% stated that they almost never click on online ads.

More surprisingly: 90% of the respondents said they never made any purchase commitment after clicking on an ad.

This doesn’t mean paid media is dead, but rather that there is room for improvement. Marketers should focus on more relevant messages addressed to the right target audience.

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TV still makes the race

With competition from Netflix & Co. as well as online advertising, the television industry has undergone seismic changes over the last five years.

But one thing has remained constant: TV is still by far the most effective advertising medium. That’s at least what we can say anno 2016.

On average, the general population spends over four and a half hours a day in front of the tube, making TV watching one of the most common modern leisure activities. So, it is not a surprise that television commercials are still the most powerful form of advertising.

But what about 2026? Will it be the same, or will we all replace the regular TV with the most modern, who knows whatever form of media by that time? I think that we cannot predict anything yet and just have to see what the future will bring us.

 

Guest article by Nicoline Russel

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One thought on “Why do companies still spend money on TV advertising?

  1. I am annoyed typically by television commercials and mute them/talk to my husband through them. I do know some people that absolutely love them though and especially look forward to those that air during the super bowl. Great information, thanks for sharing!

    Like

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