Underspending in 50% of media plans jeopardizing maximum ROI: Nielsen report

About half of the marketers are not spending enough in a channel to get maximum returns on investment (ROI). Spend often needs to be higher to break through and drive returns, states Nielsen’s first-ever ROI Report. Nielsen’s “50-50-50 Gap” states that while 50% of media plans are underinvested by a median of 50%, ROI can be improved 50% with the ideal budget.

The report identified gaps in marketers’ budgets, channels and media strategies that are compromising ROI on media plans. The global report reveals data and delivers insights on what drives returns on ad spends, how to measure the returns, and how to improve on the metrics brands already have, with content unique to advertiser, agency, and publisher audiences.

“Nielsen’s 2022 ROI Report serves as a guide for brands, agencies and publishers. In a time when there are more channels than ever to reach desired audiences, it’s critical that insights on ROI are attainable and easy to understand,” said Imran Hirani, vice president, media & advertiser analytics, Nielsen. “Brands can’t afford to waste valuable ads on the wrong audiences. By investing wisely and having a balanced strategy of both upper-funnel and lower-funnel initiatives, brands can reach the right audiences and maximize their ROI.”

Beyond budgeting, the ROI Report delivers key insights and recommendations to deliver higher ROI across multiple marketing areas including:

● Full funnel marketing: It’s rare for channels to deliver above average returns for both brand and sales outcomes, with 36% of media channels faring above average on both revenue and brand metrics. To grow ROI, brands should pursue a balanced strategy for both upper and lower funnel initiatives. Nielsen found that adding upper funnel marketing to existing lower and mid funnel marketing can grow overall ROI by 13-70%.

● Emerging media: It's difficult for brands to spend big amounts without proof that the new media works, but spending small amounts can make it hard to see if the media is working. Nielsen found that podcast ads, influencer marketing and branded content can deliver over 70% in aided brand recall, and that influencer marketing ROI is comparable to ROI from mainstream media.

● Ad sales growth strategy: Ultimately, ROI will inform publisher pricing power. Publishers are not just competing against others in their channel, but also against other channels, so comparing channel ROIs can help set pricing strategy. The ROI Report uncovered that social media delivers 1.7x the ROI of TV, yet social gets less than one-third of TV ad budgets.

● Audience measurement: Campaigns with strong on-target reach deliver better sales outcomes. However, only 63% of ads across desktop and mobile are on-target for age and gender in the U.S., meaning that on the channels with the most exhaustive data coverage and quality, over one third of ad spend is off-target. To capitalize on opportunity and drive impact, advertisers should prioritize measurement solutions that coverall platforms and devices, with near-real-time insights.

The report also identifies three important lessons. One, the media spend needs to be between 1% and 9% of the revenue to stay competitive. Two, overspending isn’t as problematic as underspending. Three, underspending levels vary by channel. Though many brands are already spending most of their budgets on TV, there are still many cases where brands are underinvested in the channel. And for display and video, over half of plans show an underinvestment.