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Is Broad Reach the Key to Marketing ROI? – Part 1

Last updated: April 16, 2020

ROI Return on Investment indicator

There's a debate raging among some marketing professionals about the merits of audience targeting versus broad reach campaigns. Over the past few years, the broad reach approach has been gaining converts. This approach suggests that a single message, pushed to a large audience via broad reach media will sell more products and net a higher return than a more targeted approach. This idea runs counter to the notion that targeting the right people at the right time with the right message in the right place would deliver a higher return on investment (ROI). The debate is intriguing, so we decided to take a deep dive into data we've collected to help marketing professionals determine which approach might be better for them.

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In this first installment of our two-part series, we’ll explore the case for broad reach efforts. In our second installment, we’ll share the arguments for a more targeted approach.

The Case for Broad Reach Efforts

The chief advocate for a broad reach approach has been Byron Sharp. Sharp, professor of marketing science and author of the popular book "How Brands Grow," posits that a brand's consumers aren't as loyal as we may think. They come and go. So, brands looking to win in a competitive marketplace need to win more often and need broader reach. For more on Sharp's thinking read Jack Neff's excellent article in Ad Age, The World According to Sharp.

To start our analysis of the broad reach approach, it will be helpful to have a basic understanding of a Spend to Impact Response Function (SIRF). SIRFs are at the heart of every marketing ROI analysis. The SIRF is an algorithm that mines and analyzes data from past campaigns to develop curves that plot the impact, e.g., sales lift, for various levels of spending on each part of the marketing mix. Ideally, a brand spends on each medium and the media plan as a whole right up to the point that incremental returns no longer justify an additional dollar of investment. You can read more about SIRFs in Rex Briggs' book, "SIRFs UP – Catching the Next Wave in Marketing."

SIRF.png

This chart is the plot of a typical SIRF. It shows the value of each dollar spent. One inevitable and inescapable truth of marketing is that each additional dollar we spend has less impact in the marketplace. With a SIRF, the steeper the curve, the higher the ROI.

Advocates of the broad reach approach argue that the curve flattens because of frequency – Delivering the same message to the same person has a diminished impact. They suggest, therefore, that if one pursues more reach, all else being equal, marketing efforts will get a better ROI.

Their second point is that, as budgets expand, each additional dollar spent gets less and less targeted. They believe that any benefit of paying a premium for targeting diminishes as investments increase. Here broad reach supporters would ask, if a marketer is going to run a big campaign anyway, why pay the premium for targeted advertising in the first place? Consider this point: An addressable TV advertisement can cost 10x a national ad. A local TV advertisement can cost 3x.

In sum, the basic physics of how ROI works favors less expensive broad reach oriented campaigns with less frequency. This observation is the cornerstone of the broad reach argument.

Make sure you read part two of this series in which we’ll explore some of the benefits of targeting and share tips to develop marketing campaigns to deliver higher ROI.

Written by Marketing Evolution