All small business owners advertise their business at some point in time and in some fashion. If, for instance, you are a one-person business that installs gutters on homes, and you give the prospects you encounter a business card, you are advertising your service.
As companies get larger, they look for different avenues to advertise their service or products in order to grow their business. Many who can afford it, or have it as an option in their market, choose to use TV advertising.
There are currently 210 television markets in the United States, ranked from number 1 to number 210 based on the number of TV households within each market. New York City is the biggest market with 6.8 million TV households and Glendive, MT is number 210 with 3,630 TV households. Your TV market size will fall somewhere in between those two unless you happen to live in New York City or Glendive, MT.
Television advertising can be grouped into several different categories such as broadcast, cable, and OTT (Over the Top).
Broadcast TV’s signal is delivered to homes over the air and requires a digital transmitter and a tower to generate an over-the-air signal, and an antenna of some sort to receive the signal. In days gone by, most homes had an antenna on a pole near their house and a wire running from the antenna to the back of their television set. Today, most new smart TVs come with a digital antenna built into them.
Cable TV is another source businesses can use to advertise. Cable companies such as ESPN, CNN, TNT, and FOX News Channel (plus about 500 others) do not generate an over-the-air signal. Their signal is delivered to homes either by cable (hence the name) or by satellite to various cable companies throughout the country who then send the signal to your home via cable or fiber optics.
A fairly new way to advertise on television is by buying ads on streaming services such as Roku, Apple TV, Hulu, and others. This type of advertising is called Over-the-Top, or OTT advertising.
What you pay for TV advertising is almost always based on the number of people you are able to reach with your message. And generally, rates are based on a cost-per-rating point within a particular age group or demo (or both) and within a particular part of the day (daypart) in which your ad airs.
What is a Rating Point?
A rating point signifies 1% of a total group (universe) that is watching a program at a particular time. The group can be identified as number of households, people of certain ages such as 25-54, age + demo such as Men 25-54, and so on.
For instance, if a TV market has a reachable population (universe) of 200,000 men ages 25 to 54, then a 1 rating would represent an estimated viewership of 2,000 (200,000 x 1%). A 5 rating would equal an estimated audience of 10,000.
Rating points, defined by households, demo/ age, etc., are then generally sold by TV stations to advertisers based on a cost per rating point, or cost per point. Cost per point varies widely across the country depending on audience size and daypart.
For instance, a cost per point in New York City will be much more expensive than a cost per point in Huntsville, AL. One rating point in New York might represent over a million people while one rating point in Huntsville might only represent a few thousand people.
Additional considerations for advertising rates on TV stations is supply and demand. Super Bowl spots cost millions of dollars on network TV, and thousands if not hundreds of thousands of dollars on local tv stations, based on the size of the market. Why? The Super Bowl is the most watched TV program aired during the year, and has a limited number of available commercial spots. It’s pretty simple: the more people you reach, the higher the cost.
Buying cable television ads can be much cheaper than buying broadcast TV. However, it must be said… you get what you pay for. Cable subscriptions have been going down significantly over the past few years. “Cutting the Cord” (link to our other blog) has impacted the number of viewers you might be able to reach by buying Cable TV ads. It is highly unlikely that Cable TV reaches more than 60% of any particular market. If there are multiple cable companies within your market, then reaching, for instance, 100% of the viewership of CNN Prime Time or FOX News Channel or ESPN would require you to buy ads on each cable company.
If you wanted to buy ads within a specific geographic area, say within 10-15 miles within your business, then cable advertising might be your best alternative since most cable companies can send their signal (and your message) to specific geographical locations.
It is a fact that broadcast TV viewership and cable subscriptions have been going down for several years. The reason is the plethora of viewing choices every home now has. Netflix, Apple TV, Roku, Hulu, and many other streaming services allow viewers to watch what they want to watch whenever they want to watch it. Which brings us to OTT advertising.
How OTT Advertising Works
OTT (over the top) advertising provides businesses with the ability to purchase advertising inside of programming that viewers are streaming. There are some exceptions. Netflix does not allow paid ads within their service, as of today’s writing. Some streaming services, such as Hulu, offer their service at an additional cost to bypass advertising.
However, businesses can buy advertising and reach people who are viewing TV through these streaming services. OTT costs a bit more than traditional cable or broadcast TV and there are several reasons. OTT advertising allows you to:
- Reach a specific geographic area, down to zip code level
- Reach your audience by income level, age, gender, home-ownership, etc.,
- Buy a specific number of impressions
Simply stated, OTT advertising costs more because you are reaching an audience that is harder to reach.
If you want to buy TV advertising, the first thing you need to do is come up with a budget for doing so. Creating a budget might not be as easy as it sounds, but business owners should always have a budget before spending money on anything, especially advertising.
Lastly, if everything you’ve read within this article leaves you more confused than you were before reading it, there are people who do this kind of thing everyday. Lawrence Media Group welcomes your questions and would love the opportunity to speak with you about TV advertising for your small business.