When you are planning for your new advertising campaign, one of the most important questions that you have to answer is where the best locations or areas are to spend your money there and have a better ROI for your specific campaign?
One way that many media agencies help their clients is to show them where they have to place their ads. This is called media planning, but this is one of the jobs that a media planner has to do. In a blog about media planning we discussed about BDI/CDI indexes and a matrix built on these indexes (http://armaniads.com/principles-of-media-planning-part-1/). As a tool for better understanding, let’s dive into a real world example which Armani faced in the past.
Story of a FMCG Brand
Once in a time Armani has a client who wants us proposing for his budget allocation. As you might guess we have used BDI/CDI indices and made our proposal based on these two. For this project, you need sales information about the brand, so is the category sales information. These are what we took from our client. The market has four major sectors for the client: North, West, Center, and South.
Calculating the BDI and CDI for each sector is at the second step, and you can see the results in table 1 below (remember that these numbers are hypothetical).
Table 1- Hypothetical BDI/CDI Calculation for a FMCG Brand
After this it’s time to put these BDIs and CDIs into a matrix which we discussed earlier.
Figure 1- BDI/CDI Matrix
As you see in table 1, each area has its own specific situation, so the firm should operate different campaign in each. By considering the firm’s strategy, the two indices might have different weights. So, what is a weighted BDI/CDI matrix?
In real world cases, you might not base your decisions only on that matrix, so you might want this metrics to be weighted. So before we go further in that practical example, let’s focus on weighted BDIs and CDIs.
Weighted BDIs and CDIs
A method of selecting markets might be to weight the BDI and CDI to arrive at a single combined index. Before this weighting is done, however, a marketing strategy decision must be made to guide the media planner in the proper weighting of the two indices. A marketing strategy that calls for x dollars of advertising spending in direct proportion to sales requires that the percent of brand sales component of the BDI be used exclusively in allocating media expenditures to each market. At the other extreme, if a marketing strategy requires that brand advertising be allocated only on the basis of category development, the media planner would have to use only the percent of category sales component of the CDI in deciding spending by market.
Any mixture of these two strategies requires a mixture of weights for the BDI and the CDI. For example, suppose the marketing strategy states that brand sales should be protected in all high-sales areas but that spending should be increased where category development is high and brand development is low. In that situation, the planner might elect to weight the BDI 75 percent and the CDI 25 percent. The following example illustrates how that calculation would be made in a typical market:
Weighted BDI + Weighted CDI=159
All markets would be evaluated on the basis of a similar weighting, and only those that reach a certain level would be selected. Weighting is risky, however, unless the planner knows exactly what each weighting signifies. A safer procedure would be to weight BDI and CDI 50 percent each and then combine them. Nevertheless, some kind of arbitrary decision would have to be made. The cutoff point might be set at 125—that is, any market indexed at higher than 125 would be selected and any less than 125 rejected, at least until experience dictates otherwise. The situation in the example was as same as the one mentioned above, so the BDI has three times weight as CDI. Weighted indices and the index of sum of them are as below.
Table 2- Weighted BDI and CDI
The weighted sum column is the base for our decision making and the last column which is in percentage tells us while assuming the media cost is similar in all sectors, so the percentage of our campaign expenditure should be allocated in such a way that North has 20% of the budget, Center 25%, and so on.
In our case, the client budget for this specific campaign was about 120 billion Rials which equals to 1.2 million dollars considering the exchange rate of the day which this article has written. Spending percentage mentioned above will guide us to the last table as below.
Table 3- Budget allocation considering weighted BDI and CDI
You have to be noted that these allocation is by assuming the same media cost in all regions, but if you had different costs so this indices will show you the priority of your budget allocation and the exact media budget allocation will have to consider the differentiations. By involving the differentiation in media costs, the spending percentage will show us the weighted priority of our budget allocation so we will have a table as you see below.
Table 4- Calculation of the final index for decision making by considering the media cost differentiation
The fifth column, %cost * priority, is the multiple of the %cost by the weighted priority which makes our basics for final index of our decision making criteria. The final column is the fifth column on percentage of the total. So this would take place in the second column in the table 3 as the spending percentage and will show us how much we must pay for our media in each market area. As you can see, if you don’t consider the media cost, you spent the most of your budget in areas such as the West in our example but by attending to the media costs, a big portion of the budget will go to other areas such as the North.
This was a practical example in which you can use the BDI/CDI tool for determining your budget allocation. We hope that you can use this technique in your future campaign and as the result, reach higher ROI for your advertising campaigns.