The Impact of Digital TV On The Advertising and Media Industry

The Impact of Digital TV on the Advertising and Media Industry
By
MURILO RUIVO CERDEIRA
March 1999
THE UNIVERSITY OF HULL
The Impact of Digital TV on the Advertising and Media Industry
being a Dissertation submitted in partial fulfilment of the requirements for degree of
Masters in Business Administration
in the University of Hull
by
MURILO RUIVO CERDEIRA
March 1999
Contents
Contents
Acknowledgements Executive Summary 1. Introduction
1.1 Objectives 1.2 Literature Review 1.2.1 Market Reports 1.2.2 Professional and Trade Journals 1.2.3 Secondary Research Findings 1.3 Primary Research - The Methodology 1.3.1 The Research Design 1.3.2 The Research Instruments 1.3.3 The In-Depth Interviews 1.3.3.1 Research Limitations and Bias 1.3.3.2 Findings 1.3.4 The Focus Group 1.3.4.1 The Sample 1.3.4.2 Research Limitation and Bias 1.3.4.3 Findings 1.3.5 Telephone Interviews 1.3.5.1 Research Limitation and Bias 1.3.5.2 Findings 1.4 Organisation of the Dissertation
vi vii 1
3 3 3 4 4 4 5 5 6 7 7 7 8 9 9 9 10 10 10
2. The Step Changes in the British Broadcast

2.1 The Audience Research 2.2 The Convergence of Media 2.3 Conclusion
12
15 15 18
Murilo R. Cerdeira - MBA March-99
Contents
3. The New Medium: Digital Television

3.1 Introduction 3.2 The Digital Television 3.2.1 The Digital Television Platforms in the United Kingdom 3.2.2.1 Digital Satellite Television (DST) 3.2.2.2 Digital Terrestrial Television (DTT) 3.2.2.2.1 Free-to-air Digital television 3.2.2.4 Digital Cable Broadcasting (DTC) 3.3 The Decoder or Set-Top Box 3.4 Widescreen Television or High Definition Television (HDTV) 3.5 Interactive Television 3.6 SWOT Analysis 3.7 PEST Analysis 3.8 Conclusion
20
20 21
22 23 24 25 26 26 27 27 28 32 35
4. The Consumers and Digital Television

4.1 Introduction 4.2 Consumers and Interactive Television 4.2.1 The Interactive Television Trials 4.3 Do Consumers want more channels? 4.4 Do Consumers want better picture and sound? 4.5 What Benefits consumers see in having Digital Television? 4.6 What Dangers do consumers perceive in having Digital TV? 4.7 Who are likely to sign in Digital Television? 4.8 Digital Television Growth 4.9 Will Digital Television take up quickly? 4.10 Conclusion
36
36 36 39 40 41 42 43 43 44 45 47
5. The Impact of Digital Television on the Marketing Communication Industry 49
ii
Contents
5.1 Introduction 5.2 Changing Marketing Communications 5.3 The Marketing Communication tools for Digital Television 5.3.1 Advertising Programming 5.3.2 Advertiser-supplied Programming 5.3.3 Advertised-funded Programming or Co-funded Programming 5.3.4 Advertorial 5.3.5 Banners and Icons 5.3.6 Broadcast Sponsorship 5.3.7 Classified Advertising 5.3.8 Direct Response Television (DRTV) 5.3.9 Infomercials 5.3.10 Product Placement 5.3.11 Spot Advertising 5.3.12 Virtual Advertising 5.4 Conclusion
49 51 53 55 56
56 57 58 58 61 61 62 63 63 64 65
6. The Impact of Digital Television on the Advertising Industry

6.1 Introduction 6.2 Advertising 6.2.1 The Porter 5 Forces Model 6.2.1.1 The Threat of Entry 6.2.1.2 The Threat of Substitutes 6.2.1.3 Bargaining Power of Suppliers 6.2.1.4 Bargaining Power of Buyers 6.2.1.5 Competitive Rivalry 6.3 Advertising in the Multi-channel Digital TV Environment 6.3.1 Product Awareness 6.3.2 Entertainment and Information Offer 6.3.3 Direct Selling 6.4 Interactive Advertising 6.4.1 Interactive Advertising Trials
Murilo R. Cerdeira - MBA March-99 iii
67 67 67 69 70 70 71 72 73 73 74 74 75 75 77
Contents
6.4.2 The Buyer Behaviour Process Model 6.4.2.1 The Stimulus and Perception Process 6.4.2.2 The Learning Process 6.4.2.3 The Motivation Process 6.4.2.4 Attitude 6.4.2.5 The Group Influence 6.5 Branding in the Digital Television Era 6.6 The Creative Challenge 6.7 The Agency Remuneration Systems 6.8 Conclusion
79 81 82 84 85 87 88 90 92 92
7. The Integrated Marketing Communication (IMC)

7.1 Introduction 7.2 The Approach 7.3 Models to Organise an Integrated Marketing Communication Agency 7.4 The Effectiveness of Integrated Campaigns 7.5 Conclusion
95
95 95
96 99 101
8. The Impact of Digital Television on the Media Industry

8.1 Introduction 8.2 The Impact on Media Planning 8.2.1 The Major Problems Affecting the Media Planning in the Digital Television Environment 8.2.2 The Opportunities of Media Planning 8.3 The Impact on Media Buying 8.4 The Television Audience Measurement System 8.5 Conclusion
103
103 104
106 108 110 113 115
9. The Survey - Consumers' and Industry's Current View

9.1 Introduction 9.2 The Consumer View - The Focus Group Analysis 9.3 The Industry View - The in-depth and Telephone Interviews
Murilo R. Cerdeira - MBA March-99 iv
117
117 117 122
Contents
9.4 Critique of the Primary Research Methods 9.5 Conclusion
130 131
10. Conclusion and Recommendations Appendices:

Appendix 1 - In-depth and Telephone Interview Questionnaire Appendix 2 - Focus Group Questionnaire Appendix 3 - Focus Group Questionnaire Appendix 4 - Interactive Adverts Appendix 5 - The Launch of Digital TV in the United Kingdom 5.1 - SkyDigital 5.2 - ONDigital
132
136 137 138 139 140 140 143
Bibliography
146
Acknowledgements
Acknowledgements
I would like to thank certain people for their support during the MBA course and dedicate the dissertation to them.
Thanks to my wife for her patience during this period, who helped me considerably, constantly supported and encouraged me
I would like to thank my supervisor Mr Trevor Sharpe for his helpful guidance and support during the MBA course
I would like to express my gratitude to those who participated in this study
I also would like to thank my parents and family for their encouragement and support
Murilo Ruivo Cerdeira London 03 March 1999
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Executive Summary
Executive Summary
The advent of digital television is enabling interactive television to provide many opportunities and challenges for advertisers, advertising and media industries. Consumers will benefit from this new technology which will offer new services with additional choice, increased personal control and freedom over the content and timing of information and entertainment. The Internet is providing an interactive media which consumers are learning to use a medium in a more active way, and recognise the value of looking for additional information. All these factors will have an impact on consumers' lives, the marketing communication industry, advertising agencies, and media agencies. Communication industry and agencies will face new dynamics, as well as many opportunities and dangers, and a new paradigm will be necessary to work in the new environment. Therefore, the industry will need to develop new strategies, increase innovation and creation, as well as management skills. An approach to an integrated marketing communication is analysed in this study.
Porter's five forces model is used to investigate advertising in the multi-channel digital environment. As audiences and media will fragment even further in the future, TV advertising may face increased competition from alternative marketing communication tools which might have an impact in communication mass market products and services. Moreover, advertising may confront competition from other media. On the other hand, niche products can be better targeted to the right audience in a more cost efficient manner. The complex buying behaviour model of Howard and Sheth model (1969) is applied to assess interactive advertising. The results suggest that this communication tool can be powerful and increase the efficiency of a marketing communication campaign.
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Executive Summary
Nevertheless, the changes that industries will face will depend on how consumers embrace this new technology. The research carried out by this study found that consumers are not willing to take up this new medium as fast as has been forecasted by the industry. The real benefits of digital television have not been efficiently communicated in order to motivate consumers to adopt this new medium. Broadcasters should focus in offering real benefits to consumers and exploit the potential benefit "choice."
The digital revolution is likely to be an evolution. Changing consumers' attitudes and encouraging them to embrace digital television will take a while, and it should be the focus point for the success of this new medium.
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Chapter One - Introduction
1. Introduction
Digital Television is introducing new opportunities and challenges, and it is likely to cause a revolution that will be the most important development in British television since the launch of ITV in the 1950's, or the invention of colour television.
Charles Morgan speculated in the BBC Yearbook for 1930, on the possible future impact of the embryonic medium of television on the established arts:
"It is yet too early to speak in detail of the probable effect on entertainment. It is not impossible that the time may come when, without leaving his armchair, a man may be a hearing and seeing member of the audience in any playhouse, cinema or concert hall throughout the world. If this power is ever brought to mechanical perfection, there is a little reason, except the desire to be gregarious, that anyone but a few should go in person to any place of entertainment again; from which it follows that, for want of a local audience, theatres, cinemas and concert halls may be closed down and all entertainment be concentrated in studios supported by an international organisation of televisionists.1"
Analysing the development of the television broadcast since the beginning until today, it is possible to conclude that what critics foresaw in the early days and the reality is totally different. However, with the advent of this new medium, digital television, the question could be asked: "Can this prediction made in the 1930s become true in the near future?"
Henry, Bryan, British Television Advertising: the first thirty years, (Century Benham Ltd, London, 1986), pg. 26 1
Digital television will bring to the viewers hundreds of television channels, a higher quality picture with CD - quality sound, choice, and less risk of interference. Broadcasters are claiming that this new medium will revolutionise viewing patterns. This new medium will turn television from a passive to an active medium, through interactivity. The interactive digital revolution, or armchair revolution, will allow viewers to do home shopping, banking, entertainment and other services, and viewers will control how, when and what they watch.
Moreover, digital television will bring new opportunities, dangers and challenges for broadcasters, advertising agencies, media agencies, and consumers. The advertising and media industries will have to reassess how they are currently working, discover and learn this different new medium, because digital television and interactive services will lead to "greater audience fragmentation, better targeting opportunities and changes in how media is planned and bought2." In addition, digital television will rejuvenate the market, and will become an important advertising tool that should be considered as part of agencies longer-term advertising plans.
Consumers may be reluctant to change from the current system to digital in the early days, as occurred in the past with the advent of colour television in the UK (1967), and the low pace of penetration of satellite and cable TV, and VCRs.
The aim of this paper is to analyse the impact of digital TV on the advertising and media industries, as well as to consumers.
Crawford, Anne-Marie, D-Day for digital TV, Marketing (2 October 1997), pg. 29 2
1.1Objectives
To analyse how Digital TV will affect Marketing Communications To determine the communication tools that will be available in digital television To examine the opportunities and dangers of digital TV for the advertising and media industries
To analyse the benefits and dangers of digital TV for consumers To analyse the problems that digital TV will solve To recommend a new approach for advertising and media industries in the digital age
1.2Literature Review
The information for this dissertation is amassed from the secondary research as described below. However, there are some gaps in the secondary research, which led the necessary direction on the research survey and the sort of information required.
1.2.1 Market Reports
Reports from Keynote, Datamonitor, and Mintel (Market Intelligence) were consulted, and important information about the market, trends, market analysis, statistics, and other useful information were brought to this paper.
1.2.2 Professional and Trade Journals
Information from reports from the Market Research Society Annual conference, ISBA's Policy conferences, Future - Journal of Forecasting, Journal of Market Research Society, The McKinsey report, The Advertising Association report, Journal of Advertising research, and others.
1.2.3 Secondary Research Findings
The general information was gathered from the marketing magazines, business magazines, the Internet, the quality national newspapers, CD-ROMS, books, and conferences.
1.3 Primary Research - The Methodology
The methodology of gathering information which was not covered from the literature review and the primary research, were collected as follows:
Four in-depth interviews with people from the broadcasting and advertising industry Two focus group with six respondents - general consumers Two telephone interviews with people from the media industry Attending the "Cable & Satellite' 98" exhibition and conferences, and "Media Research: Time to reassess" conference, both of them in London
The types of interviews used were semi-structured interviews and unstructured interviews. The advantage of using semi-structured interviews is that as the questions are open-ended the
Murilo R. Cerdeira - MBA March-99 4
respondents are free to answer and to express their point of view, giving the opportunity for the researcher to explore other questions that seem appropriate according to the respondent's responses. In addition, the presence of various respondents allowed a variety of points of view to emerge and the group to discuss them. The disadvantage is that a skilful moderator is required to conduct the discussion without any bias, or a discussion can be influenced by a few people. The advantage of using an unstructured interview is that it enabled the researcher to gain as much insight into the subject as possible by permitting the respondents to discuss the topic openly. The disadvantages are the same as the semi-structured interviews. It should be noted at the outset that the methodology was to a certain extent an evolving one that took definite shape as the research progressed.
1.3.1 The Research Design
The methodology used in this study was qualitative research, because the data generated from this type of research would be richer in insight, and would have depth in information and explanation.
1.3.2 The Research Instruments
The instruments used to collect the information were a semi-structured questionnaire, unstructured questionnaire, notes, and a tape recording. The questionnaires were designed with as clear and concise questions as possible. Bias and jargon were avoided in the questionnaire's design. Open-ended questions were used to allow the researcher to gain insight into the subject and to encourage the respondents to answer and express their point of view giving the researcher the opportunity to explore other questions that seemed appropriate according to the
respondent's responses. In order to segment the respondents (focus group), some questions to determine the respondents' patterns of behaviour, consumption and life-style were included. The questionnaire was pilot tested to refine and to check the validity and reliability of the data collected, and it was piloted with some friends. The tape recording and notes were used to allow the researcher to concentrate on questioning and listening, and to assist in the later analysis of the interviews.
1.3.3 The In-Depth Interviews
It was decided during the research design that due to the gaps and the lack of publications in this subject, that the broadcasting, media and advertising industries should be assessed, in order to determine the current view of these industries. Thus, the in-depth interview was the most suitable method. The in-depth interviews allowed the researcher to understand the dynamics of the current media, the current view about the new media, and the market as a whole. Furthermore, this sort of interview could give the researcher the freedom to phrase any questions that seemed appropriate and ask the interviewees according to their responses. Although the in-depth interviews were based on a semi-structured interview, the interviewees went deeper in the subject. Four in-depth interviews were carried out. The semi-structured approach was applied for three interviews, and the unstructured approach was applied for one interview.
Two interviews were carried out with the BBH's (Bartle Bogle Hegarty) Head of Digital Media in London. The third interview was carried out with the Account Manager of Victoria Real Ltd.- advertising agency, in Brighton. The last interview was carried out with British Interactive Broadcast's (BIB/Open TV) product manager in London. Apart from the BIB's
interview, all interviews were taped recorded. The data collection process used in the interviews were a semi-structured questionnaire (see appendix 1), a tape recorder, and notes of the interviews.
1.3.3.1 Research limitations and bias
The interview with B.I.B.'s Product Manager could be biased towards promoting particular issues specially related to satellite broadcasting, because B.I.B. (Open TV) is SkyDigital's supplier of interactive features. Therefore, careful analysis of this data was carried out, as well as all other data gathered. The limitation of these sort of research methods is that generally skilful specialists, usually psychologists, carry out this type of interview to understand and interpret the nuances of the interviews situation. As the researcher is not this type of specialist, some interpretation might not be included in the analysis.
1.3.3.2 Findings
The findings of the in-depth interview are referenced and incorporated throughout the report. In chapter 9, the interviews are summarised. The tapes and notes with the full interviews are available for any future consulting.
1.3.4 The Focus Group
In order to access the current views and perceptions of the consumers on digital television, it was decided to use the focus group. The focus group dynamics could be used to draw out individual beliefs which might not be so freely expressed in a one-to-one basis, thus
generating useful data rich in insight. In addition, the time required to carry out in-depth interviews on a one-to-one basis would be too long and economically not viable. Thus, two focus group were carried out, one male and one female. In order to assist the later analysis, a tape recorder was used for both focus groups. The topics for discussion were introduced by following a semi-structured questionnaire (see appendix 2), however during the discussion other questions that seemed appropriate were asked. Both focus groups were carried out in London. In order to segment the respondents, some questions about the respondents' consuming patterns, behaviour and life-style were asked prior to the focus group (see appendix 3). The seating in both rooms were arranged in a circular way enabling the respondents to face each other. The interview atmosphere was very relaxing.
1.3.4.1 The Sample
The focus groups were divided in male and female groups. Both groups consisted of six respondents each. In order to insure that the respondents could feel free to make their points without inhibition it was necessary that the whole group had similar social class ("status"). Therefore, a simple questionnaire (see appendix 3) was designed and applied to each respondent to find out if they have similar patterns of behaviour, consumption and life-style. The majority of the respondents who participated in the focus group were known to the researcher and this led to a very good rapport among the respondents and the researcher. In order to participate in the group, the respondents had to meet a criterion-described below.
Heavy or light television viewers Ages between 22 and 50 years old Similarity in "status" among the respondents
Willingness to discuss freely in front of other people
There is a possibility of bias on the results due to the sample size not being large enough to represent an appropriate sample of the British population. It also can be a non-representative sample because some respondents have been living in the UK for some years, but they are not UK citizens. As the findings may not provide a basis for prediction of the whole population's behaviour, the results are managed as a hypothesis to support me in reaching the conclusion.
1.3.4.3 Findings
The key findings are incorporated throughout the report, but especially in chapter 4. The summary of the findings is described in chapter 9. The tapes and notes with the full interviews are available for any future consulting.
1.3.5 Telephone Interviews
The telephone interviews were carried out because of the respondents' limited time available for personal interview. The objectives were to determine the current view of the media industry, to understand the dynamics of the current media, the industry's view about the new media, to determine the strategies the business model and solutions that the industry is creating. The interview followed a semi-structured questionnaire, but the respondents spoke freely and broadly about the topic. The advantage of using this method is that it is cheaper and faster to contact and to get the interview than the personal interview. The interviewees feel
that this type of interview is timesaving and less demanding. The disadvantage of using this method is that it is difficult to create a good rapport with the respondent, it is not possible to observe and interpret the nuances that a personal interview could explore, and questions may not be explored in their full objectives. The two telephone interviews were carried out with people from Initiative Media (media agency). One was carried out with the Broadcast Director and the other with the Strategic Planning Director.
The limitation of using this method is that was not possible to create a good rapport with the respondent and explore the questions more deeply. In addition, it was not feasible to observe and interpret the nuances of the interview; neither the freedom to phrase any questions that seemed appropriate to ask the interviewees according to their responses. In order to avoid bias in the findings, the data collected were carefully analysed.
1.3.5.2 Findings
The findings of the telephone interview are referenced and incorporated throughout the report. In chapter 9, the interviews are summarised.
1.4Organisation of The Dissertation
The dissertation is organised into 10 chapters. The chapters seek to follow a logical flow from the previous chapters. Chapter 2 introduces the step changes in the British broadcasting. The assessment of digital television is carried out in chapter 3. Consumers and the take up of
digital TV are examined in chapter 4. The marketing communication industry is analysed on chapter 5. Chapter 6 will discuss the advertising and advertising industry. The Integrated Marketing Communication approach is analysed on chapter 7. The media industry is examined in chapter 8. Finally the findings from the primary research are presented and discussed.
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Chapter 2 - The Step Changes in the British Broadcast
2. The Step Changes in the British Broadcast
Britain was the first country in the world to introduce a public television service. On 2nd of November 1936 the first BBC (British Broadcasting Corporation) television broadcasts began. On 1st of September 1939 the television transmissions were suspended because of the outbreak of World War II. The broadcasting services were suspended for nearly seven years.
In 1946 when the BBC broadcasting transmissions restarted, the Government introduced the TV licence of 2, to help the BBC to meet the increased cost of the service. At this time there was no advertising on television. The British society strongly opposed any kind of association, particularly one of financial dependence, between broadcasting and the world of commerce and industry.
In 1954 the BBC's monopoly of television was broken after a fierce campaign by financial, commercial and political interests, in and outside parliament3. The Television Act was published allowing advertising on TV and the establishment of the first commercial television - the Independent Television - ITV. On 22 of September 1955 the Independent Television started to broadcast from London. On the same night the first "natural break" during the programme, the first television commercials were broadcast. The commercials were for Gibb's SR Toothpaste and Cadbury's Drinking Chocolate, both were sixty seconds long. This new
Dyer, Gillian, Advertising as Communication (Routledge, London, 1996), pg. 57 12
medium posed opportunities and challenges for the advertising and media industry, which were used to still mediums such as press and poster advertisements.
In 1958 videotape was introduced in British broadcasting, where the programmes and TV commercials could be pre recorded and broadcast, whenever they wanted. Previously, every programme and TV commercial was broadcast live.
BBC2 started broadcasting in 1964, which was transmitted in 625-line UHF (Ultra High Frequency), whereas BBC1 and ITV were transmitted in VHF (Very High Frequency). However, the public had to change the old TV sets (VHF) for new dual-standard receivers (VHF/UHF), and they remained very cautious and confused. The new standard only took up in 1969, when BBC1 and ITV changed their broadcasting standard to UHF to enable them to broadcast in colour.
In 1967 BBC2 started colour broadcasting in the UK, the colour revolution began, but it was slow to become popular. However, in the mid 1970's the TV set problems had been rectified and colour became commonplace4.
http://www.htw.ndirect.co.uk
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In 1977 the Teletext system of editorial and advertising was launched. In addition, the World Administrative Radio Conference (WARC) decided the allocation of channels for television transmissions by satellite. The video cassette recorder was available in the 1970's, but the real take off of the VCRs was during the 1980's, when the devices became inexpensive5.
Channel 4 and S4C (Sianel Pedwar Cymru) the Welsh channel started broadcasting in 1982. Moreover, in 1982 the first satellite English-language programme service was transmitted by Satellite Television Ltd (SATV).
In 1984/85 more British channels appeared on satellite, the intention of these programmes was to be retransmitted by cable network, instead of home viewing. In 1985 the British government relaxed rules on private home dishes, and the dish sales started to increase. Satellite TV took off in Europe in 1988 when Amstrad launched low-cost satellite TV reception equipment, and with the launch of the Astra satellite, which was the first "mass market" European satellite. In 1989 Sky satellite television was launched in the UK. In 1990 Sky and British Satellite Broadcasting merged to form BSkyB, and in 1993 BSkyB started to commercialise multi-channel packages with encryption. Channel 5 started broadcasting in 1997, and it uses the last terrestrial frequency available for analogue broadcasting.
http://www.htw.ndirect.co.uk 14
2.1 The Audience Research
The airtime rates in the early days were based on the well-established American sixty-second length as the standard. The thirty-second (which was not the standard of measurement) commercial was priced at two-thirds of the minute rate. The television audience in 1955 was measured by the BBC's aided-recall. In 1956 the Television Audience Measurement Ltd (TAM) was awarded with audience research service contract. The system was measured by using an Electro-mechanical meter system, which could sense the TV set's tuning mechanism, and record them. In 1968 AGB (Audits of Great Britain) Research took control of television audience measurement in the UK, and this situation still exists under the BARB (Broadcaster's Audience Research Board) systems for current broadcast services. The new system was more accurate and offered a greater speed of reporting and cost-effectiveness. The system was based on an electromechanical event record called Setmeter, which recorded the changes of reception and time, on binary-digital form on paper tape. This technical basis of the industry research remained partly unchanged until 1984, but there has been improvement in the method of channel detection on the TV sets. BARB was created in 1980 to unite the ITV and BBC audience research system into one system. Nowadays, BARB monitors a sample of approximately 4,500 homes, and uses an electronic device - people meter.
2.2 The Convergence of Media
In the 1950s there were very defined boundaries amongst telecommunication, television, computer, and other electronic equipment services. The developments of each sector can be
15
seen on the figures 1 to 46, below. However, the past 18 years with the development of digitalisation technology (see chapter 3), computer systems, hardware, and better cable telephone wiring infrastructure have enabled the development of digital television and interactive services. This convergence is blurring the old boundaries amongst the technologies, and it will continue to dilute in the future.
Figure 1.
Figure 2.
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Miles, Ian, Cyberspace as Product Space. Futures- The Journal of Forecasting planning and Policy, (Volume 29 16
Figure 3.
number 9 November 1997). Pg. 777 -780 Murilo R. Cerdeira - MBA March-99 17
Figure 4.
2.3 Conclusion
British television has experienced many challenges and threats as has been described in this chapter. Commercial television posed many opportunities and challenges for the advertising and media industry, and the industry developed new approaches in order to create and produce advertising as well as to trade the airtime. The audience research, the vital tool to trade airtime, started with the introduction of commercial television. The processes of measurement were explained. BARB was awarded the contract of supplying audience research in the late 1960s and it still today the official organisation to supply audience research.
The convergence of media has been described. In the 1950s the boundaries amongst telecommunication, computer, and broadcasting was visible, however, with the development
of new technologies the boundaries got blurred, and it enabled the development of digital television.
This background shows us how the broadcast industry has developed, and the challenges, opportunities, and threats that advertising and media industries faced. The introduction of digital television is bringing another major step on the British broadcasting. Advertising and media industries are going to face new challenges, opportunities, and dangers. New marketing communication paradigms will be needed to use this new medium. These factors lead us to the next chapter, to understand what digital television is, and what sort of opportunities and threats this new medium will bring.
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Chapter 3 - The New Medium: Digital Television
3. The New Medium - Digital Television
3.1 Introduction
First of all it is necessary to understand the development of the technology, which has led to digitalisation. Digitalisation is revolutionising the world; it has changed the world industry environment, from telecommunication, computers, home entertainment, broadcasting and reception of television. Digitalisation is the reduction of pictures, and sounds, the reduction of words into strings of bits. This trend of digitalisation has been driven by digital technology's inherent benefits, notably performance and the ability to add new features in a flexible, compact and cost-effective manner, all combined with ready access to information. The convergence of telecommunications, computer and broadcasting (see figure 1 - 4, chapter 2) is offering a whole range of new services bringing additional choice, increased personal control, and freedom over the content and timing of information and entertainment7.
Digital TV is a new method of television transmission, because the digital signals can compress several television channels into the space currently used by a single analogue channel. This spectrum efficiency is the primary incentive driving the broadcast industry to extent their services into digital revolution. In digital terrestrial television it will be possible to carry four to six channels as a multiplex on the equivalent of one of the ordinary current analogue terrestrial channels8. Similarly, it is possible to transmit eight digital television channels from a single transponder on a satellite. The difference between analogue and digital transmission is that the former is transmitted by analogue waves, and the latter is transmitted
Byfield, Sheila & Ogilvy & Mather Advertising, A Digital Future? Marketing Research Society - Conference Papers-40th Annual Conference (1997), pg. 161 8 Oakes, Chris, More Room on the Dial? Wired News (11 September 1998), @ http://www.wirednwes.com Murilo R. Cerdeira - MBA March-99 20
by binary digits or bits (0 or 1, or "off" or "on" state). In addition, the digital signals are not affected by weather systems nor subject to interference from large objects, as on the current analogue signals. A full TV picture requires about 216 million bits per second, far too much to fit into the eight-megahertz frequency band9.
3.2 The Digital Television
Digital TV will bring a higher quality picture, and offers a route to high-definition TV (HDTV), with CD - quality sound, less risk of interference, greater viewing choice, and interactivity services. In addition, broadcasters will be able to introduce more advanced subscription services featuring a high degree of interactivity, including pay-per-view, videoon-demand, home shopping, home banking, entertainment, play games, betting, and educational programmes.
The digital revolution will enable the transmission in widescreen/high-definition TV (see item 3.4), which will bring pictures as pin-sharp as the cinema's. The low definition or the current analogue TV has a definition of 625 lines in Europe and 525 in Japan and in the USA, and it has a horizontal to vertical relation of 4:1. The HDTV has a definition of 1,125 lines10 and the horizontal to vertical relation of 16:9.
Moreover, digital television will allow individuals to programme their own schedules through the "electronic programme guide" (EPG) and it may or may not carry any sort of accompanying advertisements. Consumer will "pull" information according to their needs11.
Hawkes, Nigel, How Digital television works, Digital Times ( 01 October 1998), pg. 6 Science and Technology, In your face, The Economist (7 June 1997), pg. 114 11 Woolmington, Paul, Digital TV lets viewer take control, Financial Times (27/11/97)
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These factors may lead channels to lose control over viewers, and it is certain that the media value chain will be affected. The compression and modulation system that will be used by the television broadcasting industry in Europe is the MPEG -2 (Motion Picture Experts Group). This system works by removing redundant and irrelevant parts of the video information. The service quality required by different systems would require different rates of transmission, as showed on figure 512.
Figure 5: Service quality as a function of bit rate. Service High-definition television Enhance definition television (Studio Quality) PAL Standard VHS Compact Disc
Source: Institute of Electrical Engineers
Bit Rate 24 Mbit/s 12 Mbit/s 6 Mbit/s 2 to 3 Mbit/s 15 Mbit/s
3.2.1 The Digital television Platforms in the United Kingdom
The regulatory framework for the introduction of digital broadcasting services in the UK was set out by the Broadcasting Act (1996), and subsequent legislation. There are three manners of digital broadcasting in the UK:
Digital satellite broadcasting Digital terrestrial broadcasting Digital cable broadcasting
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Peltor, Hugh, Digital television broadcasting, IEE Review (June 1998), pg. 165 22
3.2.2.1 Digital Satellite Television (DST)
The digital satellite television (DST) in the United Kingdom was introduced on the 1st of October 1998 by Sky Digital, a company from British Sky Broadcasting - BSkyB, which offers digital services by subscription. Sky Digital provides a range of 140 different channels13, but there is a possibility of offering up to 200 - 500 TV channels, including video on demand, pay per view, Internet, and a full range of interactive services (see item 3.5). In order to receive the digital satellite channels, customers will have to purchase a new satellite dish. In the case of current satellite's customers, they will have to change for a smaller satellite dish. In addition, customers have to purchase a set-top box with smart card on it, or an integrated TV set which has a built-in decoder to be able to receive the digital service and use the interactive services. British Interactive Broadcasting (BIB), branded as Open TV, will provide the interactive services on the SkyDigital platform. The digital compression allows the transponder to carry more than 20 digital channels depending on the type of programme (see figure 614).
This enhanced capacity is allowing SkyDigital to broadcast 140 channels, offer pay-per-view, video-on-demand services, with a superior quality of audio and video. The Ka-band will make possible to broadcast up to 500 channels in the future.
13 14
SkyDigital web site @ http://www.sky.co.uk Beardsley, Scott, Miles, Alan and Rose, John S., A Bouquet of choices, The McKinsey Quarterly (No 1, 1997), pg. 66 Murilo R. Cerdeira - MBA March-99 23
Figure 6 - Effects of digital compressionon satellite Broadcasting
160 140
Number of channels
120 100 80 60 40 20 0 5 10 15 20 Number of transponders
Analogic
4:1 (Sports)
6:1 (most non-sports video)
8:1 (slow action video)
Source: The McKinsey Quarterly
3.2.2.2 Digital terrestrial television - DTT
The digital terrestrial television (DTT) broadcasting in the United Kingdom started on 15 of November 1998, and it is the world's first digital terrestrial television15. The licence was awarded to British Digital Broadcasting (BDB), which was rebranded to ONdigital, allows utilising the multiplexes B, C, D, and a share of multiplex A. The ONdigital system is a subscription television. It carries the current free-to-air terrestrial channels and a number of proprietary channels. The digital terrestrial television broadcasting is divided in six multiplexes, and each multiplex has 24 Mbit/s in a bandwidth of 8 MHz. The list of multiplex service providers is shown on figure 716.
15
ONdigital Web site @ http://www.ondigital.co.uk 24
Figure 7: List of multiplex service providers Multiplex 1 2 Service Provider BBC will simulcast existing programmes and provide new services ITV/Channel 4/Teletext will simulcast existing programmes and provide new programmes A B, C & D Channel 5/4C in Wales and SDN subscription services Ondigital will provide 16 new channels of subscription and pay TV programmes
Source: Institute of Electrical Engineers
Customers will be able to receive the digital channels by the existing aerial, and a set-top box with a smart card17 offered by ONdigital, or an integrated TV set which has a built-in decoder to unscramble the signal. ONdigital will offer 30 channels at launch, but with the improvement of compression technology will allow the system to carry up to 90 channels.
3.2.2.2.1 Free-to-air digital television
The current terrestrial broadcasters, BBC 1, BBC 2, ITV, Channel 4, Channel 5, and Teletext will transmit their new digital broadcast alongside the existing analogue transmission. They were awarded the licence to broadcast the new digital signals using the multiplex 1, 2, and A as listed in figure 7. In order to receive the free-to-air channels, consumers will have to buy a new integrated TV set that has a built-in digital decoder, or to buy a set-top-box especially designed to receive the free-to-air digital signals.
16 17
Peltor, Hugh, Digital television broadcasting, IEE Review (June 1998), pg. 166 Digital TV Group Web site @ http://www.dtg.org.uk 25
3.2.2.4 Digital cable broadcasting (DTC)
Cable & Wireless have been leading the digital cable broadcasting (DTC) in the UK18, but there are other companies such as Telewest, and NTL, which are developing their own digital cable system. The cable platform will offer similar services to the satellite platform, including 200 plus channels, video-on-demand, pay-per-view, Internet, and a full range of interactive services. The platform offers a permanently connected broadband path into and out of customer's homes, due to the capacity of the broadband cable network (fibre optics cables), which allows the customers to use the same existing telephone line provided by the cable operators. The system operates by transforming the digital signals into light waves, which are transmitted by fibre optic cables and received and decoded in the customer's house into digital signals again. The return path follows the same process. This process speeds up the transmission of the digital signal, allowing a great opportunity of offering interactive services (see item 3.5). In order to receive the digital signal and to use the interactive services, the local cable networks will provide the set-top boxes and free upgrade for existing cable subscribers. The electronic programming guide (EPG) will allow customers to browse and flip through information, access the web and access interactive services.
3.3 The Decoder or Set-Top box
The set-top box is a receiver that decodes the digital signal and it will provide the interface between domestic television sets and media methods. It enables customers to receive digital using the existing television. The telephone line has to be connected on the set-top box to build the return path required to enable the interactive services. The set-top boxes among the three
18
Cable & Wireless Web site @ http://www.cwcom.co.uk 26
different digital networks are not compatible, having different hardware and software technology.
3.4 Widescreen Television or High Definition Television (HDTV)
Digital technology will enable the transmission of widescreen format. The widescreen generally provides five channels of CD-quality digital surround and about five times more picture information than conventional television19. Traditionally the television set has a ratio of width to height of 4:3, whereas on widescreen is 16:9, which will bring the television closer to the experience of cinema. The downside of transmitting in widescreen format is that more channel spaces are required to broadcast only one programme or movie.
3.5 Interactive Television
Interactive television is a medium that allows information to be transmitted in both directions "two-way communication20." It will enable consumers to browse through virtual stores and shops from their homes, to receive customised information about products and services, to learn with full video, playing games, buying a product online and receiving it at home, and so on. Hence, many people have regarded interactive TV as the "Holy Grail" of the new media, because they believe that it will be the cash generator of the television and entertainment industry for the next century. However, there are some constraints in delivering interactive television, and a true interactive television can be only be achieved through broadband or fibre-optic cable. British Telecom, Alcatel, and Fujitsu have been developing a new system
19
Nickell, Joe, DTV: Not Ready for Prime Time, Wired News (7 September 1998), http://www.wirednews.com 20 Court, Randolph, TV ads tailored to you, Wired News (10 February 1998), @ http://www.wired.com Murilo R. Cerdeira - MBA March-99 27
called Asymmetric Digital Subscriber Line (ADSL) that may enable the existing BT network to use the interactive services. This system runs over the existing BT telephone lines at speeds up to 50 times faster than is currently possible using conventional modems. The interactive television provided by Open TV/BIB (British Interactive Broadcasting) in the UK through Sky Digital platform will "offer services as follow:21
Shopping Banking Holidays and travel Games, gambling Learning online Entertainment & leisure
Internet and e-mail facilities Public Services Interactive advertising Interactive sponsorship Information services Interactive text
The interactive television and advertising is further discussed in chapters 5, 6, and 8.
3.6 SWOT Analysis
The SWOT analysis framework is applied to analyse the strategy and the competitive position of digital television. The analyses are listed in order of importance.
21
Townsend, Chris, British Interactive Broadcasting, What's on Channel 400? Haymarket Conference Paper (London, 1997) Murilo R. Cerdeira - MBA March-99 28
Strengths
Digitalisation can improve pay television's economics by reducing transmission costs and creating more customer value through better image quality, sound, increase in pay-perview services and video-on-demand
Broadcaster will be able to use frequency space more efficiently due to the digital broadcasting systems
Digital television signals will provide better visual and audio reception by compressing the signals. It will be useful for widescreen/HDTV. Moreover, it will enable interactive services, allowing viewers to request background information on a programme, advertisement, etc. Furthermore, it will enable home shopping, banking, video on demand, pay-per-view, education and access to the Internet and e-mail
Similar to the Internet, digital TV and interactive TV may deliver better customer service, and may lower the prices of products and services offered through digital TV
Like the analogue multi-channel television, multi-channel digital TV offers an advantage22 for broadcasters of not depending entirely on advertising revenue for their income, but on electronic transactions made by TV, pay-per-view, and video-on-demand revenue
There is an economic benefit for broadcasters to use pay-per-view TV in the digital subscribed environment because the full cost of screening a particular movie, a particular sporting event, etc., can be recouped directly from the viewers, without alienating those subscribers uninterested in the particular broadcast.
22
Bughin, J. and Griekspoor, W, A new era for European TV, The McKinsey Quarterly (No 3 - 1997), pg. 95 29
Weaknesses
A major problem for multi-channel digital TV is that the digital platforms in the UK are paid, and to get viewers to pay to watch television involves a serious step change for consumers
Digital TV is more likely to be a technology-driven rather than benefit-driven phenomenon. In many research studies presented in this report and in the two focus groups carried out by myself, it shows that the British consumer does not see real benefits in digital television
Consumers are confused because confusing messages from various sources have been bombarded on them. They need to be convinced which platform is the right one for their requirements
The slow rate of interactive data transmissions, the doubt about the system's security and private issues may discourage customers to embrace interactive television
The current system of audience measurement, BARB, is not suitable to monitor the multichannel digital TV
Opportunities
Multi-channel digital TV will provide a platform for better targeting through an increasing number of niche channels, for different hobbies, lifestyles and interests
Interactivity and online services will bring the opportunity to advertisers and broadcasters to keep more in touch with their audiences, and establish a better understanding of the viewers' tastes and preferences, and ultimately build a direct relationship with customers.
30
Moreover, advertisers and agencies will have the chance to monitor an advertising campaign while it is running and make the required changes The interactive services will offer services such as home shopping, consumers will be able to conduct banking transactions through their TV set, request movies to watch whenever they want, use the Internet and e-mail facilities, videophone, and watch educational programmes In the medium term the audience segmentation and advertising effectiveness will become easier to track and measure in terms of direct response, click through, etc The interactivity and the Internet access provided by digital TV will mean that consumers/viewers do not have to be IT-literate to access information or buy products and services electronically Brand owners will be able to use the media in conjunction with interactivity in a more interesting way than just simple spot advertising. They will be able to include competition, games embedded in the advertising, etc. use programme sponsorship, advertorials, programme co-funded, infomercials, etc The medium will provide organisations which are used to doing business by home shopping an opportunity to widen their customer base to people who typically will not buy off the page, and also to widen the selection of goods that they can sell
Threats
The multi-channel digital television environment will lead to a greater fragmentation of the medium, and mass coverage opportunities will be very difficult to reach. Moreover, there is a potential threat of inability of digital TV to invest in programming which may limit its audience share
31
With hundreds of channels, there is a danger of viewers zapping all the time, and building mass audience coverage might be very difficult task. Effective media planning may become very difficult
Digital TV may have problems reaching critical mass due to the costs of the equipment required to receive digital signals
Digital TV will compete with other media such as the Internet, digital radio, newspapers, magazines, etc. Television has already lost 15% of audience share to Internet users23. In addition, viewing may also decline due to the competition from other activities and because the "leisure society" is as elusive as ever.
The downturn in the UK and the world economy could lead to the reduction of consumers disposable income, which could affect the pace of adoption of digital television
3.7 PEST Analysis
The PEST framework is applied to assess the macroenvironmental forces that may affect the strategy and competitive position of digital television. The analyses in listed in order of importance.
Political
The promotion of digital broadcasting in the UK has been driven by the increasing demand for frequencies for new wireless uses, especially in the field of personal communication, which are potentially lucrative for the UK government
23
Miller, Greg, Internet's Impact on TV Viewership Slight, Study Finds, Los Angeles Times (12 November 1998), @ http://www.latimes.com Murilo R. Cerdeira - MBA March-99 32
In order to overcome the most serious challenge facing digital broadcasters, which is to persuade British consumers to buy the equipment required to receive digital broadcasts in their analogue TV sets, the British government has set a date for the ending of analogue broadcasting, probably between ten and fifteen years24 time
The political debate on broadcasting systems and standards between the European Union members will have an impact of purchasing decisions of consumers
Economical
In the future consumers may be willing to pay a premium for any time-saving products or services, due to time pressures increasing in line with working hours
The downturn in the UK and world economy may lead to the reduction of consumers disposable income which in terms could affect the take up of the digital television technology
Critical mass may be difficult to be reached due to the price of the required equipment to receive digital broadcasts
Social/Cultural
Consumers will take more responsibility for their viewing decisions and media consumption patterns will vary more greatly by individual. These will be leveraged by the growth of flexible working patterns and changes in employment patterns as time use becomes more fractured
24
Kinnes, Sally, Box of tricks, The Guardian (21 May 1998), pg. 14 33
In the future it is expected that people's free time will be more focused on in-home activities25 (Source : Mintel), and digital TV and interactive television may play a major role here
Pressures caused by life and increased choice will require consumers to be more selective. They will only have time to watch and do things that are really necessary, which may affect broadcasters
Digital television in conjunction with interactivity may change the way which people watch television, and the way of doing shopping
As the media saturation and accessibility is increasing sharply, the amount of individual media usage is increasing as opposed to social media usage. This trend may increase even further with homes becoming saturated with media appliances
Technological Factors
The Internet is teaching people to be more media active, and they are learning the value of seeking for more information, which will help the take up of digital television and interactive television
As the technological development is leading to a blurring of the old boundaries, television will become more than just a means of receiving broadcast programming
Digital technology is enabling digital television and interactive services because digital compression offers infinite storage and processing capabilities
The limitation of the speed of data transmissions, and the security problems on the Internet may discourage customers to embrace the new technology
25
UK Leisure & Recreation, Key Note Report (Key Note Ltd, 1997), pg. 2 & 5 34
3.8 Conclusion
The digitalisation is bringing the spectrum efficiency, which has been the prime incentive driving the broadcasting industry to extend their services into digital. In addition, the delivering platforms were also explained. In the UK there will be three digital television broadcasting platforms: terrestrial, cable, and satellite. Although there will be three subscription-fee platforms, there is an option of receiving current terrestrial television channels for free. Consumers will initially have to choose between three different and incompatible formats, and this scenario will be similar to the standards war between Betamax and VHS video formats.
Digital
television
will
deliver
interactive
services
which
will
enable
"two-way
communication." Interactive TV has been regarded as the "Holy Grail" of the new media, due to be the potential cash generator of the television and entertainment industry for the next century. However, there are some constraints in delivering full interactive television.
Two frameworks models were applied, the SWOT and PEST analyses. The aim was to assess the competitive position of digital television, and to determine the macroenvironmental forces that are affecting and may affect the new medium. The new medium has strengths and some weaknesses, but it offers great opportunities and challenges. However, the pace of adoption and the success of this new media will be dictated by the consumers, and how appealing the new medium and its services are. Therefore, it is necessary to appraise the British consumers to find out if they are willing to embrace it or not, to determine what benefits digital TV is bringing to motivate them to take it, who is likely to be the early adopters, and to forecast the digital television growth. These will be discussed in the following chapter.
Chapter 4 - Consumers and Digital Television
4. The Consumers and Digital Television
4.1 Introduction
Digital television and interactive TV is promising to offer to consumers an entire range of new services bringing additional choice, increased personal control and freedom over the content and timing of information and entertainment. However, the success of this new technology will depend on consumer acceptance. It is not the technology26 but consumer demand and interest that will drive the future and the success. There have been many cases in the past of new products that would show to offer benefits based on technological advances, but they failed because consumers had rejected them. Some examples of this are "in the UK in the late 1980's the failure of BSB (British Satellite Broadcast) that offered better picture quality, but the British consumer did not want27", and the failure of the Betamax video recorder. Therefore, it is important to analyse if those claimed benefits of digital TV are seen by consumers as real benefits or just simple new technological features; if the interactive television and its service are real benefits for consumers; if better picture and sound are seen as real benefits; and if the availability of hundreds of channels are recognised as benefits.
4.2 Consumers and Interactive Television
As stressed before in chapter 3 - item 3.5, many people have regarded interactive television as the "Holy Grail." As a result, broadcasters are assuming that consumers are willing to take up
26
Forrester Research Expects Choice and Content to Drive Broad Adoption of Digital TV in Europe, Forrester Research. (28 October 1998) @ http://www.forrester.com 27 Interview with Mr Andrew Walmsley, BBH's Head of Digital Media
36
the digital technology and interact with a television set. The main questions are A) Does consumer perceive interactive TV as a benefit? B) Are they willing to interact with the TV set and use its services offered? Are they prone to pay for using this service?
According to the study of Barbara Lee and Robert S. Lee, it suggests that "interactivity could fit into but not displace the functions that television serves best28." The study was carried out in the USA with 18 focus groups and these groups served as a basis for a national probability sample survey of 1,872 viewers. The research showed that there is only one possible way of watching TV, and people have different intensity levels of viewing which vary with the content of what they are watching, what else they are doing, their motivation, etc. The important findings that the study showed are as follows:
Television is largely used for relaxation and mood improvement, which would not match with activities that require effort, intentness, alertness as it would be for the users of interactive television. People are used to watch TV in a passive manner
People enjoy low-involvement as well as high-involvement viewing and many have a need for low engagement uses of TV. This is a threat to interactive TV
Existing ways of viewing can be an obstacle to viewers exploring new sorts of programmes, including interactive programmes
People enjoy talking about shared TV experiences, which is not easily delivered by highly interactive individualised programming
Television also works like a storytelling medium and interaction may have little to offer in this area
28
Lee, B., and Lee, R. S., How and why people watch TV: implications for the future of Interactive Television, Journal of Advertising Research (November/December 1995), pg. 9 Murilo R. Cerdeira - MBA March-99 37
These results suggest that people enjoy and are used to passive viewing, and it is likely that they did not value active viewing (through interactivity) as a need or want. Thus, they may not see interactive TV as a benefit, but as an extra feature.
From the findings of my primary research (see chapter 9-item 9.2), the results suggest that in general both the female and male respondents do not see real benefits of having interactive TV. The majority of female respondents were not aware of interactive TV. However, when explained what it was and what sort of services it would offer, the majority of them found it interesting and probably would use the banking facilities (but there was some concern about security), play games online, use near video-on-demand, and some pay-per-view services. On the other hand, they would not use home shopping because of the fear of losing the social side of shopping and the apprehension of being influenced by the TV and overbuying by impulse.
In contrast the male group were aware of the subject but the majority did not see any benefit or were willing to use the services via TV. They would not use banking or shopping, but they probably would use the pay-per-view facilities and play games online. It is important to analyse carefully their answers and take into account that when I explained to the respondents what interactive was, they may not have answered truly. However, those respondents who have children felt that their kids would pressure them to sign onto the new service. Moreover, both groups reached a consensus that they would not pay extra to receive digital broadcasts and the interactive television. These results can be arguable because of the small sample size and their characteristics may not represent the whole British population. Nevertheless, these results indicate that more surveys are necessary.
38
4.2.1 The Interactive Television Trials
There have been many interactive trials around the world that showed success and failure. The trial in Orlando, Florida carried out for two years by Time Warner in 1994 with 4,000 households was a failure29. The trial provided conventional TV broadcast, home shopping, banking, near-video-on-demand, and games on demand. Although the majority of subscribers were not interested in using interactive features, the facility that was most used was the games online by teenagers. The results give us more evidence of whom will be likely to be the early adopters (see chapter 4-item 4.7).
Another trial was conducted in the UK by British Telecom (BT)30 in Colchester and Ipswich with 2,500 households, which offered near-video-on-demand, home shopping, banking, games on demand, and a special area for advertising called "AdLand channel." The total results were not published but according to BT it was a successful trial. However, some people who participated in the trial suggested that it was not so successful as it has been said. The apparent result is that there was a demand for games online, time shifting programmes and near video on demand. This suggests again that the young males are the ones that mostly used the interactivity, and they are likely to be the early adopters (see item 4.7). We can conclude that interactive services have an appeal to consumers, but if they have never used this sort of technology, they do not see any benefit on it. This is the case of most of people in Britain.
29
Higham, Nick, Public's appetite for digital TV gives taste of interactive future, Marketing Week (21 February 1997), pg. 21 30 BT successfully completes Interactive Television Trial, BT News Room (16 July 1996), @ http://www.bt.com/newsroom Murilo R. Cerdeira - MBA March-99 39
4.3 Do Consumers want more channels?
With hundreds of channels that digital television is bringing, the key questions are: Do consumers want more channels? Do they perceive more channels as a benefit? What type of programme will broadcasters use to fill such huge space? The study carried out by the University of Leeds in partnership with The Independent Television and Ogilvy & Mather, called futura.com found out that "amongst existing multi-channel homes surveyed the majority claimed to watch fewer than seven channels (figure 8), and this is amongst those people who already have additional choice31". In the study of Barbara Lee and Robert S. Lee, they suggested that viewers already have their channels and programmes repertoire, and even increasing the diversity of channels did not change this pattern.
Figure 8. Viewing in multi-channel homes 41% view seven or fewer channels 35% view between eight and twelve channels 24% view between thirteen or more channels
Source: futura.com 1996
Another research32 (see chapter 9-item 9.3) that was carried out in the USA in 1996 showed when there is an increase in the number of channels, proportionally the viewing declines. Moreover, more channels may result in more poor programmes. People, especially the British people, do not like low quality TV programmes. Broadcasters in the multi-channel digital TV
31
Byfield, Sheila. A digital future? The consumer decides, Marketing Research Society, Conference Papers.- 40th Annual Conference, (London 1997), pg. 164 32 Interview with Mr David Cuff, Initiative Media's Broadcast Director Murilo R. Cerdeira - MBA March-99 40
will need several programmes, and probably most of them will be produced with low budgets, and consequently most of them with have low quality.
In my primary research (see chapter 9-item 9.2), the female focus group showed concern about the issue of hundreds of channels and quality programmes. For the female respondents more channels meant less quality programmes. They described the current terrestrial television with the exception of Channel 5, as quality television. Despite a few channels, they considered satellite and cable as non-quality television. On the other hand, the male focus group did not show major concerns about quality programmes. In both focus groups, more channels were not seen as a real benefit.
Furthermore, the penetration of satellite and cable television has reached only 25% of the UK households after ten years. Therefore, there is strong evidence that consumers are not really interested in having more channels or to pay for them. Although consumers tend to watch just a few channels, they are switching channels more than they used to.
4.4 Do Consumers want better picture and sound?
As it has been stressed before, a good example of new technology offering better picture quality happened in the UK on the late 1980's. BSB (British Satellite Broadcast) offered satellite channels with better picture quality and failed, because most British consumers did not want or need better pictures. Another example is colour television that offered true benefits, and it "took five years to penetrate 11% and 29 years to fully penetrate in the UK
41
households33." Moreover, the results from my research (see chapter 9-item 9.2) also suggest that most consumers do not really care about the quality of picture and sound.
Some of the respondents answered that they heard or saw advertisements communicating that digital television will bring better picture and sound, but they were not convinced or interested in that. Therefore, all these factors suggest that the general British consumers perceive better picture quality and sound more likely as features rather than real benefits.
4.5 What Benefits consumers see in having Digital Television?
It has been explored and analysed in this chapter if the benefits claimed by television broadcasters are seen by consumers as real benefits or not The results suggest that they are not perceived as real benefits, or are appealing enough to persuade consumers to embrace digital television.
However, in my research, I found out that consumers recognised "choice" as a possible benefit. This may encourage them to take up the new technology. When I asked the respondents in both groups to explain what they defined as "having more choice," they got confused, but they defined it as an option of doing things whenever they want, and watching what they want. It seems that "choice" is a matter that British consumers value most nowadays.
33
Interview with Mr David Cuff, Initiative Media's Broadcast Director 42
4.6 What Dangers do consumers perceive in having Digital TV?
As stated before, the female respondents showed concern about the number of channels resulting in poor quality television and programmes. Besides, the majority of respondents in both focus groups were not willing to pay for extra equipment, nor subscription fees. In sum, the majority of the respondents' opinion about digital television is that it will probably bring high costs and poor quality programmes.
4.7 Who are likely to sign in to Digital Television?
The early adopters seem to be the typical multi-channel viewers and Internet users, who are typically young males, aged 15 to 34. They have grown up with technology34, and they are prone to experiment and embrace new technologies. In addition, many interactive trials (see item 4.2.1) showed that the young generation were most likely to use it than any other member of the household. Moreover, the current multi-channel subscribers are also the potential early adopters, because digital TV is an upgrade of the present system.
The current multi-channel households tend to be slightly younger than the population as whole, tend to be larger households with children, with a higher than average household income, and skewed towards C1, C2 socio-economic groups. However, as the television set life-cycle in the UK is around 7 years (source: Key Note), there is a huge opportunity for any consumer to change to digital television at some point in the future.
34
Carter, Meg, TV's interactive adventure, Broadcast (13 February 1998), pg. 17
43
4.8 Digital Television Growth
It is most likely that BSkyB and the cable operators will drive the digital growth in the UK, because they already have a volume of customers, and the operators will attempt to migrate their analogue subscriber bases to new digital services. There are many different forecasts 35 about the growth and uptake of digital television (see figure 9 and 10) and those supplied by the broadcasters seem to be heavily biased. It appears that there is an overestimation of "consumer's pull" in most of these forecasts. The likely scenario is that technology is "pushing" it into consumers' homes36 rather than consumers "pulling" it in. The result may be a disappointing slow up take of digital television than has been predicted.
Figure 9. Digital TV growth in the UK

% of TV households
3
2.5
Digital Satellite subscribers *
Millions of People
Digital Terrestrial subscribers *
1.5
Digital Cable subscribers *
Digital Satellite subscribers **
0.5
Digital Terrestrial subscribers ***
0 1998
1999
2000
2001
2002
Source: based on * Datamonitor, ** Morgan Stanley Dean Witter, and *** Merrill Lynch
35
Market Research Reporter, Interactive Services, Marketscape Ltd (London, No. 2, February 1998), pg. 28 & 29, and Taylor, Paul, Visions of a multimedia-rich millennium, Financial Times-IT Special (6 May 1998), pg. 5, and, Mediatel Web site @ http://www.mediatel.co.uk 36 Bentley, Stephanie, Why BDB is confident of digital TV success, Marketing Week (19 March 1998), pg. 22
44
However, what seems to be missing in many forecast studies, is the consumer option to buy a new digital TV set and to receive the free-to-air channels and not sign up to any pay television. As stated before, according to Key Note report, the television set life-cycle in the UK is around 7 years, so at some point in the future, consumers will change their TV set, and they may change to a free-to-air digital television.
Figure 10: Digital TV in Europe

12 10
Millions of People
8 6 4 2 0 2000 2002 2005 Source: Booz-Allen and Hamilton analysis, Kagan, Screen Digest
Current growth rate scenario
Market stimulation scenario
4.9 Will Digital Television Take Up Quickly?
Analysing the early years of introduction of audio and visual products in the UK can help us to determine how likely will be the future penetration of multi-channel digital television. Analysing the penetration levels in the early years of colour TV, video cassettes (VCRs), two channel television
37
(BBC and ITV), personal computers (PCs), satellite and cable TV38, and
the Internet, it is possible to conclude that multi-channel television (satellite and cable TV) has been the slowest to penetrate in the UK market (see figure 11).
37 38
Commercial TV, Key Note Report (Key Note Ltd, 1997), pg. 7 Cable & Satellite TV, Key Note Report (Key Note Ltd, 1996), pg. 7, 16 & 17 45
Figure 11. Technology uptake: The early years
100 80 60 40 20 0 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
BBC/ITV - 2 Channel TV 1955 1973 VCR 1980 - 1989 Colour TV 1969 - 1977 PC 1984 - 1993 Satellite & Cable
Source: Byfield, Sheila
Moreover, "looking in the UK after 5 years from the introduction of each new product would be 23% of homes had VCR, 12% Teletext, 11% Colour TV, and only 9% had satellite or cable TV39" which confirms that multi-channel TV was the slowest. The slow penetration of PC is due to "much concentration on the technology itself and not enough focus on the benefits offered to the user40." On the case of slow penetration of satellite and cable TV, is that the focus was on the provision of sport channels and movies. Sport channels could not be obtained elsewhere, which was an original benefit, but movies could be easily accessed elsewhere through cinema, video rental, or terrestrial television. Therefore, these data suggest that demand for more entertainment is not very high. Furthermore, "digital television is another form of multi-channel television and it is almost at saturation point. It needs digital television to become more attractive and to keep it on the same penetration curve41."
39 40
Interview with Mr David Cuff, Initiative Media's Broadcast Director Byfield, Sheila, A digital future? The consumer decides, Market Research Society. Conference Papers (1997), pg. 163 41 Interview with Mr David Cuff, Initiative Media's Broadcast Director Murilo R. Cerdeira - MBA March-99 46
Another interesting point that may delay multi-channel digital television growth is that "women are the "handbrakes" on subscription TV, because they want their families to watch less television42."
Despite all factors described above, digital television will be an inevitable success in the longterm. As it has been analysed and determined in the SWOT and PEST analysis in chapter 3, items 3.6 and 3.7, first of all, the British Government has an interest in selling the analogue frequency and it will switch off the television analogue broadcasting some time in the future. Second, digital is an extraordinary format and brings extraordinary opportunities for broadcasters, advertisers, agencies, and consumers. However, in order to attract consumers, broadcasters will have to make clear what benefits digital television will bring to them. The benefits offered by digital TV, as it has been analysed in this chapter, of better picture and sound, more channels and choice are not really seen as real benefits by the consumers, but technological features to the TV set. At the end of the day, consumers decide what they want.
4.10 Conclusion
As I found in my research and others studies, it seems that there is a general confusion amongst consumers about what digital television is, what interactive service is, and what type of benefits this new technology will bring. The television has been associated with passive involvement for a long time and as I showed consumers are not regarding interactivity as a real benefit, but as features. However, it is important to point out that the interactive services such as near-video-on-demand, games online, home shopping, banking, and so on, can have an
42
Bell, Emily, BDB airs its digital TV ambitions, The Observer (10 May 1998), pg. 27 47
appeal over general consumers. Furthermore, better picture and sound was not seen as a real benefit, but again as features. Examples were cited of new products which failed because they were based on new technologies, in other words technology-driven phenomenon. An interesting finding - "choice" was regarded as a real benefit, and this should be further studied by a large research. Moreover, my research suggests that consumers have concern about high costs, and that the wider number of television channels could bring poor quality programmes. Consumers are not expected to take up digital television as fast as it was forecast.
The early adopters seem to be the typical multi-channel viewers and Internet users, who are typically the young males. Many interactive trials and my research suggested that. The current multi-channel subscribers are also the potential early adopters, because digital TV is an upgrade of the present system. Analysing the early years of audio and visual introduction in the UK, multi-channel TV was the slowest to penetrate, which suggests that multi-channel digital TV growth may follow the same pattern. The technology is "pushing" digital TV into consumers' home rather than consumers "pulling" it in. Thus, digital television is a "technology-driven phenomenon." Changing consumers' attitudes and encouraging them to embrace this new technology will take a while. At the end of the day, consumers decide what is better to them.
Nevertheless, the success of digital TV will be inevitable (see chapter 3), and it will have a major impact on the marketing communication industry, which will be discussed in the next chapter.
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Chapter 5 - The Impact of Digital Television on the Marketing Communication Industry
5. The Impact of Digital Television on the Marketing Communication Industry
5.1 Introduction
In the past, the economics of mass production and mass consumption required a creation of demand for standardised products through the tools of mass marketing, branding, and advertising in mass media. These factors created the traditional marketing paradigm. Since then, "companies have perfected the art of mass marketing, selling highly standardised products to masses of customers, and they have developed effective mass media advertising techniques to support their mass marketing strategies43." However, marketing
communications are facing new realities. Mass markets have fragmented which is leading the industry into trying to build a closer relationship with customers. This is happening because digitalisation (see chapter 3), and IT industry have developed new systems and that is allowing the industry to segment the market and enables better targeting and delivering of the message. Thus, the traditional marketing paradigm is under attack from a different model - the "interactive paradigm44."
Marketing communications is a systematic relationship between a business and its markets in which the marketer assembles a wide variety of ideas, designs, messages, media, shapes, forms and colours, both to communicate ideas to, and to stimulate a particular perception of products and services by, individual people who have been aggregated into a target market45.
43 44
Kotler, P. and Armstrong, G. Principles of Marketing. Seventh Edition. Prentice Hall Inc. (USA, 1996) pg.475 Beech, Peter, The Impact of Interactivity on Consumer Marketing, Imperial College-The management School (1995), pg. 4 45 Smith, P., Berry, C., Pulford, A. Strategic Marketing Communications, (Kogan Page Ltd, London, 1997), pg.49 Murilo R. Cerdeira - MBA March-99 49
The main elements of the marketing communication mix are advertising, sales promotion, direct marketing, public relations, sponsorship, personal selling, merchandising and exhibitions. The secondary elements are corporate identity, packaging, and word of mouth.
As stated before, the marketing communication has experienced a relatively stable media landscape in the UK until the 1980's, when press, posters and particularly television were regarded as mass media vehicles (see chapter 8). However, the media landscape during the 1990s has changed very fast and beyond any recognition. The number of radio stations and magazines has increased, press readership has declined, and the introduction of cable and satellite TV and the introduction of Channel 5 have had an impact on television. "The ITV channel which was regarded as an instant mass marketing tool, which delivered 100% of all commercial viewing, has lost much of its power. In 1997, ITV delivered 54% of all commercial viewing46." With a high fragmented media, consumers have more choice, and almost any media becomes accessible due to saturation of media appliances at consumers' homes. Furthermore, consumers have also been changing, in terms of their habits, attitudes, demographics, lifestyles, incomes, spending patterns, and media usage patterns.
The introduction of multi-channel digital television will further increase the trends explained previously, and there will be a great multiplicity of choices for consumers. Moreover, consumers have become more selective and demanding, and they want products and services tailored to them, attending to their specific needs and wants. As a result, they also are requiring messages tailored to them. These trends will further increase according to Mintel's report (2010: marketing to tomorrow's Consumers)47. Further explanation and examples of
46 47
Abrahams, B. The only certainty is uncertainty. Marketing (23 April 1998) pg. 22 Bainbridge, Jane, 2010 Vision, Marketing (4 June 1998), pg. 18
50
these trends are cited in chapter 8. Therefore, digital television and interactive television will have a big impact on the marketing communication industry.
5.2 Changing Marketing Communications
As greater media fragmentation increases, consumers will have more choice and the audience fragmentation will grow even further. In addition, the media accessibility will increase, as well as increasing the individual media usage. Digital TV and interactive TV will blur the old boundaries (see figures 1 to 4 in chapter 2) and it will affect the way that consumers relate with media and they will enable consumers to have increasing control over their media environment. All these factors are making consumer's media consumption patterns more complex, and it will become more complicated in the future. Moreover, the current audience segmentation will not be accurate as it will be necessary in the digital age, and the marketing communication industry will "need to think of the audiences not in aggregate, but as many groups or segments, characterised by combinations of their likes, dislikes, who they are, how they see themselves, what their interests areand so on"48. Thus, new sophisticated tools49 will have to be developed to track down and understand the audiences. The fully interactive television may be an ideal platform to do it. The current television audience measurement BARB - is not flexible enough and suitable for measurement of multi-channel digital television, as it is explained in chapter 8; there will be a necessity for new audience measurement tools.
48 49
Foster, Robin, Understanding Digital TV, What's on Channel 400? Haymarket Conference Papers (1997) Online Advertising Strategies, NUA Internet Surveys (27 August 1998), @ http://www.nua.ie 51
The multi-channel digital television will carry several small and niche channels, which will be a better platform to target consumers more accurately. However, targeting a mass audience through television like it was done in the past, has become difficult, and in the future it will become even more arduous or even impossible. Therefore, the marketers will face difficult tasks in the digital TV future, such as How to design a marketing communication plan to mass consumption products? How to build a brand in such fragmented media? What marketing communication tools are available and Which should be used? What media vehicle should be used for each campaign? Moreover, it will become an even more difficult job, because zapping may increase in digital television and there is a threat of viewers switching to subscription channels without advertisements, or taking away any form of advertising in their viewing pattern.
Digital television will rewrite the rules of marketing and marketing communications. The impact is expected to even affect all disciplines of the marketing mix, the 7Ps - Product, Price, Promotion, Place, People, Physical evidence, and Process Management. The traditional marketing communications will not fit into the new realities, and a new paradigm will be needed - the "interactive paradigm." As the digital television and interactive television will provide a platform for the "two-way communication", customers will become partners in the communication process, which will be personalised and instantaneous. Companies will be able to build and to foster a direct relationship50 with individualised customers. The concept of "mass" as homogeneous and undifferentiated, or even as a member of a particular segment of society will disappear, as each participant will become an identifiable individual with distinct likes, wants and needs. The consumer will be empowered to participate in the creation, choice, and scheduling of the media consumed. Tailored products and messages to different
52
individuals will become a reality, and the traditional mass marketing paradigm will probably die.
Therefore, the marketing communication industry will need to understand the new media landscape, to learn the new medium - digital TV. The industry will have to develop new strategies, increase innovation51 and creation, and develop their management skills to meet the new dynamics that they will face in the near future. Advertisers and agencies will need to be able to anticipate and respond to any change that may occur in the media, with consumers, as well as the market in order to survive and retain competitive advantage. In order to do that, they will have to experiment in the new medium and learn it; they will need to listen closer the customers' demands and anticipate any changes that they require and take into account in every marketing plan the change in customers' habits, attitudes, their consumption and spending patterns.
5.3 The Marketing Communication tools for Digital Television
In the multi-channel digital television environment, as it has been for the non-terrestrial broadcasters, the advertising revenues may contribute for a small amount to the operational costs, whereas the major source of profit for the broadcasters may be the subscription fees and pay-per-view services. This is due to the fact that the level of viewing in the majority of channels is insufficient to attract large audience. Furthermore, each transaction made in the platform through interactive services may generate a commission on sales to broadcasters. These factors may impose a threat in the future for traditional spot advertising. Although in the
50
Owen, John, A new marketing soap opera gears up for a net result, Revolution (October 1998), pg. 7
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short-term there will not be a great change from today's communication tools, it is expected that the use of broadcast sponsorship will increase as well as the use of infomercials. The marketing communication tools that will be available in digital television is listed as follows:
Advertisers programming Advertiser-supplied programme Advertised-funded programmes or co-funded programmes Advertorial Banners or icons Broadcast Sponsorship Classified advertising Direct response television (DRTV) Infomercials Interactive advertising (explained in chapter 6) Product placement Spot advertising Virtual advertising
All these communication tools may carry or not interactive features, links, and services. These will depend on the objective and strategy of the marketing campaign, as well as the target audience that it is aimed for.
51
Shannon, John, Innovation aids fight for survival, Marketing Week (22 October 1998), pg. 24 Murilo R. Cerdeira - MBA March-99 54
5.3.1 Advertiser Programming
Digital TV will offers advertisers the chance to broadcast their own programming, with their own schedule, including interactive services. Broadcasters will have a number of channels without use, and these spare capacities can be rented to advertisers. It may be a good opportunity for advertisers because it is very likely that airtime costs on these channels will be cheap, and ultimately advertisers will have the chance to own their own channel52. Advertisers will be able to broadcast their own programmes with links to interactive areas where customers will be able to see more information, request brochures, or even book meetings with a representative or salesman from the company. In addition, they will be able to run promotions online, and offer vouchers and coupons. Also, it will be possible for the "advertisers-broadcasters" to sell their commercial breaks to other advertisers, as well as selling interactive links in their own programmes or shows. For instance, Ford may broadcast its own channel, and in one programme which demonstrates one type of car it is possible to sell commercial breaks or interactive links including promotions, for car insurance companies, to a tyre manufacturer, to an auto-radio manufacture and so on. They can also have commissions over each transaction that is made through their channel.
The key advantages can be summarised as: first, advertisers can build and attract key audiences which they can even explore by selling airtime, interactive links and areas, to other advertisers. Second, they may compete with other TV channels, which may reduce the broadcasters prices and also detain inflationary forces in the media industry. Third, the investment can be met direct or even surpassed. In the UK there are a number of companies
52
Sheldon, Nigel, Digital TV dawn explodes into life, Admap publications (November 1998), pg. 19 55
that showed interest in running their own channels, such as the Virgin Group, and Asda supermarkets.
5.3.2 Advertiser-supplied Programming
As stressed before, hundreds of channels means that broadcasters will need several programmes to fill in. Advertisers will have the opportunity of designing, funding, and producing programmes or shows to sell to broadcasters. Besides, the advertiser may include its own interactive links in those programmes or shows, and/or even negotiate to include other advertisers' icons to link to their interactive area. Thus, advertisers will be able to produce a programme or show, sell it to broadcasters or make other sort of contract with them, and also they may be able to generate extra revenue by including other advertisers' interactive links. In sum, advertiser supplied programming can build and attract key audiences, it may compete and can be an anti-inflation weapon, and most of all it can be a direct return on investment. An example of advertiser-supplied programme is the game show called Wheels of Fortune, which is funded by Unilever and owns the right to distribute and sell the programme's format around the world53.
5.3.3 Advertised-funded Programming or Co-funded Programming
Advertisers will have the opportunity to include their products or air their messages on the programme by paying all or part of the programme costs. This is due to the fact that broadcasters will very likely work on restricted budgets, and they will welcome advertised-
53
Marshall, C, Advertising, The Economist Books (Profile Books, London, 1998), pg. 25 56
funded programming54 as cheap programme-makers. As emphasised before, advertisers will have the chance to interfere in the design, and in the production of a programme or show. Furthermore, the advertiser may include its own interactive services, and/or arrange to include other advertisers' interactive links. The advantages are the opportunity to increase the brand awareness, to build or enhance the brand's image making it famous, and drive sales. Examples of advertised-funded programming in the UK are Pepsi, which funds the Pepsi Chart on channel 5, and Schweppes EuroBaSchhh55. However, in the UK there are some restrictions56 that prevent companies from explicit promoting of their product or service in a programme they have paid for.
5.3.4 Advertorial
Advertorial, a merger of editorial and advertising, is paid-for advertising in the same way as a magazine or newspaper editorial. This is a long established tool but in digital television there is an opportunity for it to be further improved. As there will be hundreds of channels on digital TV, consumers will be confused as to which channels they can trust, which channels they can purchase direct with security, and which information than can believe. Advertorial with endorsements form a reliable source, such as a personality, which reassures customers that the product or service that has been advertised is reliable, offers quality, and "value for money".
However, the success of an advertorial will rely on the quality of the information. Moreover, it can carry interactive links that have been explained in the advertising supplied programming and advertising-funded programming.
54 55
Carter, Meg, People who simply won't watch ads, The Times (8 May 1998), pg. 41 Wilkinson, Amanda, Digital opens door for advertiser TV, Marketing Week (2 April 1998), pg. 16 57
5.3.5 Banners and Icons
Like the Internet, banners and icons57 can be placed anywhere in advertising, in a programme, show, etc. It will work in the same way as it works at the Web, clicking through and transferred to a company's interactive area. In these areas consumers will be able to do the same things, which has been explained before.
5.3.6 Broadcast Sponsorship
This is a process whereby the advertiser pays to sponsor a TV or radio programme rather than buying commercial breaks in and around programmes. It comprises any type of sponsorship, such as programme sponsorship, channels sponsorship, movie sponsorship, etc. According to Martin Lowde, head of sponsorship at Laser, broadcast sponsorship may be vital to digital television funding, and it will facilitate the early growth of digital TV, much as it did in the US in the Fifties. Furthermore, broadcasters working on restricted budgets will welcome sponsors for programmes and even for the whole channels. Sponsorship is subtler than conventional advertising, achieving its influence on consumers by association with the values of the programme or slot that it is sponsoring. Moreover, it can be used to boost or change the image of the sponsor if it is seen to be backing a particularly worthy or useful programme.
A research carried out by Janine Gamon and Ivor Millman showed evidence which suggests that the benefits from sponsorship is more than delivering extra presence for a brand. The study suggested that:
56 57
Lutchford, Amanda, Can TV ads survive digital? Marketing (16 October 1997), pg. 12 Nunn, Sara, Will the flood of TV channels pull in the ads? Daily Telegraph (24 June 1998), pg. 12 58
It can raise TV presence for a brand Deliver extra presence for a brand Shape beliefs about brands Differs the extent to which it does these things
They concluded that the benefits in using sponsorship are suitable either for campaigns which use spot advertising and for campaigns which do not use spot advertising or any other forms of TV activity. The study analysed Britannia Music that sponsored The Brit Awards, The Brits Uncut programmes in 1996. Britannia did not use any other form of TV activity rather than sponsorship. The result indicated that sponsorship was capable of driving a brand's presence on TV with TV peaking of 31%, as showed in figure 12.
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Furthermore, the study assessed the awareness of the Cadbury sponsorship of Coronation Street, the biggest broadcast sponsorship in the UK, and showed huge gains as it kicked in, and it has delivered significant improvements in image of Cadbury in areas of perceived product quality and superiority58. The sponsorship was a part of a TV campaign, which involved activities immediately prior to the programme, during the bumpers either side of the break, at the close of the programme and during the commercial breaks. In figure 13 it shows that the TV advertising awareness rose in line with the campaign activity, including the sponsorship.
In sum, broadcast sponsorship can delivery extra presence for a brand on television, in a way that adds unique awareness on top of that achieved by spot advertising, and it has the potential to hold up total presence on TV. As explained before, broadcast sponsorship, including programmes and shows sponsorship, may carry interactive services and links.
58
Gamon, Janine, Millman, Ivor, Can broadcast sponsorship help to build brands, The Market Research SocietyConference Paper-40th Annual Conference (1997), pg. 63 Murilo R. Cerdeira - MBA March-99 60
5.3.7 Classified Advertising
Classified advertising on television in the UK has been explored by Teletext. Digital television and interactive television will provide a huge potential for classified advertising. Moreover, there are many viewers that are irritated by commercial messages59 "pushed" onto their television screens, and the interactivity will allow them to "pull" information if they are looking for a particular thing. It will be possible to call up the information by categories, and in many ways. Moreover, it will be able to include an infomercial or a short video clip of a product or service, attractive graphics, and customers will be able to purchase direct by television if they wish to do so.
5.3.8 Direct Response Television (DRTV)
Direct response television advertising's objective is to maximise the cost-effective response, in other words to maximise response and minimise the cost per response by keeping production and airtime costs low. In addition, DRTV allows the possibility of building a brand and generating response simultaneously60. It can be targeted at specific consumer groups in a way that most other types of advertising61 cannot and its effectiveness can be measured. Moreover, it gives the opportunity to companies in building closer relationships with prospects and existing customers and building a database for direct marketing purposes which can also generate competitive advantage to the advertiser. DRTV usually incorporates a response
59
Barwise, Patrick and Deighton, John, Digital Media: cutting through the hype, Financial Times- Mastering Market (19 November 1998), pg. 4 60 Monk, Catherine, Are you receiving me? Marketing Direct (June 1998), pg. 51 61 Direct Marketing, Key Note Report (Key Note Ltd, 1997), pg. 36 & 37 Murilo R. Cerdeira - MBA March-99 61
mechanism such as free telephone number, web site, or e-mail. However, with digital television and interactivity there is an opportunity to let viewers to order a product or service without having to leave their armchair to pick up a telephone62 or to use the computer; it will provide a "phoneless direct response TV".
Viewers will be able to use their TV's remote control to order to get extra information about the product or service. Advertisers will be able to have a dialogue and to further develop a closer relationship with each existing customer and prospect. In the long-term, advertisers will be able to use digital TV to deliver tailored messages, to attend different needs and send separate offers according to different levels of loyalty.
5.3.9 Infomercials
Infomercial is a lengthy television advertisement, which typically lasts for 30 minutes or less. The infomercials allow companies to "showcase their products in a way that it is not possible do with spot advertising or short-form DRTV63." In order to allow consumers to browse, and to get more information as appropriate to individual needs, and to buy the product, the infomercial will include interactive links. The opportunity is that within a programme, show, movie, or a TV advert there would be an interactive icon or a banner advertising, which once clicked, would transfer the viewer to an interactive area. In this interactive area, an infomercial would introduce, explain, and show the product or service offered, as well as a chance for the viewer to order and buy online.
62 63
Reed, David, Double Vision, Marketing (17 April 1997), pg. 59 & 62 Miller, Rachel, Digital TV in focus, Marketing Direct (February 1998), pg. 43 62
5.3.10 Product Placement
This sort of advertising goes in the body of a programme or show, and these may replicate real life, which means real brands must be consumed. The advantage is that it is possible to position specific products with ideal target characters showing the range as well as individual product benefits. As it is on advertorials, putting the product on with recognised TV characters gives the advertiser coverage and product endorsement. However, in the UK any form of payment for including products on TV programmes is against the law, but as it occurs in other European countries64, maybe in the future advertisers will be able to pay to use it. In multichannel digital TV broadcasters will increasingly look for alternatives of generating revenues, and product placement can be one of them. In the future, a product placement can even carry an interactive link, which could allow customers to gather more information and also purchase it direct.
5.3.11 Spot Advertising
The traditional spot advertising will be around for a long time, despite some experts that have claimed to the contrary. It will still necessitate intrusive messages and commercial breaks. Viewers are used to commercial (natural) breaks, usually they go to the toilet, make a cup of tea or watch the advertisements. Advertisers and advertising agencies have been using this marketing tool for a long time, and they have built their core skills around it, thus they will be resistant to changing this tool for others. However, new ways of using spot advertising in
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Robterson, Nick, A developing place for products on the screen, Marketing Week (29 October 1998), pg. 16 63
multi-channel digital television will be necessary. Spot advertising may become shorter in length and time, the main objective may be to get the viewers to pull out more information on the product or service that has been advertised, etc. However, the main difference is that spot advertising may carry interactive icons or banners, where customers can click through and be transferred to interactive areas. In these areas customers can play games, watch an infomercial, can seek out more information, request catalogues and brochures, print out vouchers or coupons, arrange meetings with a salesperson or a company's representative, or purchase the product or service direct through the TV.
5.3.12 Virtual Advertising
This is an advertisement superimposed digitally on virtual billboards or in places that have previously been unbranded, at televised events. Virtual advertising is seen only by the consumers watching television. An example happened in the Greek football cup final in April 1997 when branding for Tasty Chips appeared over the pitch's centre circle65. In addition, it can encourage small advertisers to buy advertising surrounding at national events on an affordable basis. This virtual advertising may function like a banner or an icon advertising on the Internet, because it may carry interactive links. Once the viewers click through them, they will be immediately transferred to a product or service's interactive area, where the viewer will be able to look for more information, to watch an infomercial, to purchase a product/service online, and so on. The advantage is that the virtual adverts will maximise the returns to the event's rights holder and allow advertisers to target their messages more effectively. The opportunities are unlimited, but inserting virtual advertising on perimeter boards or other
64
places, might be interesting to advertisers, broadcasters, and the event's organiser, but might not to consumers.
5.4 Conclusion
Digital television and interactive television will have a big impact on the marketing communication industry. The industry will face new realities, with increased mass market fragmentation, highly fragmented media landscape, increased audience fragmentation, more demanding and selective customers wanting products, services, and messages tailored to them, different viewing and complex media usage patterns, and so on. Thus, the current traditional marketing paradigm, where companies have perfected the art of mass marketing, selling highly standardised products to masses of customers, through effective mass media advertising techniques to support their mass marketing strategies, is under attack. Building closer relationships with individualised customers, new forms of segmentation of markets, and better targeting and delivering the message will be realities in the near future. Thus, a new paradigm model will be required - the "interactive paradigm."
In the "interactive paradigm" customers will become partners in the communication process, due to the "two-way communication," which will be personalised and instantaneous. Direct relationships with individualised customers, identifying each individual with distinct likes, wants and needs will be a reality, resulting in the disappearance of the concept of mass marketing. The industry will need to develop new strategies, increase innovation and creation, and develop their management skills to meet the new dynamics that they will face in the near future.
65
Shelton, E, Seeing is believing, Marketing (9 June 1997), pg. 29 65
The marketing communication industry may need to think of audiences as many groups or segments, characterised by combinations of their likes, dislikes, who they are, how they see themselves, etc. New measurement tools will be necessary to track down and understand the audiences. The marketing communication industry will face one of the major challenges posed by the digital age, which is to target and communicate a mass consumption product. In the short and medium term the marketing communication industry will have to use a combination of different communication tools (explained in this chapter) in conjunction with a tapestry of different small channels on digital TV, mainstream terrestrial channels, and particularly the popular programmes. Despite that, niche channels will be a better platform to target consumers more accurately. The threat of zapping and platforms without advertising is another problem to overcome. These points are further discussed in chapter 8.
Digital television and interactivity will provide a range of possibilities and opportunities for the communication industry, advertising and media agencies, tools that in the past television advertising has been unable to provide. These will include on-screen-sales promotion, PR, and direct purchase from television. Therefore, the advertising and media agencies will face many challenges, opportunities and threats, which will be explored in the following chapter and chapter 8 respectively. Consequently, the marketing communication industry will need to have knowledge of every area of the marketing communication mix, which leads towards the Integrate Marketing Communication (IMC) approach, examined in chapter 7.
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Chapter 6 - The Impact of Digital Television on the Advertising Industry
6. The Impact of Digital Television on the Advertising Industry
6.1 Introduction
As stressed before, the media landscape is experiencing dynamic changes and the pace of this change has been phenomenal. The introduction of multi-channel digital television to the advertising industry will raise many challenges, opportunities, and threats. In order to understand how to exploit these opportunities and challenges, advertisers and marketers must comprehend how it will impact upon the consumers. The traditional marketing paradigm is facing fierce challenges, and a new marketing paradigm is required. In this chapter these points will be analysed.
6.2 Advertising
The role of advertising whether it is on a national, local or direct basis is important in the promotional plans as it can inform, remind or persuade established or potential customers of the existence of a product or organisation66. The main function of advertising is to communicate with specific audiences, building awareness and meeting the communication objectives. In addition, advertising has an important role to play in the development of competitive advantage by becoming a mobility barrier, deterring other organisations in entering the market or even deterring the exit of the market. It can generate the means for differentiation and sustainable competitive advantage by providing the communication necessary for target audiences to frame a product.
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Fill, Chris, Marketing Communications: frameworks, theories, and applications, (Prentice Hall Europe, Hemel Hempstead, 1995), pg. 286 Murilo R. Cerdeira - MBA March-99 67
The design and assembly of advertising messages is extremely important because there is a greater opportunity of building a partnership between members of the target audience and the brand. Moreover, the effectiveness of advertising will depend on the style of the message which depends on considering the underlying emotions of the target audience and the motivations which drive attitude and purchase intentions during the process of design and assembly. The advertising can be delivered by four vehicle classes: electronic (digital and analogue television, radio, Internet, etc.), print (magazines and newspapers), out-of-home (cinema, outdoor, transport, in-store, etc.), and other media (direct marketing, etc.).
As it is explained in chapter 5 and 8, advertising was regarded as a mass marketing communication tool, which could reach mass audience almost instantly. Particularly, television provided a perfect platform and the great value of television to advertisers over the last 30 years in the UK has been the ability to reach mass markets67. However, the media landscape during the 1990s has changed due to further media and audiences' fragmentation, increased saturation, and accessibility, which has pressurised the traditional marketing paradigm.
Digital multi-channel television is bringing one of the most difficult challenges for advertisers and marketers, which is how to reach a mass audience in a highly fragmented medium. In the past, if a company in the UK wanted to create interest and awareness in a new product it would invest in a few advertising slots during the latest ITV crime drama, stick up some billboard posters in metropolitan areas and buy a few pages in a national press, and then it would sit back and wait for the phones to start ringing68. Digital television will offer a greater
67 68
Longhurst, Paul, What's on Channel 400? Haymarket Conference Paper (London, 1997) Abrahams, B, The only certainty is uncertainty, Marketing (23 April 1998), pg. 22 68
opportunity for advertisers to have dialogues with customers, to have "one-to-one communication," with viewers through interactivity. Therefore, the advertising industry will need to develop a new interactive paradigm to cope with the dynamics of this new medium. Transactional services can be linked with advertising and there is a real opportunity to build direct relationships with consumers. Moreover, advertising will become more measurable and accountable. However, in the digital television age the advertising strategy, tactics, control and measurement will be certainly affected and different.
6.2.1 The Porter 5 Forces Model
The Porter's five forces model69 is applied to analyse the advertising environment, especially television advertising, on digital television, to identify and provide an understanding of what forces influence degrees of competition and opportunities for building competitive advantage. The model is illustrated in figure 14.
69
Porter, Michael E., Competitive Strategy (Free Press, New York, 1985), pg. 4 69
6.2.1.1 The Threat of Entry
The advertising industry has always been facing constant threat of new entrants, because there is low product/service differentiation between competing agencies. Moreover, The barriers have lowered even further with the development of the Internet70. As it involves relatively low capital investment to set up an independent agency, there has been an increase in numbers of new agencies. In addition, with the further development of digital technology and filming technology, production companies will no longer necessarily have a large number of production staff, expensive locations will not be necessary, there will be less time to produce an advert, resulting in less expensive commercial films and campaigns. Agencies that will gain competitive edge in the digital age will be those that spend on research and development. The agencies' core skills have been around skilled creative individuals and a good relationship with advertisers. However, as the Internet has shown, these barriers are likely to weaken in the digital television environment, because skills such as planning functions, storyboard, copyright, can be copied. Thus, advertising and communication companies will have lower potential share, because they operate in an overcrowded market that has been facing little growth.
6.2.1.2 The Threat of Substitutes
The great value of television advertising to advertisers over the last 30 years has been the ability to reach mass market. As multi-channel digital television will lead to greater audience fragmentation, and increasing the viewers' choice, mass audiences may be more difficult,
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Kassaye, W. Wossem, The Effect of the World Wide Web on Agency-Advertiser Relationships: Towards a Strategic Framework, International Journal of Advertising (1997, No. 16) pg. 95 Murilo R. Cerdeira - MBA March-99 70
complicated and more expensive to reach. According to Michael Porter, when substitutes become more attractive in terms of price, performance or both, some buyers will be tempted to move their habit away from the organisations in the industry. Therefore, as advertising costs of reaching an audience across a number of channels may increase, especially on television, advertisers may seek out new ways of communicating and reaching mass audience more efficient and effective. Moreover, in this scenario some marketing tools may be more costeffective than advertising. The competition of substitutes for advertising within the marketing communication tools (promotion mix) would be direct marketing, public relation (PR), sales promotion, personal selling, sponsorship, exhibitions, corporate identity, point-of-sale, etc.
6.2.1.3 Bargaining Power of Suppliers
The bargaining power of the advertising agencies in the UK is low. The reason is that there are several full service agencies, creative shops and media independents in the market, and the competition amongst them is fierce. In addition, advertisers are increasingly demanding measurable campaigns to justify their advertising budgets; they are looking for more costeffective manners of communicating their message. This brought the opportunity to the belowthe-line activities, and advertisers have used more often disciplines such as sales promotion, direct marketing, database marketing, etc. This indicates that the advertisers have the bargaining power over the advertising agencies.
On the other hand, media power has gone into the hands of few major players71. In addition, is likely that a handful of major global media companies will come to dominate the industry.
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Shannon, John, Brands move in on global village, Marketing Week (14 January 1999), pg. 34 71
They will retain the power of supplying media, because these few companies will be able to buy airtime in bulk. There is a high degree of supplier concentration and this would suggest that supplier bargaining power should be high.
6.2.1.4 Bargaining Power of Buyers
The buyers, advertisers, have great bargaining power over advertising agencies, creative shops, and media independents. The main reason is that the supplying industry is comprised of a large number of advertising agencies, there is low product/service differentiation between competing agencies, and the costs involved in switching suppliers are very low. Second, advertisers have been increasingly using below-the-line disciplines such as sales promotion, direct marketing, database marketing, etc., because they have been demanding measurable campaigns to justify their advertising budget. Moreover, as the advertising budget is limited, the competition amongst the suppliers is severe. All the factors described have helped to lower the advertising agency power and to strengthen the advertisers bargaining power.
On the contrary, advertisers have no bargaining power over the media owners. As in the digital television environment the media and audiences are likely to fragment even further, and media vehicles such as ITV, Channel 4, The Sunday Times are likely to attract and deliver messages to large audiences; the price of airtime and space may increase as well. This is due to scarce media that will able to reach great mass audience. However, a few major players handle the media power. It is likely that in the future that this trend will increase even further, with a handful of major global media companies coming to dominate the industry. These will provide to media agencies great buying power over some media owners. Thus, in the digital television age these will offer a great bargaining power for a few media companies.
6.2.1.5 Competitive Rivalry
Advertising, especially television advertising, has had the main advantage of communicating and reaching large audiences in a cost-effective manner. The greater fragmentation of digital TV may lead the costs of airtime to decrease in the niche channels, but these channels will reach small audiences. At the same time, prices at the few TV channels that will reach bigger audiences may become very expensive, becoming prohibitive for many advertisers. Thus, advertisers who need to reach large audiences will have to spread their messages across into several television channels, which may also be very expensive. As audiences will fragment even further, as well as the media landscape, with increased saturation and accessibility of media, advertisers will look for more cost-effective ways, and new manners to achieve the audiences. Therefore, the competition will come from others advertising vehicles such as radio, the Internet, cinema, outdoors, newspapers, magazines, posters, and direct mail.
6.3 Advertising in the Multi-channel Digital TV Environment
Digital television age will bring hundreds of commercial channels, and there are speculations that it will be impossible to advertisers reach a mass audience in this environment. However, this idea may not necessarily be true because there will be some programmes that will have mass appeal, where advertisers can target to large audiences (see chapter 8). Nevertheless, it will provide a platform for better targeting72 through an increasing number of niche channels, for different lifestyles, hobbies, and interests. In the long-term advertisers will be able to target individuals rather than demographic groups. In the short and medium-term the advertising on
72
Satellite & Cable Television, Leisure Intelligence-Mintel (August 1997), pg. 28
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digital television will be of three main types in the full service network73. In the long-term, with full interactivity, these boundaries may disappear and an advertisement will carry features of all types. They will be the product awareness, information offer, and direct selling. A list of available types of TV advertisements is described and examined in chapter 5, item 5.3.
6.3.1 Product Awareness
The traditional product awareness advertising (the 30 seconds spot advertising) which is used for new product introduction, branding and reminding people will still be used in the digital television in the short and medium-term. In this case the audience is relatively passive and the messages intrude briefly on the consciousness of people who are not intending to receive that particular message.
6.3.2 Entertainment and Information Offer
The entertainment and information offer advertising is a spot advert that encourages people to interact with the advert to entertain, and/or to look for or request additional information through interactivity. Contrary to traditional advertising, the message is invited into the viewer's home; the viewer "pulls out" more information. This is the case of Open TV (B.I.B.'s system through SkyDigital platform). However, the advertiser and agencies would have to anticipate, have packaged, and ready all sort of information that consumers would require from the advert. In the long-term, there will be also the option to live interact with a person. Interactive advertising is more effective than the traditional. A research carried out during the
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Baldwin, Thomas, McVoy, Stevens D., Steinfield, Charles, Convergence - Integrating Media, information & Communication. (Sage Publications Inc. California - USA, 1996), pg. 231 Murilo R. Cerdeira - MBA March-99 74
Videotron interactive TV trial in London showed that people recalled the Kellogg's Frosties interactive advert 2 to 3 times higher than normal advertising74 (see item 6.4.1).
6.3.3 Direct Selling
Direct selling, also known as direct response television (DRTV), can be a single 30-second spot advert, spot advertising with information offer, an infomercial, or a programme length commercial. The interactivity options in the consumers' TV will allow them to make purchases online using the keypad on the remote control or by telephone. Direct selling may be an extension of the entertainment and information offer advertising, where there is an attempt to consummate the inquiry in a direct sale.
6.4 Interactive Advertising
Interactive television through digital TV will offer a range of possibilities that TV advertising in the past could not provide, such as information on demand, sales promotion on-screen, direct purchase, and mainly the possibility to better target the right consumer and tailor make the advert to meet customers likes, wants and needs. Viewers will be able to be proactive by interacting with TV if they wish to do it, instead of watching TV passively as it is today. Interactive advertising will not be re-packaged linear advertising, but re-defined advertising. The viewer will be able to command the advert and bring about different endings, extract additional information, play an advertisement game, and so on. Contrary to traditional advertising, the advertisement's message will be invited into the viewer's home, and it will be
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Interview with Mr Jason George, Victoria Real's Account Managers 75
more focused in trying to persuade the viewer to use the interactive options. In other words the advert may call the viewer to "pull out" more information, to press that button, like a banner advertisement does on the Internet."75 The interactive advertisement's objective may be not to sell a product but to get the viewer to interact, to press a button, and then comes what is behind the advert which is to sell the product. Whereas today's advertisements are about getting the consumer to buy the product.
In the British Interactive Broadcasting's system (Open TV), the interactive advertisements will enable the viewer to request extra information from his/her TV set, print out coupons or information or even store them in the set-top box for later viewing while the viewer continues to watch the programme. Viewers can also require extra information, brochures, or catalogues. Moreover, the viewer will be able to purchase the product on screen, via the interactive links in the advert, allowing a direct relationship between the advertiser and customers. The system will probably encourage the viewer's impulse purchasing76 and it will be similar to Direct Response TV77. The advertising agency will create and produce the advertisement with special icons - interactive links. All these activities will be done through the remote control. The full explanation of the B.I.B.'s system is described in chapter 9 (item 9.3).
Interactive advertisements do not necessarily need to carry links to get or order more information or sell a product. They can carry entertainment features to get the viewers attention and make them to have an exciting, relaxing experience or branding as is explained on the Kellogg's Frosties advertisement on item 6.4.1, and chapter 9. In sum, the interactive advertisement will allow direct relationship with consumers, it will give immediate feedback
75 76
Interview with Mr Andrew Walmsley, B.B.H.'s Head of New Media Hurst, Ray, Getting set for the great interactive television stakes, Net Profit (April 1998), pg. 10 77 Interview with Mr Simon Edelstyn, British Interactive Broadcasting's Product Manager Murilo R. Cerdeira - MBA March-99 76
about how many people responded to the advertisement, how much money they usually spend, their patterns, it will enable the to build up a powerful consumer's data base, and distribution costs may reduce.
Despite the advantages and opportunities that interactive advertising offer, some people in the industry and the majority of the interviewees were sceptical about building up a closer relationship with consumers. The reason is that not every consumer wants to have a dialogue with a product or a brand. However, question marks can be posed: Do consumers really want to have dialogue with brands? Do they want to have a relationship with products? Do they want to have dialogue with all sorts of products or just some products? Do viewers want to have an active viewing? These questions are explored in chapter 4.
The company's supply chain will be heavily affected by digital TV and the interactive services provided by this medium. It will require a strong logistic behind it, to deliver and distribute goods, catalogues, brochures, samples, and the creations of several fulfilment houses. Probably digital TV and the interactive services will give strength back to manufacturers78. Nevertheless, the most important point for advertisers, advertising, and media agencies in using interactive advertisements will be to have clear objectives to be achieved.
6.4.1 Interactive Advertising Trials
Interactive advertising has shown effectiveness in many interactive TV trials around the world. In the UK, according to Jason George, account manager at Victoria Real Ltd (see chapter 9),
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Interview with Mr Simon Edelstyn, British Interactive Broadcasting's Product Manager 77
the research carried out during the Videotron cable interactive TV trial in London in 1996, showed that people recalled the Kellogg's Frosties interactive advert 2 to 3 times higher than the normal advertising and increased the brand awareness. The Kellogg's Frosties advert invited the viewers to interact deciding by the push of a button on the remote control what happened, creating new adverts, new endings each time that they interacted. "There was a possibility of 50 different combinations on the Kellogg's advert79." Another interactive trial was The Pepsi Juke Box for the BT trial in Colchester and Ipswich. Viewers could interact by choosing any video music to watch. The result was that providing entertainment and a reward system, viewers interacted with the advert, and therefore "Pepsi branded in a more positive way in a positive experience80."
In France, according to Richard Lord, the TPS Satellite company has run interactive advertisements since 1996. One example is the interactive advert for the launch of Renault's Kangoo, which was a traditional 30-second spot but with interactive icons on the screen. Viewers could use the remote control to press the icon, and they were transferred to an interactive area. "84% of the service's 230,000 subscribers at the time visited the interactive area, and 75% of those people subsequently said that its bland appearance hadn't really been a problem for them as they didn't perceive it as advertising. The response to the advert was regarded as good, because 3.5% of those who visited the interactive area asked for an appointment with a Renault dealer, while 3.6% requested a brochure81." This example showed how effective an interactive advertisement can be, and how it could also solve the problem of measuring the advertisement's efficiency.
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Interview with Mr Jason George, Victoria Real's Account Manager ibid. 81 Lord, Richard. Interactive advertising learns to crawl. Revolution (February 1999) pg. 33 Murilo R. Cerdeira - MBA March-99 78
There are other alternatives, such as to include interactive sponsorship in interactive service areas such as banking, games online, shopping, video-on-demand, etc, which brings the viewer to an interactive area or may play an advert, etc. According to Richard Lord, Procter & Gamble's Pantene hair care brand sponsored part of the video-on-demand area of the Hong Kong Telecom's digital TV service. If viewers clicked on the sponsor icon, they could watch a movie called Comrades for free, but in return they had to agree to watch the Pantene adverts. The result was that during Pantene's campaign, more people watched Comrades, "2,500 people compared to a typical 50 on other evenings82. " As consumers are becoming more selective and exigent, they are demanding something in return for lending their time to watch an advertisement. This will further increase in the digital television environment, because they will be able to get rid of the advertisements. The result of P&G's campaign showed that there are many successful manners of reaching and persuading consumers to pull out the advert, watch it, and reward them by giving some incentives.
6.4.2 The Buyer Behaviour Process Model
The complex buying behaviour model of Howard & Sheth (1969, see figure 15) is introduced to analyse how interactive advertising may help advertisers and agencies, and how powerful this communication tool can be by increasing the efficiency of a marketing communication campaign. In any development of a marketing communication strategy it is imperative to identify, analyse, and understand the target market and ultimately its buying behaviour. The principal aims are to help to understand, to predict the buyer future behaviour, and to explain the buying behaviour process. "These models indicate the stages through which the consumer
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Lord, Richard, Interactive advertising learns to crawl, Revolution (February 1999), pg. 33 79
passes from the time he or she first becomes aware of a need for a product or service to the time when a product is purchased, a brand selected, and the consumer evaluates the success of his or her purchase and decides whether to buy that particular product and/or brand again83." These models also indicate the social and psychological forces that shape the potential buyer's action at each stage in the process.
The Howard & Sheth model (1969) is based on the cognitive theory, which is based upon an information processing, problem solving, and reasoning approach. This model "tries to incorporate into the hierarchical communication models the intervening variables of perception, motivation, learning, memory, attitudes, beliefs, group beliefs, etc.84." Moreover,
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Foxall, Gordon R., Goldsmith, Ronald E, Consumer Psychology for Marketing (International Thomson Publishing Company, London, 1997), pg. 25 84 Smith, Paul R., Marketing Communications. An Integrated Approach (Kogan Page Ltd , London, 1997) pg. 74 Murilo R. Cerdeira - MBA March-99 80
this model infers that consumer behaviour is preceded by a sequence of mental information processing. "Buyer behaviour is largely determined by how the customer thinks and processes information" (Howard 1983).
6.4.2.1 The Stimulus and Perception Process
As shown the Howard & Sheth model in figure 15, the consumer receives information from the environment - the stimulus (inputs). In our case this stimulus will be the interactive advertising for a new brand, for a fast moving product, etc. Following the stimulus is the perception phase, where the consumer receives and interprets the stimulus, which begins with the process of sensation and is a selective mental operation. However, as consumers are hit by between 500 and 1500 different advertisements a day (Smith P. R., 1997), it is necessary that the consumer has given attention to the stimulus (interactive advertising), otherwise little perception will take place. Consumers will give their attention largely to those things that are interesting, novel, or from which they derive satisfaction of needs and wants. In addition they react to any stimulus according to their motives, attitudes and social situation. In order to enable interactive advertising to grab attention and be perceived from the consumer, it will have to include features such as intensity and size, colours, contrast, sound and movement. Moreover, it will also portray discriminative stimulus in the form of rules, suggestion, norms, promises, prompts and other verbal and non-verbal description of the contingencies of reinforcement. As movement attracts the human's attention, and the eye's movement is involuntary, there is a huge opportunity to explore TV advertising because of enhanced motion and sound features.
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Interactive advertising will have various advantages in comparison to the traditional ad, because it will carry enhanced quality graphics, interactive links offering sales promotion such as discounts, print out coupons or vouchers, order free-samples, request special brochures, etc. In addition, it can offer to consumers a chance to play games online, to interact and choose the storyboard and the ending of a TV advertising (see Kellogg's Frosties-item 6.4.1). In other words, it will offer entertainment to consumers. Interactive advertising will also enable a consumer to purchase direct from it if he or she want to do so. However, as consumers also perceive types of risk involved in purchasing any product, they may not purchase product at all due to the fact of non-contact or touching the product prior to the purchase, and the security reasons of buying online. Moreover, the perception of price, brands, place, advertising
messages also affect consumer's perception.
6.4.2.2 The Learning Process
Once the attention is grabbed and the consumer has perceived the interactive advertising, the learning process begins. Consumers start to look for information or retrieve information stored in memory regarding products or services, which came from a past learning process. They search for additional information to clarify the want and need that has been aroused by the stimulus and perception. In addition, consumers evaluate the alternative competing brands, which may satisfy this want or need. They perform brand comprehension. Taking the connectionist learning theory, the stimulus-response learning model, to analyse interactive advertising we can see that interactive services have valuable features and they are recognised as additional benefits. Building associations through voluntary participation suggests that these interactive services can actively invite the consumer (buyer) to participate, be immediately rewarded, and eventually connect a particular product or service with a particular stimulated
want or need. Interactive services may be recognised as additional benefits, which can be obtained by performing specified responses. The online sales promotion embedded in an interactive advertising such as free-samples, discounts on direct purchase, vouchers and coupons and special gifts may encourage the consumer to interact and try. The interaction will enhance and reinforce the learning process, as well as will the immediate reward process (such as online discount, request of free-samples, etc). The quality of the interactive advertisement, the interactive area, the speed of the communication will have an impact on the "quality learning" of the product or service, which can be positive or negative.
Cognitive learning occurs "when the consumers are given specified instructions to follow in order to deduce which behaviours they should perform based on information.85" Moreover, the learning process is affected by factors such as familiarity, expertise and involvement. Particularly, the level of involvement - high or low involvement, will directly affect the type of information process which will occur when a consumer is exposed to an advert. If we analyse the new generation - the teenagers - they have grown up with new technologies, they learned to be active viewers, and they are prone to interact, and especially to play games. At this point, interactive advertising which offers an online game will be likely to have a good response from this group, and they will probably learn in a highly involved manner. In this case, the consumer may not consider the immediate reward of playing a game, but it is maybe the catalyst factor to get the consumer involved, and to try to make them have positive experience. The involvement and the positive experience are the essential factors, which will be stored in the consumer's memory and will aid to recall the brand when he or she is shopping. All these
85
Foxall, Gordon R., Goldsmith, Ronald E, Consumer Psychology for Marketing (International Thomson Publishing Company, London, 1997), pg. 91
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may lead to a consumer's confidence and intention of purchase, as well as the purchase itself. The learning process will depend on the motivation of the consumer.
6.4.2.3 The Motivation Process
The motivation process occurs when an individual perceives a goal (incentive by an advert) external to himself and experiences internally a need or drive that stimulates him to reach that goal. The motivation factors can be social, psychological, symbolic, hedonic, cognitive, and experimental. These motives both function simultaneously and may be satisfied simultaneously. Maslow's theory suggests that different people extract different benefits from the same product, and markets can be divided in benefit segments. Thus, communication can be tailored to develop the ideal positioning for a particular segment.
Analysing interactive advertising, we can conclude that like a traditional advertisement, it satisfies all five needs/wants. However, the advantage of an interactive advert is that it can satisfy immediately the cognitive and the experimental need/wants. The consumer who is watching advertising may become curious or have the desire to learn more, find out, and comprehend the brand. If this scenario happened in traditional advertising, the consumer would have to look for extra information later, with many other sources, which would be a quite laborious task. In contrast, if this scenario happened within interactive advertising, the consumer could press a button and call out more information from the brand, request a brochure or catalogue, request a visit from the company's representative, or even to have a "conversation" with the brand ("one-to-one communication"). The main advantage is that the information required to start the cognitive need/want is immediate. In addition, during the interactive process a consumer also could have an enhanced experience with the brand. This
experience would give good or bad feelings to consumers, and this could produce desire, emotions or moods, which would increase motivation and the learning process.
6.4.2.4 Attitude
Attitude refers to the feeling of liking or disliking that consumers hold with regard to products, brands, advertisements, or other marketing stimuli. Consumer attitudes are very important to advertisers and agencies because they predispose consumers' intention and behaviour toward the marketing mix. Attitudes can be changed, but it may be a quite long process. However, marketing strategies such as advertising and sales promotion can influence attitudes. In order to do that, it is necessary to persuade the consumer. Persuasion is one important objective of a marketing strategy, and its aims is to change attitudes in order to change behaviour. The persuasion process consists of two broad factors: the message source and its channel, and the message itself and its receiver. The message source may come from the advertisement or a salesperson. Three source characteristics are credibility, attractiveness, and power. Analysing the interactive advertisement, we can see that if an advertiser or marketer uses a credible source in their ads, such as an Olympic golden medal athlete, to advertise a new gymnastic machine, he or she in endorsing the product because their opinion appears more trustworthy.
The use of a credible source may be crucial to get consumer's attention and to reduce the selective perception to not cause the message to be screened before even considered. The advantage of the interactive ad here is that it could also provide more credible and trustworthy information. If the consumer needed/wanted extra information, he/she could be transferred to an interactive area, where more information would be available including many selfexplanatory tables, testimony of many other consumers and experts, links to other well
recognised associations, etc., which may lead to the purchase. Although the channel of communication used by traditional and interactive advertising are the same - television; interactive advertising may enable a certain intimacy in relation with the consumer. This is due to the interactivity features, because the consumer can feel that his/her request has been answered specifically to his/her needs/wants. In the future, with full interactivity and "one-toone communication," digital TV will become an even more valuable communication vehicle, because messages or any relationship will be individualised. These features transform interactive advertising in a very attractive manner for consumers to look for information and to be entertained, as well as being a powerful source.
The way that the message of the advertisement is presented is also important. Today's many advertisers use humour appeals, and/or fear appeals in the message to persuade the consumers (receivers) to change their attitudes. As explained on item 6.4, probably interactive advertising may carry entertainment appeals as the main persuasion tool. However, it is arguable that every consumer will want to be entertained, and have a more active viewing pattern. Therefore, the effect can be negative, which means that the consumer may not give attention, may not interact, may not learn, may not get any motivation, and he/she will not change his/her attitude towards the brand advertised, and there is no purchase. Furthermore, the advertising had not even increased consumer's awareness.
Digital television and interactive television will enable advertisers and marketers to follow the consumers' attitudes towards a product and/or an interactive advertising, and any changes in consumers attitude will be possible to be screened as soon as it starts. As Williams (1989) says: "If a marketer is able to identify the attitudes held by different market segments towards
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his product, and also to measure changes in those attitudes, he will be well placed to plan his marketing strategy."
6.4.2.5 The Group Influence
"Consumers are influenced by their group memberships and, particularly, by their reference groups. The brand choice, conformity and independence depend to an extent on social affiliations; reference group influences differ from product to product and from brand to brand86." As within the group, some people develop the role of decision-makers and influencers, thus targeting them is valuable. In addition, segmentation criteria such as activities, interests, spending patterns, opinions, etc, can be extremely useful, particularly for interactive advertising. In the digital television environment, targeting specific groups is already available, but in the future with "one-to-one communication" the tailored messages for each individual will be a reality. If an advertiser or marketer identifies the influencer or the decision-maker in a group, tailored interactive adverts can be targeted to them, including different methods of persuasion, different messages and appeals, different interactive services, promotions online, and so on. The point is to try to change the leader attitude towards to the brand, which may influence the whole group. Therefore, interactive advertising can be extremely helpful in doing that.
In sum, the information-processing consumer starts when a consumer receives the information (advertising), receives and interprets the information, searches for additional information to clarify the want/need, evaluate, develops beliefs, attitudes and intentions that determines
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Foxall, Gordon R., Goldsmith, Ronald. E, Consumer Psychology for Marketing (International Thomson Publishing Company, London, 1997), pg. 211 Murilo R. Cerdeira - MBA March-99 87
whether a purchase takes place, acting upon these intrapsychic forces to purchase and use the product/brand, revaluation the attitudes and intentions in the light of satisfaction by using the product, and finally store the new attitudes and intentions in memory for future reference.
6.5 Branding in the Digital Television Era
One of the major challenges that advertisers and agencies will face is branding, particularly with mass consumption products, in a highly fragmented audience as it is in digital multichannel television. Digital TV will challenge the usual way that advertisers and agencies create brands, which is based on the traditional marketing paradigm (see chapter 5). A brand is a name, symbol, or design (often all three) which identifies the product as having a sustainable, differential advantage. The aim is to persuade customers to make a choice, either through re-enforcing existing habits or by creating new perceptions. However, to do that in a highly fragmented environment will be a difficult task. Currently advertisers have been discussing if it is cost-effective and sensible to bombard a gradually decreasing audience with costly commercials. Despite the fact that mainstream commercial television has been losing audience share, especially ITV, mainstream television still provides the best way to reach high coverage. A spot during Coronation Street usually gave an advertiser 18 million viewers, a coverage not possible on any other media, but it has lost 11% of audience share over 5 years87 as shown in figure 16.
Moreover, as the TV audiences are decreasing the advertisers and agencies should develop new strategies, and use different communication tools to create brand awareness and build a
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Interview with Mr Andrew Walmsley, BBH's Head of new Media 88
brand in a complex media environment. That is, targeting audiences and reaching them through a tapestry of different small channels, such as digital TV, magazines, and communication tools (see chapter 5, item 5.3) such as broadcast sponsorship, programme sponsorship, product placement, etc. A successful example of using different channels to build a brand and boost sales was the case of the Boddingtons bitter beer in January 1999, which advertised its bitter beer by placing the product in the Friends series. The awareness and demand as so high that the product ran out of stock very quickly, and it became trendy in the
Figure 16: Loss of milestone programming
Coronation St Mon/Wed Prime Time
100 95 90 85
Television rating has fallen 11% over 5 years

80 75 92
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94
95
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Source: BARB/BBH
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US.
As the tendency is that audiences fragment even further and people may become less channel loyal, audience guaranteeing programming such as the soap operas, Friends, Frasier, News at Ten will become even more important. Probably the most effective way of targeting and reaching mass audiences to build a brand will be around the popular programmes. Moreover, there will be an opportunity for targeting and reaching bigger audiences in the "TV gateways88" (see chapter 8 item 8.2.1).
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Clawson, Trevor, The Flavours of interactivity, Revolution (November 1998), pg. 48 89
Mature, established and well known brands may find that targeting the audience more precisely can be more cost-effective in building brand awareness and loyalty by combining creative ideas and good media planning. On the other hand to launch a new brand, especially targeted to mass consumption, without any previous awareness will be the most difficult task that advertisers and agencies will face. In the long term advertisers will have the opportunity to exploit the interactivity through digital TV, which will allow advertisers to try to build a relationship with individual consumers and enhance the brand awareness, fame and equity. However, it will be important that a branding campaign be integrated with various marketing communication tools (see chapter 7).
Concluding, the main skill that both advertisers, advertising and media agencies will need to advertise a mass consumption product or a niche product to be successful is the ability to analyse the mass of information available on their potential customers89. Moreover, advertisers and advertising agencies will need to learn how to identify a target market that is both worth entering (from a volume and profit perspective) and attainable (from a communication perspective). In contrast, to advertise a niche product the advertiser and advertising agencies will need to become skilled in using media such as television, which in the past were regarded as very expensive.
6.6 The Creative Challenge
One big challenge in the digital and interactive environment is how to avoid the television commercials to be zipped or zapped by viewers, or how to grab viewers' attention (see item
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Soberman, David, Into the upside-down age, The Financial Times-Mastering Marketing (19 November 1998), pg. 3 Murilo R. Cerdeira - MBA March-99 90
6.4.2). In this environment viewers will be empowered with the choice of removing the advertising from their viewing. In addition, with the increased agencies' accountability for the advertising they produce in the interactive environment, it will put a further pressure on agencies90. It will be easier for advertising agencies to target advertisements to specific groups, through the large number of niche channels, and it may reduce the "nothing to do with me" factor. On the other hand, as stressed before, to develop mass-market consumption products advertising and target a large audience will be difficult task.
Interactive advertising, as it is suggested by Andrew Walmesley (Head of New Media, BBH) will need to use different ways of persuasion from today's adverts. The most probable way is to include entertainment, because interactive television enables agencies to include features that allow viewers to change the storylines, by playing games (see Kellogg's Frosties-item 6.4.1), competitions, etc. Another alternative is rewarding the consumers if they watch the advertisement or interact with it. Examples of interactive advertisements are described on item 6.4.1. Entertainment will increase viewers' involvement with the advertisement and it will make the viewing experience more valuable and effective (see item 6.4.2). Thus, it is very likely that advertisers will need to become entertainers. Moreover, there are other options to avoid viewers zipping and zapping and grabbing their attention such as reducing the commercial breaks, placing the more interesting adverts on the first slots, sponsoring specific areas and giving something in return if viewer watches the advert (see item 6.4.1). Broadcasters could develop some mechanisms to motivate interesting adverts. Agencies will find themselves in a position of much greater responsibility, because the interactive advertisements will be able to measure its success.
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Morris, Stefan, Is the Future of UK television Advertising Interactive? BABS Dissertation (1996), pg. 46 91
6.7 The Agency Remuneration Systems
A further problem that agencies will face it is the compensation system. For a long time the advertising industry has been discussing whether the commission system should be replaced by a more professional fee-for-service structure. There are some criticisms about the commission system, because clients feel that agencies should act for them and in their interests not for the media owners. In a highly fragmented medium as will be digital multi-channel television, the cost of buying airtime in small and niche channels may be very small in relation to the work of preparing commercial advertising and buying the airtime that the agencies will get very little compensation for their efforts. One solution will be that the advertising industry finally adopts the fees structure compensation. Another solution is to use a mixture of fees, commission, and results. Payment by results is another possible solution which would bring agencies to a more business-like approach. However, there are some problems with the system because agencies usually do not have total control over its performance, and the results are beyond the agency's influence.
6.8 Conclusion
The advertising industry will face many challenges, threats, as well as many opportunities with the introduction of multi-channel digital television. The advertising industry will need to understand how this new medium will impact upon consumers (see chapter 4). Advertising has played a major role in any marketing communication strategy, and television advertising was regarded as a mass marketing communication tool, which could reach a mass audience instantly. However, the media landscape during the 1990s has changed due to further media and audiences' fragmentation, increased saturation, and accessibility, which is pressurising the
traditional marketing paradigm. Therefore, the advertising industry will need to develop new skills and a new paradigm - the interactive paradigm to cope with the new dynamics of this new medium and the digital age.
A framework, Porter's five forces model, was applied to investigate the advertising environment, to identify and provide an understanding of what forces influence degrees of competition and opportunities for building competitive advantage, in the advertising industry, focused on TV advertising in digital television. The advertising in digital television will be of three main types: product awareness, information offer, and direct selling. In future, these types may blur among themselves. A list of available types of advertisements is described on chapter 5, item 5.3. Interactive television advertising will provide opportunities that in the past TV advertising could not provide, such as information on demand, sales promotion on-screen, direct purchase, and mainly the possibility to better target the right consumer and tailor make the advert to meet customers likes, wants and needs. Contrary to traditional advertising, it is very likely that the advertisement's message will be invited into the viewer's home and focused in trying to persuade the viewer to use the interactive options. The interactive ad will allow direct relationship with consumers, and also it will give immediate feedback about how many people responded to the advertisement, their habits, patterns, and so on. However, not every customer will want to have a dialogue or relationship with each and every product or brand. The most important point for advertisers and marketers will be to have clear objectives to be achieved by using interactive ads. Despite that many interactive trials have failed (see chapter 4), the interactive advertising that was accessed in those trials had proved effective. People recalled the advert 2 to 3 times more than a traditional advert.
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The complex model of Howard & Sheth was introduced to analyse how interactive advertising may help advertisers and agencies, and how powerful this communication tool can be by increasing the efficiency of a marketing communication campaign. The analysis suggests that interactive advertising may be more effective because consumers' perception to adverts with imbedded promotions, sales promotion, etc. would be high. The learning process would be enhanced and reinforced due to immediate reward and information, and the motivation would be high due to interaction. The low quality of transmission would be a downside. Attitude can be changed in the long-term due to positive interactive experience.
Branding will be one of the major challenges that advertisers and agencies will face, particularly with mass consumption products. Digital TV will challenge the usual way that advertisers and agencies create brands, which is based on the traditional marketing paradigm (see chapter 5). Mature brands will be targeted more precisely and in a more cost-effective way. On the contrary launching a new brand, especially targeted to mass consumption will be a difficult task. Interactive adverts may approach the solution to carry more entertainment features. The debate over agency remuneration will be an issue in the digital environment.
Consequently, the advertising agencies will need to have knowledge of every area of the brand communication mix, and knowledge of how the product is manufactured, stored, distributed, also all marketing functions such as sales promotion, PR, sponsorship, and direct marketing. All these factor leads towards to Integrated Marketing Communication (IMC) approach, which is explained in the next chapter.
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Chapter 7 - The Integrated Marketing Communication (IMC)
7. The Integrated Marketing Communication (IMC)
7.1 Introduction
There are many forces driving companies towards integrated marketing communication such as the increase on the fragmentation of the media, pressures on marketing communication budgets due to constant pressure for cost savings and increased performance, the audience of the main channels for mass campaigns diminishing, and the move from mass advertising to one-to-one communication. Thus, some advertisers need one communication agency to manage the multiple marketing communication function. In addition, the IMC approach can help companies in achieving sustainable competitive advantages.
7.2 The Approach
Integrated Marketing Communication (IMC) is a strategic business process used to plan, develop, execute, and evaluate co-ordinated and measurable persuasive brand communication programmes over time which consumers, customers, prospects, and other targeted, relevant external and internal audiences91. The IMC offers a better manner to build a brand and communicate its message through a unified message ("one sight, one sound") in a costeffective way by integrating each element of the communication mix with other tools of the communication mix. The emphasis is on trying to achieve greater consistency and synergy among all elements92. The trend towards IMC may intensify when advertisers start to use
91
American Productivity & Quality Centre, Integrated Marketing Communication, APQC (1998), http://www.apqc.org 92 Clarke, Simon, Brand-building through Integration, Marketing (17 October 1996), pg. 26
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interactive adverts, because it requires that the agencies have knowledge of every area of the brand communication mix. There is a gap in the market that the British advertising agencies could fulfil and take advantage of this great opportunity and offer this sort of service. The advertising agencies have an advantage over the other communication agencies because they have been participating in the development of the advertiser's brand strategy and they understand more the in-depth brand core values.
One can argue that advertising agencies have traditionally marginalised below-the-line techniques, and in the case of an advertising agency managing the multiple marketing communication functions, they would give preference to television advertising. However, as there is a potential approach towards replacing commission to fee remuneration, the advertising agencies probably would not be so focused on television advertising. Other could argue that advertising agencies core competency and skills are focused on advertising and not in other types of communication tools. The main concern of an advertising agency may be the necessity to hire people, or create various departments or huge structures to support the IMC. This may not be totally true as is explained in the following item.
7.3 Models to Organise an Integrated Marketing Communications Agency
According to the study of Anders Gronstedt and Esther Thorson there are five models most commonly used, or a mix of them that American advertising agencies have approached to IMC. However, there may be a number of variations of these models, or even different models. The five models (see figure 16) range from a loose co-ordination of separate specialist
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agencies to a total integration of generalists in one agency93 . The first model is a consortium of separate communication agencies led by an advertising agency. The main agency may help its client to develop a strategy and then decide what persuasive tools they will use. The advantage of this model is its cost efficiency. However, there may be some disadvantages such as lack of horizontal communication between various specialist agencies, and the consortium may be temporal and may work better for a single integrated marketing campaign.
The second model is a consortium where the main agency executes more than one discipline. The principal agency may have various combinations of in-house service and outside suppliers. One advantage is that it can be cost-efficient. The disadvantage is that there may be fights between the communication areas, which may lead to little synergy between the disciplines. Moreover, the advertiser's perception of this sort of agency that executes more than one marketing communication tool in-house is that they are less skilful at each tool.
The third model, all specialists are brought in-house, but they still remain separate units within the agency. The advantage is that the work of specialists can be easily co-ordinated if they are working for the same agency, and specialists are better able to preserve and develop their expertise if there is a "critical mass" of specialists of the same area in each department. The disadvantage is that there is a risk of specialists acting in their self-interest if working in different units and profit centres, and it can have little synergy between the communication areas.
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Gronstedt, Anders and Thorson, Esther, Five Approaches to Organise an Integrated Marketing Communications Agency, Journal of Advertising Research (March/April 1996), pg. 50 Murilo R. Cerdeira - MBA March-99 97
Figure 16: The Five Models
DM - Direct Marketing CP - Consumer Promotion RM - Retail Marketing PR - Public Relations
Source: Gronstdet, Anders and Thorson, Esther
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The fourth model is a matrix organisation where specialist agencies are brought in-house and are integrated with a matrix structure, working in close collaboration. The main advantage is that a synergy among the communication areas can be reached, because the team as a whole reaches a consensus view about a proper media mix and how to integrate them. However, the whole process can take time to manage, and there is potential for conflicts between department and accounts.
In the fifth model, the borders are completely blurred. The agency is structured by accounts instead of functional departments. Its strength is that the agency personnel are generalists, that can lead towards a completely synergy among the communication areas. The downside of this model is that it is difficult to maintain cutting-edge knowledge and skill in each communication area, and requires big commitment from the employees. The most appropriate model that an agency should approach will depend on the desired balance of integration versus expertise in specialist communication areas, as well as on the agency's culture, history, etc. In order to become a successful integrated agency and maintain sustainable competitive advantage, the advertising agency needs to become a "learning organisation" to develop expertise in its discipline as well as in all communication disciplines that the agency executes internally. Moreover, to achieve "world class" or "best-in-class" and create and sustain excellence the advertising agencies should also utilise "benchmarking" techniques.
7.4 The Effectiveness of Integrated Campaigns
It is very difficult to measure the effectiveness of an integrated campaign. However, research showed evidence that "integrated marketing of many different varieties and combinations can
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enhance short term performance in a measurable way"94. Moreover, it suggested that mixed media campaigns must be integrated to fully enhance performance. "Unrelated marketing activity conducted simultaneously with no attempt to link or integrate a message or creative theme may have no benefit other than extended reach95."
The research analysed TV and press campaign based on the data from the IPSOS Group, which tested 1,910 press advertising campaign during five years in France. Within the total database, 1,251 were new campaigns running for the first time. Campaigns that used magazines only were 884, while 94 used a mix of both magazines and TV, and 47 used magazines, TV, and poster together. The test provided a measure of campaign impact by recording recognition of a number of current campaigns from the same publications, the attribution of the brand to each campaign, and an attribution/recognition ratio (A/R ratio) calculated. The higher the A/R ratio, the more strongly branded the advertisement was. The test is represented on figure 17.
The results showed that combined TV and Press campaigns provided and enhanced impact for press advertising. In addition, the A/R ratio is very high, producing a 55% improvement in the overall level of attribution. This may seen obvious if a linked TV campaign is running because TV is traditionally seen as such a high impact medium. However, the equivalent figures for combined magazine and poster campaigns show the same pattern, and if anything, are actually showing a stronger enhancement through integration, with a similar expenditure on press advertising.
94
Wilkins, Jon, TV or not TV? The Market Research Society - Conference Papers-40th Annual Conference (1997) pg. 60 95 ibid.
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Figure 17: Press campaign impact scores

300 250 200 139 150 100 50 0 Recognition Attribution A/R Ratio The results were indexed to 100 for campaigns that contain magazine advertising only Source: SIP (Suivi Impact Presse) - ISPOS France/ Jon Wilkins 162 256 Press Only 167 120 157 Press & TV Press & Poster Press, TV & Poster
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100
119
100 100
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7.5 Conclusion
Advertisers have been facing many pressures such as the increase on the fragmentation of media and markets, pressures on marketing communication budgets due to constant pressure for cost savings and increased performance and decreasing of main channel's audience for mass campaigns. The force of media fragmentation will be analysed in the next chapter. These forces alone have been driving companies towards integrated marketing communication. Digital TV and interactive TV will offer a range of possibilities and opportunities which advertising on television in the past has been unable to provide, as well as many dangers. These will include on screen sales promotion and direct purchase from television. Consequently, the advertising agencies will need to have knowledge of every area of the brand communication mix, and knowledge of how the product is manufactured, distributed, all marketing functions such as sales promotion, PR, sponsorship, and direct marketing. Thus integrated marketing communication can be a solution.
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Five models have been shown five models to approach integrated marketing communication. The most appropriate model that an agency should approach will depend on some factors described in this chapter. Nevertheless, it may have a number of variations of the models, or even different models than other advertising agencies may have developed.
I also presented data that suggested that integrating marketing campaigns could increase the brand's short-term performance in a measurable way. The key point to a successful integrated campaign is that it must be really integrated to reach greater consistency and synergy, in a cost-efficient manner. In sum, all these factors may drive advertisers to look for integrated marketing companies, and therefore advertising agencies should take this "momentum", in which many advertisers and agencies may take the dangerous position of "wait and see", to develop and implement the integrated marketing communication approach to achieve success, differentiation, and gain a sustainable competitive advantage.
Therefore, these factors presented in this chapter will have an impact on the media industry, on what medium an advertiser should use, the trade currency, and so on. The media industry will be analysed in the next chapter.
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Chapter 8 - The Impact of Digital Television on the Media Industry
8. The Impact of Digital Television on the Media Industry
8.1 Introduction
Media is a huge item of expenditure and it is the biggest single cost in marketing for a business. The media in the UK was relatively stable until the 1980's, when press, posters and particularly television were regarded as mass media vehicles. However, the media landscape during the 1990s has changed very fast without any precedent. The number of magazines has increased dramatically, the number of radio stations has risen, press readership has declined, and the introduction of cable and satellite and the fifth terrestrial channel has had a big impact on television. "The ITV channel, which was regarded as an instant mass marketing tool, delivering 100% of all commercial viewing, has lost much of its power. In 1997, ITV delivered 54% of all commercial viewing96." These trends will grow even further, and
consumers will have a number of multiple choices (see figure 17). These changes are leading to a greater media and audience fragmentation, which is leading to a more complex consumer's media consumption patterns. Consequently, the media planners and buyers are facing new challenges, and with many options that they must consider adding to their schedule97, they will have to develop new skills, modelling systems, better planning tools, research and personnel to keep pace with it.
Nowadays in the United Kingdom, media planning and buying are carried out either by a full service-advertising agency or by a media agency (media independent or dependant). The media dependant agency is owned by an advertising agency, an agency group, or an agency
96 97
Abrahams, B, The only certainty is uncertainty, Marketing (23 April 1998) pg. 22 Fry, Andy, Choose your Weapon, Marketing (16 April 1998), pg. 31 103
holding company, whereas the independent is not owned by an advertising agency. The media agencies today offer the same services as the media departments in a full service agency, as well as providing consultancy services, particularly at strategic level, account planning, media research and auditing services.
Figure 17: Consumer's multiple choices 1985 Television Channels Radio Stations Consumer Magazines 18 58 1804 1995 50 150 2112 2005 500+ 350 3500
Based on the Henley Centre Media Futures and Motive Media's reports
As advertisers are increasingly pursuing maximisation of revenue through maximising audience, advertisers consult both an advertising agency and a media agency to achieve an "optimum" communication plan.
8.2 The Impact on Media Planning
Media planning's main purpose is to reach the maximum number of target consumers in a costeffective way. Today the media planning tasks have become difficult because the media landscape has changed beyond recognition (also see chapter 5). However, in the future with digital television, interactive television, video-on-demand and pay-per-view will change the media landscape in an unforeseeable way, media planning will become very difficult and perhaps different from today's. Greater media fragmentation is increasing the consumer's choice, which is leading to fragmentation of the audience. An interesting point is that this
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audience fragmentation may follow similar patterns that have already happened in the magazines and radio markets. Media accessibility is increasingly sharply, and it is leading to an increase in the amount of individuals as opposed to social media usage. Hence, consumers are watching television alone, and making their own viewing decisions. The convergence of technologies is blurring the old boundaries and it is affecting the way that consumers relate with media. In addition, the consumer's media consumption patterns are becoming more complex than they were, and it will become more complicated in the future. In sum, consumers are watching, reading, and listening to a far wider selection of media which has made it difficult for an advertiser to reach its target audience.
The increased consumer's choice and the increasing audience fragmentation is having an impact on the old audience classifications - by age, sex and occupation, which is telling an incomplete and sometimes misleading story about the audiences. This problem will further increase when digital television penetration takes up (see chapter 4). Increasingly the "media industry needs to think of the audiences not in aggregate, but as many groups or segments, characterised by combinations of their likes, dislikes, who they are, and so on"98. Therefore, new sophisticated tools need to be developed to track down and understand the audiences, and to feed that understanding into the media industry, especially to media planners.
Within a highly fragmented media and audience, digital television has some advantages over radio, newspaper, and magazine advertising, because digital TV may be an even cheaper substitute for them. One of the Radio and newspaper's strengths is to reach geographical audiences. Digital terrestrial and cable television will enable an opportunity for advertisers and
98
Foster, Robin, Understanding Digital TV, What's on channel 400? Haymarket Conference Papers (London, 1997) Murilo R. Cerdeira - MBA March-99 105
media planners to target specific geographical areas within a country, city, or borough. They will be able to air an advertising campaign with direct purchasing links, sales promotion and so on to very specific areas.
Another important issue for media planning in the digital television environment, (within highly fragmented audience and media) which will probably be raised again, is the debate whether there is a threshold number of exposures that is needed before advertising works, or does the first advert that the viewers see have some effect and then diminishing returns set-in gradually. Nowadays, it is generally accepted that three exposures are necessary as a minimum and ten as a maximum before impression, awareness, and learning occurs. As advertisers' aim is to maximise coverage and to guard against excessive frequency, and all to often companies are choosing a policy of smooth rather than burst advertising plans, the media planners will have to reassess the coverage and frequency concepts. Although the rise of the alternative media allows advertisers to target consumers more accurately, reaching a mass market in one hit has become more difficult or will even be impossible in the future. As a result, the planning of media for large advertisers has become more time consuming. Therefore, the media planner or buyer has to struggle with how to achieve the maximum exposure of their client at the optimum cost of delivery.
8.2.1 The Major Problems Affecting Media Planning in the Digital Television Environment
As explained previously, media planning has been facing many changes in the media landscape, and it will confront even more challenges in the future. The mass coverage opportunities in digital television may be diluted due to media fragmentation, and audience
fragmentation and building coverage will be a difficult task. Targeting a mass audience through television like it was done in the past, is starting to be difficult, and in the future it will become even more difficult. Until 1981, if a company had a product, particularly a new one, a company could slap it on ITV and be certain that the majority of the population would have seen it after just three or four well-chosen spots in the middle of Coronation Street and News at Ten99.
New strategies will be necessary, and the use of a combination of different communication tools, not just spot advertising, to tackle this problem. In order to target and reach big audiences in the medium-term, media planners will need to use a tapestry100 of different small channels in digital TV, mainstream terrestrial channels, and particularly the popular programmes, and a variety of communication tools such as broadcast sponsorship, infomercials, described in chapter 5. In the digital television environment viewers will navigate the TV by the EPG (electronic programme guide), which will guide their viewing around101. As cited on chapters 5 & 6, in the long-term the marketing communication plans will be around the major programmes and "TV gateways102." First because people are very specific about medium repertoire and they make special appointments to watch specific programmes, thus programmes will probably be more important than channels. Second, " TV gateways" will be a few strong channels that will keep attracting more audience than other channels, and working like Internet "Portals," where the viewers will be able to customise and design according to each viewers' particular tastes and needs. In sum, media strategists will
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Abrahams, B., The only certain is uncertainty, Marketing (23 April 1998), pg. 22 Bentley, Stephanie, Digital Dilemma, Marketing Week (4 June 1998), pg. 28 101 Interview with Mr Andrew Walmsley, BBH's Head of New Media 102 Personalised Pages Give Users More Control, NUA Internet Surveys (20 October 1998), @ http://www.nua.ie
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have to focus on which programme they will schedule the television advertising for, rather than what time it is on.
The same rule is applied for branding (see chapter 6 item 6.5), particularly with new products and mass consumption products, which will be one of the major challenges in the digital age. The concept of branding is creating or enhancing brand awareness, fame, and equity, and in order to create awareness and fame in a highly fragmented medium, such as digital television, it will be very difficult and expensive.
Building coverage for an advertising campaign in a highly fragmented audience and medium as it is in digital television will also be a very difficult task. In addition, zapping may increase in digital television and there is a threat of viewers switching to subscription channels without advertisements. In conclusion, effective media planning will be harder than it is today. Interactive television will pose threats, as explained before.
8.2.2 The Opportunities of Media Planning
There will be many opportunities for media planners in digital television. The audience fragmentation may lead to more effective targeting. Digital television will increase the numbers of niche channels for different interests, hobbies, lifestyle, such as Manchester United Channel (MUTV), golf channel, fishing channel, football channel, Formula 1 channel, and so forth. These niche channels will provide an opportunity for better targeting and reaching the right audience without waste. In the medium to long-term, digital television and interactivity will allow broadcasters, advertisers, and media planners the chance to keep in touch with audiences, and establish a better understanding of their tastes and preferences. This will lead to
better media strategy and an effective media plan. The real opportunity to do that will come with interactivity, when the "two-way communication" will be possible. In the long-term, "one-to-one communication" will be available and it will be feasible to track and understand each individual television user, and each individual will talk back to the advertiser or broadcaster.
Digital television will solve a problem that has been increasing amongst advertisers, media agencies, advertising agencies and broadcasters, which is how to measure the efficiency and effectiveness of an advertising campaign and media strategy. In the medium to long-term, with the interactivity, media planners will be able to measure in real-time on a weekly or daily basis103, how many people have responded or clicked-through to advertising by direct response104, direct purchasing, number of catalogue requests, and by a combination of impressions. The real-time measurement of an advertising campaign will bring flexibility for advertisers and agencies to evaluate if the advertisement's objectives are in line with that which has been achieved so far. If necessary they will be able to stop running the advert, reevaluate and launch a rectified campaign, or they will be able to refine and fine-tune the campaign as it runs. Thus, an advertising campaign will turn to be more measurable and accountable, which will put the media agency in a position of a greater responsibility.
Another opportunity for advertisers and media planners is the possibility to target audiences geographically through digital cable television. Potential advertisers that are not able to buy broadcast television advertising because of the high cost and the waste of reaching too many
103 104
Sleight, Ross, The best things in life are free, Revolution (January 1999), pg. 53 Witthaus, Michele, Approaching the Digital Age, In-store Marketing (May 1998), pg. 45
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people will be able to use this platform. In addition, digital television may offer an arguable chance to target light television viewers, who are becoming increasingly difficult to target.
Branding mature (see chapter 6-item 6.5), established and well known brands may find that targeting the audience more precisely using niche channels can be more cost-effective in building brand awareness and loyalty. The communication campaign will need to use several complementary channels by combining creative ideas and good media planning.
8.3 The Impact on Media Buying
The taken-up of digital television is expected to be very slow (see chapter 4), and "the erosion of audiences and revenues on terrestrial television will follow similar patterns to the introduction of satellite television in the UK105." Satellite and cable took five years to penetrate 9% of UK households106. Looking at American television "where the big four networks lost their audience share but they increased their revenue ahead of the market massively"107 we can conclude that the same pattern will probably happen in the UK. The value of advertising airtime in the big spots goes up because they are becoming scarcer due to audience and media fragmentation. ITV will lose audience share but it will still dominate UK television and still be the price-setter for some time.
Nowadays, most channels sell their airtime at discount of ITV airtime, but in the future the focus will be away from ITV, and the selling dynamics will be different. In the digital
105
Barnes, E. L., Digital TV & the Cost of Airtime, What's on channel 400? Haymarket Conferences Papers (1997) 106 Interview with Mr David Cuff, Initiative Media's Broadcast Director 107 ibid. Murilo R. Cerdeira - MBA March-99 110
television environment, "channels will probably sell their airtime on their own merits, like the magazine market is today, where they can sell against what they can command."108
The impact on the cost of airtime in the short-term and medium-term will be the price rising on terrestrial mainstream television, which will have an impact on major advertisers. On the other hand, minor advertisers will find cheaper entry prices on niche channels and new channels. Major advertisers will most likely buy packages of airtime rather than individual spots. In contrast, minor advertisers will probably buy individual spots and deal with each station.
As digital television and interactivity will enable the introduction of many thematic and nonthematic channels when their main revenue will come from online transactions, they may offer an opportunity for some advertisers to target specific audiences. These broadcasters may be able to develop premium environments where they could create shorter breaks, solo breaks, and theme breaks where advertisements can be placed and could work more efficiently. "This would mean breaking from the current convention whereby channels compete to maximise share of impacts.109" Thus, advertisers and media planners/buyers may need to focus on quality of airtime rather than simply the quality.
Interactive advertisements will bring further problems in the charging models. As consumers go to an interactive area, they may spend minutes or hours there, and it will be difficult to calculate an average watching time in these areas. The problem is how to sell and charge for interactive advertisements. Should interactive charging models take account of the number of
108 109
Interview with Mr Simon Worthington, Initiative Media's Strategic Planning Director Burdett, R., Flextech, What's on Channel 400? Haymarket Conference Papers (London, 1997) 111
people who choose to interact, and how long they do so? Or charging by the amount of bandwidth the advertiser used? Or receiving commissions on each transaction made via the system? Or by click-through, hits or impacts?
The concepts of cost per thousand (CPT), television rating point (TVR), opportunities to see (OTS) will have to be reassessed. A new paradigm is required. Measuring the costeffectiveness of different types of advertising or different media schedule by CPT in a highly fragmented media can be misleading, because it does not take into account the qualitative aspects associated with media vehicles. According to a Mintel report (2010: Marketing to Tomorrow's Consumer. Mintel International Group. 1998), the right strategy to communicate the message with consumers must be based on integrity, quality statements, honesty and openness by using a media with high credibility. It means that, the impact of advertising in a high credible medium will be different from that in a low credible medium upon an identical audience, and the current system does not measure or cannot compare the qualitative aspects of different media.
The actual television rating (TVR) just tell "some part of the story" because "seen in terms of BARB ratings is defined as a person being in the same room as a TV for 15 seconds with the TV switched on.110". Thus, the system does not really measure if the person really watched the programme or not. This has also an impact on the term of OTS, because not every viewer that is watching a programme is also watching the advertisements. Consequently, in digital multichannel television where several channels will compete for a finite advertising spend it will be
110
Marshall, C, Advertising, The Economist Books (Profile Books, London, 1998), pg.179 112
extremely important to demonstrate that not only the number of viewers subscribes to a channel111, but also that they watch for an average of a number of realistic hours.
The advertising and media industries will have to devise new trading mechanisms and charging models to deal with the new realities that digital television will impose. For instance, should advertisers and media planners/buyers trade on guaranteed levels of coverage rather than ratings? In addition, cost per thousand is likely to come down, and cost per coverage point is likely to increase. Moreover, the current audience measurement system - BARB - will not be able to measure the audience fragmentation that will occur in the digital age, which will make the task of buying airtime a very difficult assignment.
8.4 The Television Audience Measurement System
The current measurement system in the UK - BARB (Broadcaster's Audience Research Board) is not efficient in measuring fragmented audiences on terrestrial, cable, and satellite television. "As fragmentation takes place so the accuracy of published ratings declines and there is also more fluctuation in the published results112. In the digital television environment with hundreds of channels, the current system will not be able to monitor the small channels. In order to give the media planner a better measurement of audience levels of particular channels, it will be necessary to increase significantly the sample size.
111 112
Gander, Paul, Captive Audiences, Marketing Week. (6 November 1997), pg. 43 Kirkham, M., Measuring the fragmenting television audience, Journal of Market Research (volume 38, No 3, July 1996), pg. 219 Murilo R. Cerdeira - MBA March-99 113
The current sample consists of 4,485 households, but because it also has 13 separate ITV sales regions it trades on small samples within each region113. However, continuing to generate larger peoplemeter panels is not a viable economical answer. Other important issues that the system is not able to measure are the "guest viewing" and "out-of-home" viewing.
New audience measurement systems will be required for the digital age, and there are many on trial around the world. Taylor Nelson/AGB is testing the Picture/Audio Matching system in Canada and Israel, but according to some experts this system is not capable to cope with hundred of channels114. Another system is in development, called Personal Portable Meter (PPM), which is a new type of people meter because it can measure both television and radio consumption. The testing is being carried out by Arbitron & Continental Research in Manchester - UK. This meter instead of being attached to the set, it is attached to person and it can record all the person's listening and viewing anywhere. Another system that is also being tested is a system that picks up the broadcast signal which are inserted in each channel broadcast. SRI in Philadelphia has been carrying out the trial.
Interactive television will enable the measurement of the impact of advertisements more precisely, like that which has been happening on the Internet. In the medium to long-term the technology will enable the development of more complex systems that will measure the clickthrough, hits and page impressions of interactive advertising, interactive sponsorship, or any communication tool that carries an interactive link. In addition, these systems will give a truer picture of the efficiency of any advertising campaign.
113
Meredith, Bill, Audience Measurement, What's on channel 400? Haymarket Conferences Paper (London, 1997) 114 Douglas, Torin, Who will watch what we watch once digital television goes live? Marketing Week (4 June 1998), pg. 14 Murilo R. Cerdeira - MBA March-99 114
8.5 Conclusion
Media in the UK was relatively stable until the 1980's, but during the 1990s has changed dramatically. Television was regarded an instant mass medium. These changes are leading to a greater media and audience fragmentation, which is in turn leading to a more complex consumer's media consumption pattern. Consequently, the media planners and buyers are facing new challenges and threats. Moreover, the media industry is required to think of the audiences as many groups or segments, characterised by combinations of their likes, dislikes, who they are, etc. Thus, new skills, modelling systems, better planning tools, research and personnel will be needed to cope with the new dynamics of digital television.
In the digital age is very likely that the debate about the number of exposures that is needed before advertising works will rise again. The dangers for the media industry is that the mass coverage opportunities in the digital television may be diluted due to media fragmentation and audience fragmentation and building coverage will be a difficult task. One solution to target and reach big audiences in the medium-term is that media planners will need to use a tapestry of different small channels on digital TV, mainstream terrestrial channels, and particularly the popular programmes, and a variety of communication tools listed in chapter 5. In the longterm the marketing communication plans maybe around the major programmes and "TV gateways."
There will be several opportunities that digital television will bring to the media industry. The niche channels will be an opportunity for better targeting and reaching the right audience without waste. In the medium to long-term, digital television and interactivity will allow broadcasters, advertisers, and media planners the chance to keep in touch with audiences, and
establish a better understanding of their tastes and preferences. "One-to-one communication" will be able to track and understand each individual television user, and each individual may talk back to the advertiser or broadcaster. This will lead to a better media strategy and an effective media plan.
Digital television will solve a problem of measuring the efficiency and effectiveness of an advertising campaign and the media strategy. Media planners will be able to measure in realtime on a weekly or daily basis, which will bring flexibility for advertisers and agencies to evaluate the campaign's objectives. Thus, an advertising campaign will turn out to be more measurable and accountable, which will put the media and advertising agencies in a position of a greater responsibility.
In multi-channel digital television channels will probably sell their airtime on their own merits. The advertising airtime in the big spots will become more expensive. Further problems will arise in connection with charging models for interactive advertisements, and the "traditional marketing paradigm" will have to be substituted for the "interactive paradigm." The concepts of cost per thousand (CPT), television rating point (TVR), opportunities to see (OTS) will have to be reassessed. The media industry will have to devise new trading mechanisms and charging models to deal with the new realities that digital television will impose. The current measurement system BARB will not be able to efficiently measure the fragmented audiences on the multi-channel digital television. Different measurement systems are been developed to cope with the highly fragmented media.
The following chapter, the current views from the advertising and media industry is assessed, as well as the consumers' view.
Chapter 9 - The Survey - Consumers' and Industry's Current View
9. The Survey - Consumers' and Industry's Current View
9.1 Introduction
As digital TV is a new technology, it is important to access if consumers want this new service, and if the service offered meets the consumers' wants and needs. Consumers will pace the time that this new technology will take up. However, it is widely predicted that digital television will turn out to be a runaway instead of a consumer's choice due to the British Government's intention of selling off the current analogue frequency spectrum. As there are few publications about this new technology and many gaps in the existing literature, it was required to assess the current view, strategies, and solutions that the broadcast, advertising, and media industries are generating.
9.2 The Consumer View - The Focus Group Analysis
Two focus groups were carried out, one male and one female. The methodology, the research objectives, instruments, and samples are fully described in chapter 1. The profiles of the focus group, 12 respondents in total, are shown in figure 18.
General context
Although the majority of respondents have heard about digital television, there is general confusion about what exactly digital television is, and how the consumers (respondents) will be able to receive the digital signal.
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Figure 18: Focus group profiles: Sex Male Female Age 22 - 30 31 - 48 Social Class A B C1 Nationality Great Britain Germany Ghana India Pakistan Malaysia Thailand Occupation Full Time worker Part Time worker Full Time student Hours of TV viewing per day 0 - 1.0 hrs 1.1 - 2.0 hrs 2.1 - 3.0 hrs 3.0 - 5.0 hrs Respondents with Satellite or Cable at home Cable Satellite
6 6 9 3 2 8 2 6 1 1 1 1 1 1 5 1 6
2 4 2 4 7 1
Benefits of having digital television
The majority of the respondents did not see any benefits or advantage of having digital television. A handful of respondents have read or heard, especially on the BBC channel, that the benefits will be better quality of picture, sound and more choice of channels. The female group was concerned with the quantity of channels and the quality of the programmes on these channels. One respondent said:
"Zapping will become a way of life with hundreds of channels."
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For them more channels meant less quality programmes. Other respondent said:
"With hundred of channels I am worried about the quality of TV. Even with cable, I am still watching BBC 1 & 2 much more than the cable channels, because of the quality of programmes."
Moreover, the female group was concerned that British television would become like American television, where most of channels broadcast soap operas. In contrast, two respondents in the male group saw benefits such as interactive TV, shopping via TV, better quality of picture and sound. The results suggest that men are more aware of the technical aspects of the new technology, and women are more concerned with quality of programmes on TV.
Interactive services on television
The female group did not know what interactive services were, and they had not heard about it. In contrast, the majority of respondents in the male group was aware of it, and knew something about it. Most of them cited the Internet as an example of interactive medium. The majority of the respondents in both groups regularly use or have used the Internet mainly for communication, academic purposes and leisure.
Shopping via TV
Although the majority of the female respondents have used direct mail and catalogues to buy products, they were not willing to use the television to do shopping. They have fear in losing the social side of contacting people and talking to them while shopping. In addition, they were
concerned about being influenced by the TV, and as a result they probably would over-shop. However, people living in the countryside would benefit from it. One female respondent said:
"Even if something in the catalogue or on the TV attracts you, it still lacks information such as touching it, the kind of material that is made of, and size. In the countryside catalogues are vital because there are no shops around, thus shopping via TV could be very useful there."
In contrast, the majority of the male group had not used catalogue or direct mail to do shopping, and a consensus was not reached if they would use or not the TV to do shopping. However, two young respondents used the Internet once to buy products, but both were experienced Internet users. These results may suggest that younger males are more enthusiastic and optimistic about technology than women, and experienced online users are more likely to use the new medium to purchase products.
Banking via TV
Security is an essential issue, and both focus groups showed concern about it. The majority of the males were not willing to use bank facilities or to perform transactions on TV. In contrast, the majority in the female group were willing to use this service on TV, mainly because they are using the phone banking already. However, if the banking system on TV uses the Internet as a platform, they showed concern about the lack of security on the system. The female group reached an interesting consensus, they showed concern about companies and the Government monitoring and controlling everyone's information and life. Moreover, they were afraid of receiving an enormous amount of junk mail, because they believe that banks and especially the credit card companies sell their database to direct marketing companies. Another interesting remark was:
120
"I am afraid of sharing my information with Big Brother, that scares me; he is going to control our lives."
Playing Games on TV
The majority in both groups was optimistic and probably would use the game facilities. The respondents that had children agreed that they are more likely to have this sort of service in their home, because their children would request it.
Current Television Broadcasting
In both focus group the respondents were satisfied with the current programmes, as one male respondent said:
"I really like the current broadcasting, you can find whatever programme you want."
On the other hand, the female group was very concerned about losing quality programmes in the digital era. They described the current terrestrial television with the exception of Channel 5, as quality television. Except for a few channels on satellite and cable TV, they were regarded as non-quality television.
TV Advertisements
Both group were asked if they usually watched TV advertisements or zapped to other channels. The majority of the respondents in both groups said that they avoided watching adverts. They were unwilling to talk about the topic, and it seemed that in both groups the act
121
of watching advertisements was a negative attitude. The reasons for not watching the TV adverts were because they usually used the commercial breaks to do something else, such as cup of tea, go to the toilet, or zap through other channels. However, in both groups every single respondent recalled some TV adverts.
Are they willing to pay to have Digital TV?
The consensus in both groups was that they were not willing to pay to receive digital television, nor to take up the new technology soon.
Pay-per-View services
The bulk of respondents found out that this service brings convenience, because the possibility to watch whenever they want and stop the movie whenever they want is appealing. Furthermore, they recognised the benefit of choice. Nevertheless, the respondents were worried about how much they would be charged for this service.
9.3 The Industry View - The in-depth and Telephone Interviews
The industry view described in this section is the analysis of the information gathered by indepth interviews and telephone interviews carried out with people in the broadcast, media, and advertising industries. The methodology, the research objectives, instruments, and samples are fully described in chapter 1.
122
General context
The general opinion in the industry is that digital television will be taken up very slowly, and it will grow into a reasonable size to reach critical mass only over the next 10 years. In the short-term there will not be any major impact on the industry. However in the long-term, digital TV will rewrite the advertising and media rules, and the industry will have to learn this new medium to survive.
How digital TV will affect the marketing communication?
The industry expects an increase of fragmentation of the media, the introduction of interactive services and better targeting opportunities. In the functional dimension, fragmentation will lead to a number of changes for the marketing industry115. Today the media buying process is quite simple. However, in the future with the EPG (electronic programme guide) guiding people to view around, channels will become less relevant, and programmes more important. When a programme terminates, viewers will call up the EPG and see what is on next and watch it, whatever is presented to the viewer. Thus, people will become less channel loyal and that is bound to affect the whole strategy process, and also it might make it more expensive to trade the media116.
In other dimensions, interactivity will provide home banking, shopping and communication services such as an electronic postal address (email), and video telephony. However, how much those services will catch on will be entirely dependent on how many banks, shops, and
115 116
Interview with Mr Andrew Walmsley, BBH's Head of New Media ibid. 123
retailers the digital platforms can attract to their services. Usually consumers do not walk to a shopping mall with only a few shops; customers want range. This will be critical for the interactive success, and interactive TV will practically compete with the Internet, where there are always an unlimited number of shops and services.
Another important point that digital TV will affect marketing communications is in terms of how the new functions generated by the new medium relate to other functions within a company. Currently companies are structured typically around the functional basis - finance, marketing, operations, and so on. However, the current interactive medium, the Internet, is bringing customers closer to the producer, which is making successful companies operate with shorter cycle times in their business, and they are having to co-ordinate more closely their activities, such as marketing, finance, production, and so on. As a result the in Internet is affecting the corporate structure.
The key skills required to be successful in digital TV and the Internet environment will be creativity, right strategy, and management processes. Those are the three core competencies that advertising and media agencies will have to further develop.
Which marketing tools do you think the advertisers will use?
The current view among the industry in the short-term is that there will not be any big step change from the current environment. The advertisements are still expected to be used as a "push" instrument to get the viewer to buy the product. The 30 seconds spot will remain the primary use of the television medium and it will be used for a long time to come. Furthermore, the use of programme sponsorship and infomercials will probably grow. In the medium-term,
the industry still expects to use the 30 seconds spot, but the major change will be the use of interactive advertising and interactive infomercials. The use of interactive infomercials is going to be very powerful, but usually things move slowly, this will take some time to the advertising agencies to change their strategy117. The advertisements are expected to be a "pull" tool, trying to get the attention of the viewers and making them to interact with the advertisements. However, these changes will entirely depend the pace that digital TV will take up in the UK, and the required return path to enable the interactivity.
Interactive advertisement and services
Interactive advertising will have a big impact in the television industry. It is going to be possible to tailor make the advert to meet customers needs, and it will allow people to get onscreen information, request additional information, to purchase the product via the interactive links in the advert, and create a direct relationship with customers. The advertising agency will create and produce the advertisement with special icons to call the interactivity. Special companies, in the case of DST (digital satellite television) B.I.B./Open TV (British Interactive Broadcasting) will be responsible for creating the interactive links, the transactional and information services related to the advertisement or any interactive service via Sky Digital.
The interactive advertisement will connect to B.I.B. data stream and in the advert will appear an icon on the TV screen, which will allow the viewer to get the interactivity features118. The icon may appear on the screen asking for a button to be pressed on the remote control. When the button is pressed the system will be linked to the B.I.B. data stream. The system will ask
117 118
Interview with Mr Jason George, Victoria Real's Account Manager Interview with Mr Simon Edelstyn, B.I.B.'s Advertising Product Manager 125
customers to press the number of the advert that appears on the screen. After that, a screen will appear with options that the viewers can get immediately, order further information, or make a purchase. The B.I.B. system will receive automatically back from the set up box all customers' requests, and the fulfilment house/department/company will deal and process the data. The system will probably encourage the viewer's impulse purchasing and it will be similar to Direct Response TV119. It will be easier to sell strong and well-known brands, but customers will probably be afraid of buying certain products or services from the TV. Broadcasters claim that the advantages of interactive adverts are:
It will allow direct relationship with consumers It will give immediate feedback about how many people responded to the advertisement, how much money they usually spend, their patterns, etc.
Possibility of building up a powerful consumer's data base Distribution costs may reduce
However, the majority of the interviewees were sceptical about building up a closer relationship with consumers. The reason is that not every consumer wants to have a dialogue with a product or a brand.
The interactive advertisements do not necessarily need to carry links to offer information or to direct sell a product. They can carry entertainment features to get the viewers attention and make them to have an exciting, relaxing experience and branding. The examples are the Pepsi Video Jukebox and the Kellogg's Frosties adverts, which Victoria Real (advertising agency) created and helped in developing respectively. These adverts invited the viewers to participate
119
Interview with Mr Jason George, Victoria Real's Account Manager 126
in the ad and chose what they wanted to watch and listen (Pepsi) or to do (Kellogg's). Viewers could chose any video music to watch, or create different versions in the same advert. The research carried out indicated that people recalled the Kellogg's advert 2 to 3 times higher than an ordinary advertisement. In addition, people related Kellogg's and Pepsi in a more positive way, they saw more value on the brand120.
Digital TV and the interactive services will heavily affect the supply chain. It will require a strong logistic behind it, to deliver and distribute goods, catalogues, brochures, samples. Probably digital TV and the interactive services will give the strength back to manufacturers121.
Planning the marketing communication in a highly fragmented TV
The industry does not expect a big impact in the short-term, and the strategies and the dynamics will remain the same as today. In the long-term the industry expects that the dynamics will be more complex than today. The EPG (electronic programme guide) will guide customers around, and as a result programmes will be more important than channels. Therefore, the industry expects that the marketing communication plans will probably be around the major programmes and the niche channels that reach the desired target audience. In addition, the communication industry will also use more programme sponsorship, coproduction sponsorship, and the use of other mediums such as newspaper, magazines, and radio to support the television campaign to reach bigger audiences.
120 121
Interview with Mr Jason George, Victoria Real's Account Manager ibid. 127
The audience measurement of hundreds of channels and programmes will be a big issue, and the industry believes that the current BARB's measurement will not yield accurate information. The media agencies will need new types of Optimisation software to find the best way to talk to the audience, how to talk to them, which is the best time or programme to talk to them, etc.
How to advertise a product in a highly fragmented medium to achieve mass market
According to the industry, to advertise a product to achieve mass market and branding will be the biggest challenge that digital TV will bring in the future. Digital TV will challenge the brands, and the way that advertisers create brands will change. Their expectation is that branding in a highly fragmented media will be very difficult. In the short-term there will be no difference. However, in the medium-term as people will be less channel loyal and more programme loyal, it is expected that the best way to reach large audiences will be around the popular programmes. In contrast, some interviewees believe that there will be a few strong channels that will keep attracting more audience than other channels. These channels can also be used to reach large audiences.
How the media will be sold on digital TV?
The industry expectation is in the long term, the new medium may not follow the current rule of dividing the audience share by the cost of a hundred (CPT)122. The TV airtime will still be sold based on audience, but there will be the possibility to sell the media based on consumers'
122
Interview with Mr David Cuff, Initiative Media's Broadcast Director 128
response, like the Internet123. As it works today, the small channels will probably offer cheap air times, and they may only add frequency to a TV campaign rather than the airtime in the market124. According to the industry, the TV stations at the multi-channel home have a market share of 1% or less, and these audiences are very easily reached elsewhere. In contrast, the most popular programmes have the most audience and big ratings, and these programmes belong to the major channels and major budgets. One reason that a programme has a big audience is due to the ability to pick up the light viewers. Thus, the media planner will be able to reach larger audiences by buying a spot on the major channels, as could not be done in the multi-channel environment
According to Initiative Media, the best example of post-fragmented TV market in the world is the US television market. A research showed that the average number of channels in New York is 45 for home, and the average number of channels tuned in was 10. The research showed that people proportionally watched less and less the channels that they have got. The industry expects that with hundreds of channels, several programmes will be required, and probably most of the programmes will be produced with low budgets, and presumably with low quality. The industry view is that the big channels will probably sell their airtime even more expensively, like it has happened in the USA where the top four networks lost their audience shares, but they increased their revenue ahead of the market massively125. The four networks gained more in advertising revenue than the market by increasing their premium cost of hour. Compared to the UK, in the multi-channel home there are only five channels that produce airtime to advertising schedule, they are ITV, Channel 4 & 5, Sky One and Sky Sport 1, whose airtime is becoming more expensive. Therefore, in the digital TV landscape the big
123 124
Interview with Mr Andrew Walmsley, BBH's Head of New Media Interview with Mr David Cuff, Initiative Media's Broadcast Director 125 ibid. Murilo R. Cerdeira - MBA March-99 129
spots will become scarcer, and their value will go up as has happened in the US television market
Audience Measurement
The industry's opinion is that the current BARB's people meter is unable to measure accurately the current satellite and cable television, and for multi-channel digital TV is not feasible. The BARB's system uses small sample sizes that are not possible to extrapolate the results to the whole British population. Therefore, a new measurement system will be necessary, and ultimately digital TV will allow the return path and measure the consumer's response.
9.4 Critique of the Primary Research methods
Despite the fact that the research carried out by myself has fulfilled the objectives, some problems with the methodology have become clear. The analysis of the gathered information was handled with a certain extent of difficulty. This is mainly due to some questions which were not properly designed prior to the research. Hence, these questions had to be redesigned during the research process. In a future investigation it is recommended that an effective research strategy should be developed before starting the research process. This procedure would ensure objectiveness and economy in the process of the information gathered.
Another critique is about the sample size used in the research process, because it is not large enough to represent an appropriate sample of British population. Moreover, the samples may be non-representative due to some respondents not being British citizens. Thus, a large sample size representing the whole population of Britain would be required for a future research
study. It is recommended that skilful moderators should carry out the interviews and analyse them. They usually are psychologists and have the ability to understand and interpret the nuances during the interviews. Telephone interviews should be avoided in qualitative research because they do not allow a good rapport, making it difficult to explore deeper any questions. Moreover, it is recommended for a future research to conduct several face-to-face interviews with people from the advertising, broadcasting, and media industries. This would provide additional insights and point of views from different companies.
9.5 Conclusion
In this chapter the main findings from the primary research were summarised. Focus groups, telephone interviews, and in-depth interviews comprised the primary research. Consumers were assessed in order to determine if the respondents were aware of digital television, interactivity, and possible services offered through the TV such as shopping, banking and playing games. In addition, they were assessed to check if respondents could see any benefit in digital TV, and their willingness to take up the new technology. The results are summarised in this chapter, but is important to point out that there is general confusion about what digital television is.
The broadcast, advertising, and media industry were also assessed to determine their current vision about the new medium, to estimate the strategies and solutions that the industry is creating. The industry's opinion is that digital television will take up very slowly. There will be no major impact on the industry in the short-term. Nevertheless, digital TV will rewrite the advertising and media rules in the long-term. There will be many opportunities and threats, and in order to succeed the industry will have to face them.
Chapter 10 - Conclusion and Recommendation
10. Conclusion and Recommendations
British television has experienced many challenges. Since the mid 1980's the boundaries amongst telecommunication, broadcast, and computer have blurred. The introduction of digital television is bringing another major step in British broadcasting.
The advent of digital television will affect the marketing communication industry, advertisers, advertising, and media industries. The industry will face new dynamics and realities. The art of mass marketing has been practised and perfected, selling highly standardised products to masses of customers, and companies around the world have developed effective mass media advertising techniques to support their mass marketing strategies. Thus, digital television is affecting the "traditional marketing paradigm." A new paradigm has to be developed - "the interactive paradigm."
The dangers that will affect the marketing communication, advertising and media industries (see chapters 5, 6, 7 and 8) are the increasing fragmentation of media and audiences, and increasing fragmentation of mass markets. Mass coverage opportunities in digital TV may be diluted due to these changes. Branding, particularly new mass consumption products, in multichannel digital TV will become more difficult. Moreover, consumers are changing their attitudes and behaviour in an unforeseeable manner, consumers' media usage is becoming more complex, and consumers are becoming more selective and are demanding tailored products and messages. Furthermore, television-charging models are likely to be affected, and concepts of cost per thousand (CPT), television rating point (TVR), opportunities to see (OTS) will have to be reassessed. Another problem will be the audience measurement, because the current system provided by BARB is not flexible and suited to measure hundred of channels.
The opportunities for marketing communication, advertisers, advertising, and media industries (see chapters 5, 6, 7, and 8) with the introduction of digital television are huge. The availability of hundred of channels, will bring several niche channels which will be a better platform to target customers more accurately. In addition, branding mature and well-known products will be more precise in targeting the audience and more cost-effective. However, the pace of the changes will depend on consumers' acceptance of digital television. Interactive television will become reality and it will provide a better platform to develop a closer relationship with customers. In the future "one-to-one communication" will be feasible and individualised messages, products, and services will be tailored to each individual. This factor will present the chance of keeping in touch with the audiences, and establish a better understanding of their tastes and preferences. Moreover, there will be the possibility of advertisements carrying on-screen-sales promotion, information on request, games online, and direct purchase through digital television. In sum, digital TV will bring a great opportunity to a better and effective marketing communication strategy.
Digital television and full interactivity will solve the problem of measuring the efficiency and effectiveness of an advertising campaign. Moreover, it will offer the possibility of measuring and evaluating a campaign in real time. Thus, marketers will have the flexibility to redesign, refine or fine-tune any advertising campaign. In addition, the new medium will provide a better platform to measure audiences, and to measure their attitude and changing behaviour.
The communication tools that will be available to use in digital television will be the advertisers programming, advertiser-supplied programmes, advertorials, banners or icons, classified advertising, virtual advertising, interactive advertising, spot advertising, broadcast sponsorship, infomercials, direct response television (DRTV), programme sponsorship,
advertising co-funded programming, and product placement. The last six tools being the most likely communication tools that the marketing communication industry will use in the early years of digital TV. This topic is fully explored in chapters 5 and 6. All these tools may or may not carry interactive features.
The advertising and media agencies must also adopt the integrated marketing communication (see chapter 7). The IMC may drive the agencies towards a better positioning in the market and may create a sustainable competitive advantage. This is due to the requirements in designing interactive campaigns and advertisements, where agencies will need to have knowledge of all elements of the communication mix. Thus, agencies should take this
"momentum," and develop a true IMC approach, and not take the dangerous position of "wait and see."
As stressed before, the pace of changes in the marketing communication industry will depend on customers' adoption of the new medium. It has been showed in chapter 4 and 9 that consumers are very confused about digital TV. Apart from "choice," consumers are not seeing real benefits to fulfil their needs and want to motivate them to embrace the digital revolution. Nevertheless, it is important to point out that interactive services such as video-on-demand, shopping, banking, and games online have an appeal to consumers. The research results suggest that consumers perceive that multi-channel digital television will bring the danger of increased costs and low quality programmes.
The early adopters seem to be the young males, and potentially the current multi-channel subscribers. Therefore, the take up of digital television will be slower than has been predicted.
134
The digital revolution is likely to be an evolution. Changing consumers' attitudes and encouraging them to embrace digital television will take a while, and it should be the focus point for the success of digital TV.
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Appendix 1
Appendix 1
Project: The impact of Digital TV on the Advertising and Media industry. In-depth and Telephone Interview's Questionnaire
1. How digital television will affect the marketing communication? 2. Which marketing tools do you think the advertisers will most use in the digital environment? Sponsorship, infomercials, 30 ' air slots etc? 3. How do you think the interactive advertisement will be? 4. How is going to be to advertise a mass-market product in a highly fragmented medium? 5. How the audience viewing will be measured? 6. How does a media agency work nowadays? 7. How is going to be the impact of digital TV on the advertising and media industries? Is it going to have any change? 8. How the media planner will plan the marketing communication strategy in a high fragmented medium - digital television? 9. Do you think that is going to be a greater use of mixed media strategies? 10. How the media will be bought and sold on digital TV? Based on audiences ? Will be more easy or difficult to buy and sold it? 11. Which audience research on digital environmnet will the media industry probably use? BARB's people meter? 12. Do you think that consumers know what interactive advertising is? 13. Do you think that with digital TV the consumer's viewing hours will increase? 14. In your opinion with in a multi-channel environment people tend to avoid watching adverts? Do you think they will zap more often? 15. In your opinion Do you see any kind of benefits that viewers will probably perceive by having Digital TV and interactivity? 16. Do you think that viewers are willing to pay for more channels and services?
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Appendix 2
Appendix 2
Project: The impact of Digital TV on the Advertising and Media industry. Focus Group - Discussing Questions - Questionnaire for Consumers (Viewers)
1. Do you usually watch television? In average how many hours a week do you watch TV? 2. Have you got cable or satellite TV in your house? If yes - Do you watch frequently cable and satellite programmes, or you usually watch BBC 1 and 2, C4, ITV or C5? Which one is your home page, your starting channel? 3. Have you heard about digital television? 4. Do you see any benefit that in having digital television? 5. Have you heard about interactive television? What do you think about that? 6. Have you ever done home shopping, such as direct mail, via Internet, or via telephone? 7. Would you like to use television to do shopping? 8. What about home banking, would you like to use your TV screen to control your account, pay the bills, request check books, etc? 9. Do you like games and gambling? What about playing games in your digital TV by yourselves or against other viewers, would you like it? 10. Do you use Internet? Do you use at home, office, or both?, How often do you use?, would you like to have the access on your TV set? 11. What do you think about the current broadcasting and programmes? 12. Do you watch the TV advertisements, or you just "zap" to other channel? 13. What kind of programmes do you expect to watch on digital TV? 14. What kind of advertisements you expect to watch on digital TV era? 15. Are you willing to pay for a set up box and satellite/cable rental to receive digital TV? 16. How much more would you pay?
17. What do you think having an option to pay per view?
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Appendix 3
Appendix 3
Project: The Impact of Digital TV on the advertising and Media Industry. Focus Group - Questionnaire Date: ____/____/ 98
1. Name: _____________________________________________________________ 2. Age: ______________________ 3. Sex: Male Female
4. Occupation: ________________________________________________________ 5. Degree: ____________________________________________________________ 6. Marital status: ______________________________________________________ 7. How many children do you have, if any? ________________________________ 8. Home: A. Owned B. Home is being bought on mortgage C. Rented from local authority D. Rented from private Landlord E. Other
9. How many Televisions do you have at home? ____________________________ 10. Do you have car? Yes No
11. What is the make? _________________________________________________ 12. How many times do you travel abroad within one year? __________________
State some brands that you usually buy on the following categories: Personal Care 13. Soap: ____________________________________________________________ 14. Deodorant: _______________________________________________________ 15. Shampoo: _________________________________________________________ Clothes 16. Clothes: __________________________________________________________
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The Impact of Digital TV On The Advertising and Media Industry

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The Impact of Digital TV on the Advertising and Media Industry

MURILO RUIVO CERDEIRA

THE UNIVERSITY OF HULL

The Impact of Digital TV on the Advertising and Media Industry

being a Dissertation submitted in partial fulfilment of the requirements for degree of

Masters in Business Administration

in the University of Hull

MURILO RUIVO CERDEIRA

2. The Step Changes in the British Broadcast

Murilo R. Cerdeira - MBA March-99

3. The New Medium: Digital Television

4. The Consumers and Digital Television

5. The Impact of Digital Television on the Marketing Communication Industry 49

Murilo R. Cerdeira - MBA March-99

6. The Impact of Digital Television on the Advertising Industry

7. The Integrated Marketing Communication (IMC)

8. The Impact of Digital Television on the Media Industry

106 108 110 113 115

9. The Survey - Consumers' and Industry's Current View

9.4 Critique of the Primary Research Methods 9.5 Conclusion

10. Conclusion and Recommendations Appendices:

136 137 138 139 140 140 143

Murilo R. Cerdeira - MBA March-99

I would like to express my gratitude to those who participated in this study

Murilo Ruivo Cerdeira London 03 March 1999

Murilo R. Cerdeira - MBA March-99

Murilo R. Cerdeira - MBA March-99

Murilo R. Cerdeira - MBA March-99

Chapter One - Introduction

Murilo R. Cerdeira - MBA March-99

Chapter One - Introduction

Murilo R. Cerdeira - MBA March-99

Chapter One - Introduction

1.2.1 Market Reports

Murilo R. Cerdeira - MBA March-99

Chapter One - Introduction

1.2.2 Professional and Trade Journals

1.2.3 Secondary Research Findings

1.3 Primary Research - The Methodology

Chapter One - Introduction

1.3.1 The Research Design

1.3.2 The Research Instruments

Murilo R. Cerdeira - MBA March-99

Chapter One - Introduction

1.3.3 The In-Depth Interviews

Murilo R. Cerdeira - MBA March-99

Chapter One - Introduction

1.3.3.1 Research limitations and bias

1.3.4 The Focus Group

Chapter One - Introduction

1.3.4.1 The Sample

Murilo R. Cerdeira - MBA March-99

Chapter One - Introduction

Willingness to discuss freely in front of other people

1.3.4.2 Research limitations and bias

1.3.5 Telephone Interviews

Chapter One - Introduction

1.3.5.1 Research limitations and bias

1.4Organisation of The Dissertation

Chapter One - Introduction

Murilo R. Cerdeira - MBA March-99

Chapter 2 - The Step Changes in the British Broadcast

2. The Step Changes in the British Broadcast

Dyer, Gillian, Advertising as Communication (Routledge, London, 1996), pg. 57 12

Murilo R. Cerdeira - MBA March-99