The Impact of DVR on DRTV This article was published in the September/October 2006 issue of Philly Ad Club's AD NEWS

By Warren Hunter and Linda Reed

Direct response television continues to evolve. Rising cable rates have led to shrinking margins … per-inquiry opportunities are declining in part due to increased demand and willingness of advertisers to pay premiums for time … and conversion to digital television and cable’s move to digital transmission will likely facilitate yet another pricing structure for time and access.

Consider also that today’s savvy television viewer is becoming a bit more elusive as a result of the emergence of consumer-driven, ad-free options (such as TiVo). Mediamark Research Inc. reports an increase in DVR households (including TiVo users) from 8.6% in 2005 to 11.2% this year. At present, however, this remains a limited threat because these consumer-driven households tend to skew toward affluence (with average incomes exceeding $150,000) — and therefore represent a market outside the traditional core DRTV buyer.

So what is happening out there in TV land? MRI and Nielsen Research are both attempting to get a handle on commercial and DVR-based ad viewing. Advertisers anticipate that rates will become more negotiable if viewership is shown to significantly decrease during programming breaks. Consumer behaviors such as skipping, fast-forwarding, rewinding, and pausing are not new ones — nor is the assumption that the viewing audience declines during commercial breaks.

Since it began offering advertising three years ago, TiVo has made great strides by tagging commercials to allow viewers the opportunity to click small icons on the screen using a remote, or to click into a commercial. Together with a group of advertising agencies, TiVo has launched a function that enables viewers to search for commercials about products of interest. Commercials are organized into categories and keywords are used to search for relevant material. The result: an increase in relevancy, a more controlled television experience, and a more measurable and potentially cost-efficient broadcast model.

TiVo has in fact become an additional traditional advertising channel. And such developments portend huge opportunities for marketers. Household analytics — aligning consumer behaviors, specific programming, audience demographics — represents an important first step towards transitioning DRTV from a broad-reaching to a much more targeted media. Such activities bring a level of database-like analytics to both the medium and the message.

With TiVo to soon provide advertisers with analyses of its users’ commercial viewing habits, including programming genre, day, station, and time slot, direct marketers will be able to apply appropriate metrics that make TiVo viewers trackable. Such data may also accelerate the movement of advertising dollars out of traditional DRTV and into other media channels and/or broadcast applications such as product placement.

From the consumer’s perspective, the advent of consumer-driven television helps transition the purchase decision from impulse buy to a considered action. Research tells us that close to half of all households with computers locate those computers in close proximity to a television. We’re witnessing that direct response television can become a means for initiating the research that ultimately results in a decision to buy and/or request information.

Much of the shift in how we direct marketers view, execute, and evaluate DRTV campaigns is the result of the exponential growth of online applications. The earliest sign that things had changed may have been a smoothing out of the traditional peaks-and-valleys response curve seen when comparing DRTV calls to Web site activity. It became evident that a significant number of commercial viewers are choosing to find out more about an advertised product or service online. Therefore, capturing that “next step” in the process and crediting the direct response television campaign for such leads is critical for accurate campaign evaluation.

With the time widening between when a consumer watches a television spot and when he or she responds, marketers are looking toward new opportunities. To win in this new environment, however, marketers must ensure that all media channels are in sync and aligned to support, leverage, and effectively analyze the total campaign performance. In short, the direct marketing discipline of performance-based, audience-focused analytics has the potential to radically change how marketers deploy DRTV advertising dollars and measure return on investment. Stay tuned!

Warren Hunter is president and CEO of DMW Worldwide, a full-service direct response advertising agency with offices in Wayne, Pa., and Plymouth, Mass. Linda Reed is DMW’s chief marketing officer. The agency — which ranked 38th in the prestigious Advertising Age “Top 50 Direct Marketing Agencies” list and 6th in the Philadelphia Business Journal list of “Top 25 Advertising Agencies” — provides strategic planning, creative, database management, broadcast, media, production, fulfillment, and Internet marketing. Industries served include insurance, health care, financial services, consumer products, B2B, and non-profit. Hunter can be reached at 610-407-0407 or via e-mail at whunter@dmwdirect.com. Visit DMW on the Web at www.dmwdirect.com.