Risk in Media Planning
If you sit through a media planning meeting between a planner and a client, you'd probably hear terms such as GRPs, reach and frequency, CPRPs, effective frequency, and recency. If you sit in more sophisticated meetings, you'd probably hear of words such as "optimized media plan".
However, it is very rare for media planners to talk about risk management.
Which is quite surprising.
GRPs - ratings, TARPs, rating points - all cost money. And in these times of "very fickle-minded audiences", variability in ratings are more pronounced than ever before.
In spite of these phenomena, media planners are still preparing plans based on pre-set and predefined GRP goals and CPRP ceilings. They sometimes use sophisticated, individual-/respondent-level data to come up with "optimized" media plans.
However, such optimization techniques do not take into consideration "risks" - that is, the possibility of the media plan not delivering its goals.
I believe that the time has come for media planners to take into account the variability - and the risks - that come with their media plans.
I know that it is a tall order - but as audiences are being exposed to more and more options within a medium and within a timeblock, it is time for media planners to take into account risks and variability. It is only when we start thinking of risks and variability - and measure them and take them into account in a media plan - can we truly talk about ROI.
I have prepared a simple program that you could probably use as a starting point for thinking through a "risk management" approach in media plans. Of course, I will not claim to be an expert myself in risk-management; nor will I declare that the attached file is something that solves the problems of risk-management in media planning.
However, the attached could be a starting point - however simple it may be.
Here is a description of the file.
The challenge is simple: There are 10 programs that a media planner must consider buying. Each has a corresponding CPRP (cost per rating point). Here's the clincher, however: the average ratings of each of the programs are somewhere around 12.5. There is little difference across the 10 programs in terms of ratings - the media planner can only decide based on costs.
My proposition is simple: There is an opportunity to go beyond costs. In fact, there is a need to go beyond costs.
It is when things seem to be similar that we need to apply concepts of risk management into the media planning process.
To demonstrate, look at the attached file (after you've downloaded it and opened it in Excel 2000 or later). Enter any inputs that you'd like to test out in the blue cells. And then run SOLVER. It has been preset in the file.
The goal of SOLVER is to minimize what I call the "Risk Factor" whilst meeting the constraints that are defined by the media planner (e.g., the plan should be within budget; there is a minimum amount of GRPs that need to be achieved; there are minimum/maximum shares per program).
The Risk Factor is a simple measure - it is based on the concepts of variance, a common measure of risk and variability in the world of Finance.
This - I hope - will inspire others to take into account risk measures in the same way that they look at optimized GRPs, reach, and frequency. The time for risk management concepts to be incorporated in media planning, I strongly believe, has come.
And media planners should rise up to the occasion - specially now that clients are faced with challenges that they have never encountered before.
