Recently I saw a TV commercial for a fast food restaurant advertising a brand new milkshake flavor, only available for a limited time. As a big fan of maple and bourbon, I immediately went to look up the nearest location, only to find out it was two states away. Why, I wondered, would they spend money to advertise so far from their locations? Surely, even the most dedicated milkshake enthusiast would think twice about driving three hours for a dessert fix.
However, as a media measurement professional I know there are often very real benefits to opting for national over local advertising buys for certain brands, like this fast food restaurant. On the other hand, buying locally-targeted ads may make more sense based on the business and industry landscape. Here are the key considerations for deciding to go local vs national:
Are there opportunities to realize cost savings?
National advertising for most audiences is significantly less expensive on a cost per GRP basis than local buys in terms of TV and other reach media. A recent client example for similar reach and engagement showed Los Angeles GRPs over 5x more expensive when bought locally versus national coverage. With dozens of candidates and the US heading into an election year, expect this differential to be even greater starting in the fall. [The Iowa Caucus is February 3rd, followed by New Hampshire on February 11th. Super Tuesday, involving 13 states (including Texas and California) is on March 3rd in 2020.] For brands with presence in enough local markets, purchasing nationally may be a more cost effective option.
Are there additional brand building benefits involved?
Advertising beyond a brand’s immediate area of distribution can generate brand awareness amongst new potential customers. In the case of the fast food restaurant: 1) it may help draw in new customers who see the commercials and then travel to areas with locations and recognize the brand name, and 2) it may raise awareness among potential new franchisees. On a recent trip to Texas, for instance, I finally got that maple bourbon milkshake I had seen on TV back home.
For more unique, high-ticket purchases, customers may even consider planning a trip specifically to visit a location far from home after seeing national advertising for the product. I was recently reminded of this when seeing an ad in a hotel for dental implants – travel was certainly not cost prohibitive when looking at the alternative options for such a big expense procedure.
Is ecommerce involved?
And for companies with an online presence in addition to a limited number of retail locations, national marketing can drive online sales amongst people who may never have otherwise known about the brand. (If only milkshakes could be bought online – sigh.)
Is competitive differentiation key to the industry?
For businesses like internet service providers, where competitive differentiation on speed and service plays a large role, local advertising often makes more sense despite its higher cost per GRP. In these cases, there is limited upside to advertising nationally, since it is difficult to source customers in markets led by competitors. In telecom, where markets may be controlled by one or two key players, messaging needs to be applicable to what products and services are specifically available.
Where is the potential customer pool concentration?
For industries with a potential customer pool located only in specific markets, local targeting will usually be the best option. For instance, in the case of true luxury goods, it may make sense to focus investment on high net-worth markets where flagship stores are located despite the higher price tag. Similarly, for insurance vendors it is likely more cost effective to concentrate investment on the West Coast for earthquakes and other regions for floods rather than purchasing national ads.
There will undoubtedly always be cases in which local advertising is preferable to national, and vice versa, but the considerations when selecting between the two go far beyond the physical location of stores. It is important for localized businesses to consider the cost savings and brand building benefits of national advertising in deciding the best avenues for reaching consumers, while also accounting for potential customer base demographics and any industry intricacies that may make local advertising a better option. Now, about that milkshake…
– Aaron Baker, VP, Project Teams