A view from Gideon Spanier

Brands rip up media plan in the face of disruption

Tesco is in the middle of an extraordinary media planning experiment.

The retail giant has been cutting its media spend for years amid falling sales. But it decided last September, in consultation with MediaCom, to take more radical action. Tesco slashed its media budget for newspapers to practically zero and shifted most of the money into online and social media. TV and other traditional media have also been heavily cut. Call it zero-based media planning – when a client resets the budget to zero and starts its media buying plan with a clean sheet of paper.

Tesco’s thinking was that the influence of newspapers was badly diminished and online offered better reach and effectiveness, especially in combination with the supermarket’s rich customer data. It’s a bold strategy that might be working. Last week, Tesco reported its first quarterly rise in UK like-for-like sales for three years.

Newspaper chiefs are horrified. Tesco was spending £60 million a year, or more than £1 million a week, in press five years ago, according to Nielsen. It has spent barely £1 million in the first three months of this year.

Seen in this context, it is no wonder that Asda, another struggling grocer, has replaced its media and ad agencies.

At a time of unprecedented disruption, brands must experiment, and quickly, because they know the status quo isn’t sustainable. Technology is driving change, and it fits with another growing trend beloved by Silicon Valley companies – A/B testing. That means testing two strategies simultaneously – say, running two ad campaigns in different markets – to see which works.

Even rival companies are, inadvertently, going through a form of A/B testing. The chatter among marketing chiefs is how Unilever is cutting its TV spend and putting more into online video and social. At the same time, Procter & Gamble is doing the opposite because it feels TV is delivering better results than online.

This clash of views reflects what I wrote here last week about how broadcasters and tech giants are vying to prove the relative merits of TV versus online video.

After YouTube claimed brands should put 24 per cent of their TV budget into the site to reach 16- to 24-year-olds, Thinkbox hit back as it calculated that just 1.4 per cent of video ad consumption by millennials is on YouTube. Now YouTube has this week published more research (planned before Thinkbox spoke out), which claims that "YouTube delivered a higher ROI than TV" in 77 per cent of cases, based on 56 campaigns across Europe.

No-one, including Thinkbox, should underestimate the scale of this epic battle. If more brands behave like Tesco and shift their money, some media owners are going to go out of business.