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MANAGERIAL APPLICATION 3.1

Sampling Technology for TV Advertising

Nielsen Media Research estimates the popularity of TV shows using a random sample of more than 5,000 households, containing over 13,000 people. This number fluctuates daily as about 300 households come in and out of the sample every month. Nielsen is careful to ensure that various ethnic and income groups are represented in proportion to the overall population, as measured by U.S. census data. For example, 11 to 12 percent of Nielsen TV samples are African-American, and this matches the percentage of all TV households in the United States classified as African-American.

Detailed information is collected using a "People Meter," or box about the size of a paperback book, which Nielsen installs on or near each TV set. For national programs, People Meters record what is being watched and by whom it is being watched. Each night, this information is relayed to Nielsen computers. To measure local TV audiences, Nielsen gathers information using viewer diaries four times per year, during February, May, July, and November "sweep" months. Information about which programs are airing for each station or cable channel comes from a coded ID number that is part of almost every TV picture. Keeping track of what is on TV is also done with the help of program listings provided by networks, stations, and cable systems, as well as published TV listings for more than 1,700 TV stations and 11,000 cable systems. Nielsen's signal identification technology converts TV commercials into digital "fingerprints" that can be automatically identified.

All of this information is combined to produce the famous Nielsen ratings, which measure TV program popularity. Nielsen ratings are not just a vital indication of audience size. The more audience a program delivers, the more commercial time is worth to advertisers. Given the high cost of programming, it may take 10 million viewers for a nationally syndicated program to generate the advertising dollars necessary for business success. Against this backdrop, it comes as no surprise to learn that viewers, advertisers, TV executives, and Hollywood are all interested in Nielsen ratings!

See: Nielsen Media Research (http://www.nielsenmedia.com).

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