How Do Nielsen Ratings Work? - Definition & History

Instructor: Endya Perry

Endya has taught corporate training courses and led seminars in various business topics. She has a master’s degree in business administration.

What are Nielsen ratings? Why do we have them and where did the idea for ratings come from? How do they work and what are they used for? Find the answers to these questions in this lesson.

What is an example of a scenario where the ratings would be used?

Laura is very excited. She finally has the marketing budget to use for television commercial advertising. This was a huge accomplishment. However, she now needs to decide when her commercial should run. So many questions entered her mind. During which show should the commercial run? On which channel should it air? To answer these questions, Laura turned to the Nielsen ratings. After the commercial has launched, she will also use the Nielsen ratings to determine the success of the commercial campaign.

What are Nielsen Ratings?

Nielsen ratings refer to the national TV ratings for shows broadcasted in the United States. The Nielsen Rating system is designed to assess the popularity of TV shows, commercials, and advertisements.

What Insights do the Nielsen Ratings Provide?

The Nielsen's technology is able to provide insights to corporations, aiding them in their advertising efforts. The technology is able to obtain and support a large amount of real-time data. The Nielsen technology is able to precisely track consumer behavior during TV shows, movies, programs, and commercials. Nielsen ratings can inform their advertising clients when viewers change the channel and when they watch various commercial blocks. They can also track the demographics of viewers that fit within the target market segments a company wishes to reach.

How did the ratings come to be?

Arthur Charles Nielsen, Sr. (A.C. Nielsen) founded the A.C. Nielsen company in 1923. The company specialized in quality testing. They also offered consulting services regarding machinery and parts. The company struggled financially, nearly going bankrupt. They recognized that they needed to move into a different and more profitable direction. The company began focusing on market research and measuring sales.

Nielsen is often credited with aiding in the creation of various market research tools and concepts, including the market share concept. By 1942, the company had entered the radio audience measurement industry. A.C. Nielsen, Jr. joined the company in 1945. Under his guidance and forward-thinking, the company gained great efficiencies in the method used to collect data and provide measurements. By 1950, they began using their technologies to evaluate how people watched various TV shows. Currently the company tracks more than just television habits. As the market has changed, the company's tracking and measuring efforts have as well. They now also measure data related to smart phones, DVR selections and subscriber services, such as Netflix.

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