|ads--behind the scenes|
An important concept to understand before going into the nitty gritty details of television advertising is that a network's "product" is not actually the shows, but the viewers: networks "sell" viewers to advertisers.
Advertising agencies help businesses put together a marketing strategy. These strategies range in sophistication from simple to complex (a series of different commercials with multiple target audiences).
As part of the strategy, they decide what demographic group the commercial will be geared toward. These groups are determined by the advertisers and not the network. Generally though, age groups can be divided in the following ways:
In addition to ratings and demographics, advertisers pick commercial spots based on psycho-graphics. For example, if a network decides to air a mother's day special, advertisers whose target audience is mothers might decide to air commercials during that program. Although the program's ratings might not be as high, advertisers are assured that the demographic composition of the audience is closer to what they want.
As far as purchasing goes, advertisers buy commercial positions on a cost per (ratings) point (CPP) or cost per thousand (CPT) basis. Basically, that means that advertisers pay either by the percentage of the total audience tuned in to a particular program, or by the number of people, expressed in thousands, tuned in to the show.
Networks sometimes cancel shows mid-season due to horrible ratings. Rather than repaying advertisers in cash, they agree to run extra commercials during other programs to make up the difference in ratings (remember...the advertisers bought based on a ratings guarantee). These are called "makegoods." If a show does poorly but is not cancelled, the networks are still obligated to make up the ratings differences in extra commercial spots for advertisers.
At the same time, sponsors can pull advertisements. In the event of an airplane crash for example, all ads for airline companies are pulled. Most of the time though, ads are pulled because the sponsor just doesn't have enough money. In that case, networks make up some of the money by increasing the cost of commercials that have already aired.