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Why Radio Is Not Embraced By Advertisers

12-10-2012
by Eric Rhoads

For decades, the RAB and others have preached that selling is about being customer-centric. We've all heard it, we've all been trained to interview clients about their needs, and there is not one broadcaster on earth who does not know this to be true. So why is radio not getting its fair share of ad dollars nationwide? I've discovered what is probably the major reason.

A Dream Team
"What if," I thought, "I could put together a dream team of advertisers, and ask them why radio is not getting more ad dollars?" After all, we in radio think we have a strong story. We think we have decent relationships with listeners. We think we can move product. Unlike other legacy media, it appears radio has not lost its audience. I wondered what we could learn if we somehow got the most important advertisers in the world together in a room, just to talk about radio.

When I raised the idea, I was told, "It will never happen. Why would those people bother to take the time to help radio by answering our questions?"

"But what if I could pull it off?" I asked. "Everyone one in the industry would be there to listen. This could be the most powerful focus group in the history of radio. Every group head would be in the front row, not only to show their support, but to hear what these advertisers are saying."

I like a challenge, so I decided to do it.

A $100 Billion Panel
At Radio Ink's recent Forecast conference, this impossible task was accomplished ... almost. We managed to get five advertising greats in the room and on a panel to tell us exactly how radio can get on their radar. These men represented $100 billion in advertising and 75 percent of all advertising spending in America. They were:

Bill Koenigsberg, president/CEO and founder, Horizon Media
Tim Spengler, worldwide CEO, Magna Global
Doug Ray, president, Carat
Brian Terkelsen, CEO, Mediavest USA
David Verklin, marketing consultant (panel moderator)

Yes, we pulled it off. We got them there. It was historic. No one before has managed to get all five of these giants on a panel together. Each was willing to speak frankly about radio. As an opportunity, it may have been the most important hour in the history of radio. There was only one thing missing. The group heads in the front row.

Though there were several radio presidents and CEOs who stayed and listened, most of those representing radio's biggest companies were outside of the room. And they did not hear the most important advertiser focus group in the history of radio. Perhaps they had meetings or e-mails or pressing matters to attend to. Perhaps I didn't communicate the real power of this panel.

I'm not being critical of them. I'm sure some of these group heads and advertising executives already know and talk to each other. But if they had stayed in the room, and listened, it would have sent a powerful message.

Critical Feedback
Had the group heads been there, they would have heard that advertisers need to see metrics and measurement techniques that are focused on ROI. The panelists told us ratings are not the metrics they're looking for; they need proof of our ability to move product and engage customers. And they want the research to support it -- information they said no one in radio has provided. And they told us that other media are considerably more sophisticated about offering the proof of ROI agencies need. In other words, these agency heads were saying, "Show us the proof that will give us the confidence to invest."

Though they want radio to come with more ideas, they also said the discussion usually doesn't even get that far. Clients simply won't buy unless we first provide proof of radio's relevance and effectiveness.

These execs said radio is no longer on the radar of many advertisers -- it's not even part of the discussion. When radio does make the media plan, it gets little more than crumbs. Agencies find it hard to understand radio's value proposition, and they can't interest their clients in it, or their creative people. The panelists even said they don't feel they know how to get good radio creative.

Asked if they have radio departments, most said they have small "audio departments," but most of that attention is devoted to online audio.

Koenigsberg said, "The product benefit is just the cost of entry. The consumer wants value exchange. It used to be about reach, now it's about engagement. It used to be about frequency, now it's about relevance. It's no longer cost per point, it's cost per value point. Your story has to be reinvented. You have not figured out how to take the engagement factor and audience engagement and package your story."

Digging Deeper
After this eye-opening panel, I started exploring the problem further and found that what radio is missing is airtight econometric examples of performance or payback. Other mediums, including television and even print, are laser-focused on proving their ability to generate ROI. Radio is not. We've been on the sidelines too long.

When the Internet Advertising Bureau couldn't get advertisers to invest on the Internet, then-CEO Greg Stewart commissioned a cross-media optimization study with more a dozen advertisers, at a cost of millions.

Once the IAB proved to advertisers that the Internet could move product, they worked with the advertisers to identify the optimal spend -- which was more than before the studies. And Internet advertising began to explode.

I am not saying that these studies were the sole reason for Internet advertising's growth, but they played a large role. Stewart has since moved to the Mobile Marketing Association -- and again commissioned a study the power of the medium, which is opening doors that had been closed.

For radio to grow, we need to substantiate our claim that radio not only delivers a positive ROI, but delivers an ROI that is greater than other media options available to advertisers. We are not competing for ad dollars in a vacuum.

Earlier this year, when Facebook was under pressure to demonstrate its ability to generate ROI, the company attacked the issue head-on. According to a report in the Wall Street Journal, Facebook personnel were sent to work hand-in-hand with advertisers to figure out how they could deliver greater results. The reason advertisers are flocking to what we call the "shiny new toys" is not because they are new or shiny, but because they are accountable and measurable.

It's Selling 101: Speak the language of the person to whom you are selling. And as an industry, we are not doing that. It is incumbent upon all of us to not only bone up on the topics of econometric modeling, ROI, and payback, but to really focus on how we as an industry can enhance our performance in this arena.

Econometric studies cost a lot of money. But it's also generally true that if you pay a lot of money for insight, you will typically believe what it tells you and act upon it.

Where Is The Radio Econometrics Study?
There is no econometrics study for radio. Why not? We tell advertisers we haven't lost our audiences  -- and we haven't, according to Arbitron -- and that we remain strong. We talk about our ratings, but advertisers simply don't care. Pandora can not only give targeted data by neighborhood, it can tell you how many listeners clicked in response to an ad and how many of those went on to make a purchase. That is what advertisers are demanding.

And this is not only a national issue. A lot of business that is classified as "local" on your books is placed directly with your stations by national agencies.

Are We Living In The Past?
The bottom line is that radio's ratings, its audience strength, and its relationship with its listeners are of little value to advertisers unless we can prove it all translates to business. We're using 1970 sales techniques in 2013, and few are paying attention. Media alternatives that have studies to prove their effectiveness are blowing past radio.

We have to prove, via third-party studies, from firms respected by major ad agencies,  that radio can provide substantial payback for the investment.

This focus on ROI is being driven by technology, increased media alternatives, and "C suite" expectations. Chief media officers are under tremendous pressure to deliver results from their marketing ad spends. The average life expectancy for CMOs in a job is around 36 months. These are high-paying jobs, they want to keep them, and they realize they need to perform. So they choose their media partners the way we all choose stocks, investing where they'll get the best return.

It's Not About Ratings Anymore
Everything radio does needs to be about audience engagement and return on investment. Instead we're focusing on keeping our PPM numbers high by doing things that likely result in the opposite of consumer engagement. Do we really believe a spot buried in the middle of a commercial-laden stopset is going to drive business? Sure, it's good for PPM listening, but I suspect that if engagement were measured, it would show that is not the optimal environment for an ad.

Some might say Arbitron's study from last year confirmed that much of radio's audience is retained during an ad break, but I would argue that retention doesn't equate to engagement. After listening to Bill Koenigsberg, I suspect that he would agree.

There's a fine balance. We must be passionately driven to deliver results for clients. Ratings are not relevant to a client if you can't prove you'll accomplish their goals. We must start proving it. Saying it is so does not make it so.

Focus On Outcome
Advertisers care about consumers taking action. Radio must stop focusing on features, benefits, audience sizes, targeted audiences, and ratings. Those things only matter after we prove we can provide significant results. We must focus on outcomes. It's how all advertising is being evaluated today.
 
Clients only care about what you can do for them. Google Local and others are proving their value proposition and showing exact results. Your local focus needs to be about proof.

The old definition of insanity is to repeat the same behavior while expecting different results. And I believe that's where radio is today. Yes, we're seeing some digital innovation. All that helps, but nothing will bring change faster than a national radio study proving that radio moves the needle.

We all believe radio moves product. Now it's time for radio to step up to the plate and fund a study to prove it. The bottom line is that we need to have enough "science" to convince the CMOs that radio is the right place to spend their limited ad dollars. If we can show the cause and effect, radio's budget will never be cut. It's all about ROI.




(1/31/2014 4:55:34 PM)
oPAMNG Very informative article post.Really looking forward to read more. Fantastic.

- NY
(1/9/2014 12:21:24 AM)
CX2TfQ Thanks a lot for the post.Really looking forward to read more. Really Great.

- NY
(12/14/2013 1:05:08 PM)
eZNa2f I cannot thank you enough for the blog.

- NY
(10/23/2013 2:06:33 PM)
yR32ce Im thankful for the blog. Really Great.

- NY
(12/17/2012 4:28:45 PM)
I don’t understand how gravity works – but it does - doesn’t it?

It sounds like as an industry – we need to do a better job of educating buyers on how radio works. If there are better tools for R.O.I. measurement –(that the other guys are “laser-focused” on) --- by all means share! That discovery might finally allow us as an industry to charge what our product is really worth! The best advertising medium to influence buying decisions in America today is still – RADIO!

One of the sharpest retailers I ever had the good fortune to know – taught me plenty about “R.O.I.” (he was a retailing genius). Ken - tracked everything – before he started any advertising campaign he already knew exactly how many people were walking in to each of his stores, how many people made it to the cash register, his total sales, the average ticket, the weather, holiday impact and day of the week. He kept track of everything – (and this was before computers) so that when he added advertising (which always promoted “bona-fide offers-with deadlines” not just “image ads”) his goal was to improve those numbers. He tracked the impact it had – he watched his store traffic counts, and most importantly he compared his sales against previous months, quarters and years – he knew exactly what worked and what didn’t!

Radio Still Works –and in three easy steps- Step 1: Develop a Strategy Step 2: Create a Strategy Focused Message and … Step 3: Run it with adequate Consistency and Frequency – so you cut through the clutter! The good news is – Radio is still the most cost efficient medium when it comes to delivering buyers through consistency and frequency! If you have 15 minutes …just ask -Geico, or Home Depot, Wal-Mart, AT&T, McDonald’s and thousands of other national and local brands who have spent billions on Radio. What secrets do these advertisers know that your panelists don’t?

Education is the answer!

As to your question - “So why is radio not getting its fair share of ad dollars nationwide?”– That has to do with competition … remember - supply and demand? – There are some 14,728 radio stations, 1,774 television stations and roughly 1,400 daily newspapers. We drive our rates lower because agencies pit us against one another – and don’t value our brand – “RADIO”!

~RADIO WORKS … JUST LIKE … “WORD OF MOUTH” – ONLY FASTER!~

Sincerely,


Bob DeFelice
Sunrise Broadcasting



- Bob DeFelice

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