October 7, 2015

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First Mediaworks

The Future Of Marketing Is Here: Can Radio Remain Relevant? (02/07/05)

By Reed Bunzel, Editor-In-Chief

Forget mass marketing. It doesn't exist. And while we're at it, let's toss in target audience, target demos, cost per thousands, gross rating points and even the Arbitron diary. Done. Kaput.

In case you haven't noticed, there's a major marketing shift going on, and it's coming from the top down. Advertisers are discovering that the traditional, half-century-old marketing system that involved gross impressions and reach and frequency doesn't work in a nation of individuals. Oddly, the shift is also emanating from the bottom up, reflecting a growing impatience on the part of consumers with the advertising messages that bombard them daily. Enough is enough, they're saying - and, to paraphrase the tagline for THX digital sound, “the advertisers appear to be listening.”

That's the message from Natalie Swed Stone, who commands industry respect as a tenured professional with more than 20 years' experience in the advertising and marketing communities. As U.S. director of national radio investment at OMD, she guides all network radio investments for the company's clients, providing strategic counsel on effective use of the radio medium.

“In radio, we've had commercial-free hours, or 45 minutes of commercial-free music, and then taken 10 or 12 commercials and isolated them into one long pod,” Swed Stone observes. “That's how bad things have gotten, and it has to be changed completely. We need a new model that positions commercials as programming. This way, every minute of the programming hour would be viewed as programming, whether it's commercial or not.” That model puts the burden on radio programmers and broadcasters, she notes, “but they have to do it. They have to be able to choose which commercial goes where, which commercial goes first, how to put them in islands and how to put them in a place where it's palatable to the listener.”

Rather than defining target audiences, Swed Stone believes advertisers are trying to understand the mindset of a particular person. “To do this,” she explains, “we usually get a profile of what media that particular person likes, what their social activities are, what hobbies they have - and then we'll see if a format fits in, or if they have a format preference. We're moving away from broad targeting.”

Swed Stone began her career as a research analyst at CBS Television Network, and joined NW Ayer in 1979 as manager of Network Television Research. Her ties to OMD were established in 1981, when she became manager of network radio for BBDO. She sold radio from 1988 to 1998, including ABC Radio Networks and MediaAmerica, and returned to the agency side of the business in 1998. She headed the network radio department at The Media Edge before joining OMD (a division of Omnicom) at its inception in 2000. Swed Stone's clients include J.C. Penney, Dell, Epson, ABC-TV, State Farm, Visa, Office Depot, McDonald's, Cingular, Clorox and Travelocity.

As a recent speaker at Forecast 2005, Swed Stone met with Radio Ink to discuss relevance, consumer control, individuality and the integration of marketing and programming.

INK: During the past 12 to 18 months, the traditional mass-market approach to marketing has shifted to focus entirely on the consumer. What is driving this shift?
Swed Stone:
The change originated at the advertiser-client level, where there's extreme pressure for accountability and return on investment (ROI) based on the competition in all areas of business. A recent article in The Wall Street Journal noted that a chief marketing officer is replaced or changes jobs every two years, because of the difficulty of the job. Advertisers can no longer look at a media expenditure and assume that business will go up simply because they advertise. They must indicate how, if they spend a certain amount of money in a certain way, sales will increase. As a result, we've had to develop research models and new ways of assuring success and results.

Evidence indicates that consumers now use several different media simultaneously. Is this causing advertisers to re-examine how they market their products?
You raise an interesting point, which speaks to the difference in media planning today vs. the way it was. We used to look at everything medium by medium, so people could decide to use television or radio; they could decide on a certain GRP level, and conduct different research for each medium. We're now looking at a total marketing approach. We need to find one research methodology that tracks consumer behavior among all media. Then, we'll be able to see if the total plan, or elements of the plan, affected the consumer. People may say, “I heard about it on the radio,” but they also may have read about it in a magazine or seen it on television. Those elements may have started the purchase decision, and the radio campaign pushed them over. We're trying to figure out which combination works best.

What has radio's role been in this?
Radio has basically killed the golden goose. During the past few years it's been about “How many commercials can we insert?” In radio, we've had commercial-free hours, or 45 minutes of commercial-free music, and then taken 10 or 12 commercials and isolated them into one long pod. That's how bad things have gotten, and it has to be changed completely. We need a new model that positions commercials as programming. This way, every minute of the programming hour would be viewed as programming, whether it's commercial or not. That puts a lot of burden on radio programmers and broadcasters, but they have to do it. They have to be able to choose which commercial goes where, which commercial goes first, how to put them in islands and how put them in a place where it's palatable to the listener.

Many programmers want little to do with sales. Can they be convinced to take an active role in integrating commercials into their programming clock?
They've been playing to the research in answer to the old question “How do I get my ratings up?” They can get away with it in today's research climate by programming the spots a certain way, because the research is measured in average quarter hour in a diary. If we go to minute-by-minute ratings, I know that if I program three or five minutes of commercials, I'll lose 30-50 percent of my audience. I'll know it, and the ad community will know it. Nobody will buy those numbers - if they do, they're going to pay half.

How does Clear Channel's Less-Is-More strategy fit into this?
Clear Channel is on the right track. They're reducing commercial clutter. They're paying more attention to pods and position, which commercials should go first, which commercial is more likely to retain an audience in the second position. That's a new way of thinking, and it's important. But adjustments still need to be made, and questions answered.

How important is a commercial's creative element in this new consumer-centric marketing climate?
Clear Channel also understands that the quality of the commercial is critical, which puts the burden on the agency and the advertiser. We cannot just give them anything and expect them to accept it. They have to be partners and say, “I'd like to accept your business. Would you mind if we consulted you a bit?” Or, “Would you mind if we made that less noisy? We believe our listeners, our consumers want something a bit softer.”

Have you read the Wirthlin Study released last fall by the Radio Ad Effectiveness Lab?
Yes. We must take a long look at the RAEL research, especially the findings about relevance. The Wirthlin Study addresses the fact that consumers expect commercials and programming to be focused on them. If we're putting a commercial out to 10 formats, we have to be sure it's relevant for those 10 formats. If we're addressing younger men, older men, younger women, all at the same time in the same way, it may not be effective. We need to pay more attention to individual consumers, and we haven't been doing that.

Does this mean an end to such concepts as target audiences and target demos?
We're moving away from those definitions. In internal discussions at OMD, we ask, “Who is the consumer? Tell me more about who we're trying to reach.” We don't really use the word “target” anymore. We say things like: “We're looking for active consumers” - or we give them a name, such as “information-seekers” or “mouse potato.” That's the new target. We are trying to understand the mindset of a particular person.

Is the perspective shifting from mass media to one more focused on the individual consumer?
Yes. I don't know if there is mass media anymore. We still call television and radio mass media, but those terms are not defined the way they were 20 or 30 years ago. Look at TV news: You can't use three television networks anymore and assume you'll reach 70 percent of the people. Most media plans need many more elements than they did in the past, which is why this multi-media research and approach is so important. Most television plans today include cable, and radio plans of the future likely will include satellite radio and Internet radio. With so much fragmentation, we can't call anything “mass” anymore.

Would it be like comparing Leave It To Beaver with The Osbournes?
That's a fabulous way of looking at it - the Leave-It-To-Beaver way we used to live vs. what we're doing today. Most of us were once like that one family, but today we have many different families. Even the definition of family has changed.

In the absence of mass media, how can advertisers reach the consumers they want to influence?
We're trying to figure out which combination of media is best to deliver a message. A person is much more than a demographic. We have to imagine what this person is all about, and which media he or she is most likely to use. That's very different from thinking: “I'm going to buy television; now which program should I buy?” or “I'm going to buy radio, what should I be buying?”

With so many different elements affecting consumers today, how can you identify the best media to reach them?
It's not easy. We've told the satellite radio broadcasters, “We know we can't buy your non-commercial programming channels. But when they're not listening to your non-commercial channels, where do they go? Do they like rock music or alternative? Do they like ESPN?” How can I reach listeners when they go to a commercial channel for information or traffic or weather?

Is radio easier to buy than in the past?
Radio is not difficult to buy, because technology has helped us. Electronic Data Interchange (EDI) is a big help in managing the fragmentation of formats and the thousands of stations and spots we have to deal with. Without technology and EDI, it would be very difficult. The difficult part - the next stage - is negotiating my pod position, then confirming that it was my pod position. Then get the research for that pod position and make future buys based on that. As I understand it, in Europe pod positioning is everything, even on radio. As we become more global, that will become more of an issue. Buying today is not that difficult, but we need to get to a different accountability.

Has radio been lax in its effort to become accountable to the advertiser?
Part of it has been our responsibility. We need to make our needs very clear. We must convey what we're looking for and what the advertiser is looking for. It's important that radio salespeople understand things have changed. For example, when we hear that sellers want to market themselves - “We're reaching 90 million people,” “Radio reaches 96 percent of the population,” or “Our aggregate number of impressions is this” - it's not relevant anymore. I want them to tell me about their listener. That's the bottom line: Who are you programming to? What's the natural fit?

What is the natural fit?
We're now advertising to an individual, which is the point of that relevance study by RAEL. We're talking about individuals. If a salesperson tells me “I have 90 million people,” he's trying to speak to me in a mass language. I want to speak about the individual, and I don't think salespeople get that yet. The relevance study shows people really believe the radio is speaking directly to them. It should be like a conversation with a friend. It should sound real, not like it was produced in a studio for unknown people.

Is there still a perception that some radio salespeople will do anything to get the sale?
Some people will take any money you give them. They'll tell you they have whatever it is you want. That's a disservice. They don't understand the consumer. The old methods and old thinking about mass marketing, GRPs, CPMs and negotiating is not relevant anymore.

What can radio salespeople do to get a better understanding of advertisers and agencies?
They should do more focus-group research on the people they're programming to, then give us that information. That would be invaluable. They do a lot of music research, but that's as far as it goes. It's time they started thinking of the advertiser as a partner in the whole process, including programming. Radio must look at innovative ways to partner with any media outlet they can find. Think of radio as a part of a multi-media mix. If radio is presented in isolation, it will be thought of in isolation.

What about radio sales training that still teaches such lessons as “How to steal money from newspaper”?
Radio broadcasters should think in terms of working with a newspaper or a magazine, or the stronger entities in their market. Then they can say, “Look what we did - we partnered; we think this would work for you.” That would be creative and innovative, as opposed to “us vs. newspaper.” They should be thinking about partnering with whatever medium the advertiser wants. They need to say, “You use a lot of newspaper? Let me see how I can work with that.” Or: “This works for you? Let me see how we can extend that for you in radio.”

Has the Radio Advertising Bureau been proactive in conveying this marketing shift to its members and the national advertising community?
In the past, there wasn't much marketing to advertisers and agencies on the national level, and the RAB was serving the individual radio stations by giving them sales training, research and marketing materials. That was their job. Part of this must have changed recently due to pressure from individual groups and members, who said it was time the RAB emulated the Cable Ad Bureau, which has been very effective in marketing to agencies and advertisers. The RAB's work has been superb lately. The RAEL website has been getting thousands of hits. There's a need for this information, which nobody had been providing. Of course, the RAB could do more - it's one thing for them to talk about the research; it's another thing to implement the ideas. The RAB can do only so much; radio broadcasters have to make the sale happen.

For the first time in more than 20 years, except for two recessionary years, radio's revenue growth in 2004 was lower than the retail sector's growth. Is this a reflection of the explosion of media choices and a resultant shift in marketing strategies?
Slow radio revenue growth is definitely tied to this shift, largely because there are so many more media today. Even last year, most media people were asking: “How is television doing?” and “If more money goes into TV up front, will that hurt radio?” That's a narrow way of looking at things, given what we know now. While everyone was looking at TV and radio, other media were emerging.

How do we mix programming and advertising?
We must be subtle about it. It's really up to the programmers - that's what they're paid to do. We're headed toward integrating programming and marketing, so they have to do it. Maybe it goes back to simply having palatable commercial pods. Maybe a minute is all the average person can take. A few minutes of music, then a commercial minute and then a few more programming minutes. They must find creative ways of integrating programming and advertising.

How does the Internet play into this?
Radio stations have not really tapped the Internet. Maybe - maybe - there's a way to do some of this integration online and use the medium to cross-promote. If radio people don't start using the Internet in a smart way, competition is going to take it from them.

A number of radio stations are using the Internet to connect listeners to advertisers. Should they do more?
Having another touch point with the consumer is critical. The Internet and iPods are giving consumers control. They're getting used to it, and they want more. They can program their iPod; what if they could access programming from the radio station's website? That would create a personal relationship with the station. Maybe then, commercials for products would be applicable to them in a personal way.

This sounds like a scene from Minority Report, in which Tom Cruise is bombarded by personalized advertising messages.
That is where we're headed. We've all read about the technology that one of the satellite companies is developing, which will give them the ability to know exactly where you are. If they know you're in your car, they can put in a commercial that says, “There's a McDonald's a quarter mile up from you,” or “Because it's you, John, we're going to give you a free Big Mac.”

Isn't this still off in the future?
Yes, but it's on everybody's mind. In media and advertising, we're always looking at next year. We're planning for 2006. It's not unusual for a client to say, “We're planning on 2006, so we need some new ideas.” People may think we put too much emphasis on satellite radio or the future, because 96 percent of people still listen to radio. Because we are constantly living in the future, we're more focused on this than some people think we should be - but we have to be.

Does this imply that radio doesn't look at the future enough?
The greatest challenge for radio is programming. For decades, radio has offered music to people, and now we have several different ways of accessing it. The question is: How can radio stay competitive? How commercials are packaged is part of that, because there are people offering non-commercial environments for the same music. Radio must take a hard look at its program and commercial offerings.

Isn't that what television networks did by introducing reality shows? Love 'em or hate 'em, they shook up the stale mix of sit-coms and cop shows.
You're right. The creation of the reality show gave people something to talk about. The Apprentice, Survivor - they were compelling. Viewers wanted to tune in to find out what was going on. But radio doesn't have anything like that. There's information that I won't get anywhere else. Radio must provide something vital.

Is that part of the attraction of talk radio?
Talk radio has been one of the worst offenders in terms of commercial clutter. While talk radio may be compelling, the minute they go to three or four minutes of commercials, the listener can't stay with it. People don't have the patience for it. We need to get information and be entertained at the same time. People are too savvy to listen to all those commercials. As marketers, we're constantly thinking about tomorrow's approach. But by the time we do it, everyone else is catching on, and we have to find a new way of breaking through.

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