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A Road Paved With Revenue: GM’s Betsy Lazar Says Radio Can Get There From Here (03/19/07)

By Editor-In-Chief Joe Howard

The automotive advertising category is one of radio’s largest, and automaker General Motors is one of the category’s biggest spenders — the biggest, in fact, for 2006. As radio relies on this category year to year, automakers count on their radio advertising to reach drivers who might be ready for a new set of wheels.

The two businesses have also faced their share of struggles in recent years. While domestic automakers work to lure back drivers who’ve become increasingly loyal to import brands, radio fights for listeners’ attention against the growing wave of digital media.

At February’s RAB2007 conference, GM Executive Director for Advertising & Media Operations Betsy Lazar talked about these parallels in a keynote address, and shared with radio industry executives her insights on how each industry can learn from the others’ challenges. Later, she shared with Radio Ink some of her thoughts on opportunities radio may not be seizing, including online money she believes the industry could have if its online infrastructure were stronger.

As a key decision-maker for one of radio’s best customers, Lazar understands better than most why radio works, but she also has keen insight into what the industry can do better, and how it can grow its share of the media advertising pie.

RADIO INK: General Motors is radio’s top automotive advertiser. Why is radio working for GM?
Betsy Lazar:
We are big believers in radio. Chrysler’s been spending pretty aggressively, but we pulled the first 10 or 11 months of 2006, and still play out as the leader. Our OnStar service also uses radio as their primary medium, and their experiences have only served to reinforce our belief in radio across other divisions. In fact, we do a lot of tactical scheduling to align OnStar’s messages with our brands’ whenever we can. Because they are closer to what you would think of as a direct-response model — not quite that way, but closer than brand advertising would be — they get a measurable lift when they’re using radio. That is part of what is reinforcing their usage of radio, and we’ve shared those insights across the other divisions.

RI: Has your overall radio spending increased, decreased, or stayed the same in the past three or four years?
BL:
It’s pretty stable, but it may have increased. Our Chevy Local Marketing Groups in particular have been increasing spending over time. A Local Marketing Group, or LMG, is a dealer marketing group in a particular region. There are about 775 LMG groups. Each meets as a group and, working with our regional salespeople, they decide what their media plans will look like and what products they want to be marketing. That all works against a master retail planning calendar with each division.


RI: How much input does corporate have into where the LMGs place their spending?
BL:
The media plan for those groups, and the media plans nationally for the divisions, are all orchestrated by GM Plan Works, our agency that handles planning and buying. The goal of GM Plan Works is to make those plans fit seamlessly together. We try to show the dealers what we think would be the best media plan. If we say we think radio would be a good part of their mix, they can say no — but they generally believe that a multi-media approach will give them higher reach over a shorter period of time than a single-media approach.

RI: What are some of the reasons they give if they don’t use radio?
BL:
I’d say the reason for some of the smaller LMGs is that they’re trying to connect to the national campaign and they’re preference is a visual medium. That would be a common reason not to use radio.

RI: Has GM’s Internet spending increased? What is effective about Internet spending?
BL:
There are a couple of influences with Internet spending. One is the level of accountability. If we run an Internet ad, the consumer can engage with GM and click on our message, but they can also drill deeper by going to our websites right from the messages. They can identify a dealer and identify themselves as a lead so that a dealer can follow up with them. All of those things are possible using the Internet.

Now think how that same message would play out using radio. You can drive them to the web — for more information, go to chevy.com — and we have examples of campaigns that have been successful in doing that. With the web, the consumer is there with your message. That’s why we’re enthusiastic about stations that offer radio and digital components. When I say digital, I am talking about the Internet. Some stations have as much as 30 percent of their listeners going to their websites every week. If we can do some sort of combination messaging on the web and on the radio, that is a more powerful way to communicate with prospects. With all of the accountability issues out there, advertisers aren’t hesitating to shift resources online.

There’s another element to this that gets a little more techie. I’m hearing from my buying teams that even if a station has a website, on some of the back ends of those websites we can get uncommon placement, which doesn’t help the industry.

RI: What are uncommon placements, and what is the effect on advertisers?
BL:
We have to build custom-sized creative for those sites. The most common way to run digital ads is for us to serve our own ads, but those sites aren’t set up to do that. When we serve our own ads, we traffic them electronically and automatically. We’re not waiting for the station to say, “I served your ad, this is how many people engaged with it, and if you want to audit my records, I can show you how we counted it.” There’s a big difference between electronically serving our own ads — where we can do a census count that automatically feeds into our databases who is engaging on those ads — and physically sending creative to a radio station so they can serve it — which is the last way that you want to use digital.

What I hadn’t realized until recently is that the back ends of many radio station websites aren’t yet structured so that advertisers can serve their ads. Stations have built their sites so that anything that goes on the site needs to be served by the radio station, but most large digital advertisers serve their own ads. That is not helping your industry.

RI: It sounds like radio is leaving a lot of online money on the table. How has radio missed this opportunity?
BL:
I believe many stations set up sites without an eye to this becoming a need with their clients. They set up their sites so they can do cool things with their listeners without really thinking about the marketing opportunity with advertisers, and how the lack of a common structure and the best technology might limit their opportunity with advertisers. In any market, you have a combination of large affiliates and independent stations that aren’t really part of a group. If I am the Chevy-Baltimore dealer group running a local President’s Day sale, I would hope to run one common ad on all of the radio stations that are on that buy. I’m willing to bet that can’t happen today. Maybe this is something the RAB should take on.

RI: We hear a lot of talk about the marriage of radio and Internet, and this sounds like an opportunity to grow that side of the radio business. Is this a combination more advertisers are exploring?
BL:
Absolutely. In fact, our preference as we buy radio now is to do a combination of radio and digital. But it’s got to be easy to buy.
What kind of scale do you think all of the radio stations in the U.S. could have if a marketer could easily use an ad across radio stations? They don’t need to be connected literally, but they need to be organized so that the opportunity can be served up to a marketer. Wouldn’t it be awesome if GM could digitally purchase all Country format websites for Chevy Silverado ads? And better yet, if we could customize those locally by market? Digitally that should be an easy thing to do, but I bet if we looked at it right now, it would be an impossible thing to do.

RI: Are station owners indicating that they’re willing to try to accommodate this?
BL:
Some are, and others are still trying to figure it out.

RI: Has radio been slow to adopt change?
BL:
I believe you could make that statement across all traditional media. Almost every medium’s initial reaction is to resist digital. Then they move on to being concerned about the threat. After that, they embrace the opportunity. You could say that about network television, cable television, newspapers. Newspapers are just now moving from the fear of the threat to active plans to try to move to digital, as are magazines. There really are parallels in all traditional media. I wouldn’t say that radio is any further behind other mediums.

If we do a large-scale retail campaign, it’s a common practice to purchase the three largest Internet portals — Yahoo, MSN, and AOL — and we can literally get coverage that parallels, in fact exceeds, a top 75 market newspaper buy. That’s about 200 newspapers that we can replace and reach that audience with three Internet portal home pages.

RI: How is the comparative quality of the audience?
BL:
The audience is larger. People who are digital users tend to be slightly more upscale than newspaper readers, but the big difference is that you have a level of accountability and a level of engagement with the consumer. Again, they can go right to a dealer site if they choose to. They can go from that retail message on the home page of Yahoo to chevy.com to configure a vehicle, look at the current offers, select a dealer in their neighborhood, and engage with that dealer if they choose to.

We’ve been talking mostly about the Internet because that’s relevant to radio, but the other component that we’re getting very aggressive in is video on demand in local markets on local digital cable systems. If you go into video on demand, you should find an automotive section. In that automotive section, you’ll probably find “driver TV,” which is the VOD equivalent of a third-party automotive site. And you will also find a GM virtual showroom. That will show you exactly what we’re up to in video on demand. One of our quests for this year is getting more localized content. That’s one way we’re using local cable. So far, consumers who go in to driver TV are spending an average of three minutes with our vehicles.


RI: With HD Radio, the industry is moving itself into the digital age. What is GM’s plan for getting HD into vehicles?
BL:
Right now, we’re just looking at the opportunity. It’s no secret that we have a stake with XM Radio, and we’re going to keep a close eye on consumer preferences. We have no problem being a fast follower into that space, but we have no plans to lead into that space until we get stronger consumer pull telling us we should be doing that.

RI: It seems like radio is waiting for automakers to act, and automakers are waiting for radio to do something. Where do you think that consumer pull will come from?
BL:
The first signal for the radio industry will probably be what’s happening with aftermarket sales. A gentleman from NAB told me that major retailers like Circuit City are just starting to increase the distribution and availability of HD Radio, so that will be the consumer pull. If consumers are starting to see the value, and starting to purchase HD radios in increasing quantities, that will be a sign that they will be looking for it in their automobiles.

RI: GM has a stake in XM, which is viewed as a key rival to HD Radio. Is it fair to say you want to see XM succeed?
BL:
That is absolutely true, but we will follow consumer demand.

RI: From the consumer side, do you believe radio suffers from image problems similar to those that have affected domestic automakers?
BL:
The first thing I would say is that we still have a lot of work to do here at General Motors. It’s going to take a lot of time to change perceptions of people that don’t really pay a lot of attention to this industry. There is no easy fix; it is a long path and we’re committed to it. GM suffered from the lack of brand differentiation. We had four minivans in the marketplace — none of them near world class, to be honest. It makes no sense for Pontiac, as our seductive performance brand, to have a minivan. So, the big difference now is we’ve found a way to align our distribution to not have each division offer a full portfolio of products.

RI: How do you reach the people who aren’t paying attention to your product?
BL:
One of the reasons that digital is so important to us is that in the past, say five years ago, unless a GM customer was coming up on a lease, we had no way of identifying people who were in the market for a vehicle. People are only in the market every four years or so. So, every month only about 1 1/2 percent of the people in the U.S. buy a new car or truck. If we’re running a broad message, 98.5 percent of the people we’re reaching aren’t buying a car or truck that month. I don’t like to think about that very often, but it’s a fact. With the Internet, we have ways of identifying people who are beginning the shopping process by their behavior on the web. Seventy percent of all new car buyers today use the Internet as the integral part of the shopping process. In the luxury segment, that number is 80 percent. We’ve gotten very aggressive in trying to speak to people in the places where they go to research.


RI: What can radio do to make itself more appealing to consumers in its increasingly crowded marketplace?
BL:
Radio is a great way to target. In this day and age, that remains a unique strength of radio. Stations tend to not program for everyone; they program for more narrow targets of the population. So as we’re trying to target our brands, that allows us to pick formats and personalities that align really well.



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