Testing Radio Today – A Buyer’s Market

Before we talk about direct-response, here’s a quick catch up on several significant changes which have taken place in the American radio industry during the past several months:

• Virtually all major ownerships have reduced their workforces significantly, due to a 2-year drop in revenues.
• Virtually all Top major markets experienced their second straight year of Q1 revenue dips.
• Satellite Radio now accounts for well over 20 million America listeners (including car passengers, and those who listen via online or
• Satellite TV services). This for an industry which had no customers five years ago.
• Most major ownerships have stepped up efforts to monetize their station Websites, with some innovations such as “members-only” exclusive sections, Keyword searches, and Social Networking elements to the Sites.
• More markets are adopting PPM (Portable People Meters) as a new means of measuring audience, in lieu of outdated Arbitron
diary-keeping methods.
• Numerous Stations have flipped from formats that were unpopular and/or lost revenue in favor of formats which have more historical success in their markets.
• Bucking the trend of local stations, Network Radio has had a much stronger period, with some major network companies reporting INCREASES over a year ago.

What does all this mean to a marketer who simply wants to test whether direct-response radio works or not? It means it has been a LONG time since we’ve seen local rates this low, along with several other inexpensive options to play with. There has not been a time like this in the past 15 or so years to stretch your money further or negotiate a deal more favorable to your comfort level. Still radio is used by well over 90% of Americans each day, so it not only continues to be an effective, if undervalued test-marketing vehicle, its demise is quite premature.

Radio merely continues to undergo a shift in how people use it. It has unprecedented competition from Ipods, Steaming Audio, Satellite and the Internet. It also has more competition for the ad dollar from the Internet than ever before. Moreover, the U.S. economy has hurt revenues, and in particular, the loss of mortgage companies who had been the staples of radio advertising the past five years or so.

Recently, local radio sales people are harder-pressed to make their budget goals, and have been dealing more aggressively than years past. Frequency and CPM have long been staples of DR, regardless of the marketing venue. 2008 has been the easiest year in some time to realize Frequency and CPMs goals that befit intelligent testing. Top-rated stations in Top 10 markets, particularly the more response-friendly talk-based formats, have been working hard to assure their DR clients are happy, since they have lately had the flexibility to offer low-charge and no-charge rotations like never before. About the only place you may still see some challenges in getting clearance rates are network, which as said earlier, have had surprisingly strong sales periods, and have not had the level of low-cost media as one would expect. That said, it does pay to investigate, since there are those weeks when logs are light.

One concern specifically pertaining to achieving CPM goals has been the impact of the aforementioned PPM audience measurement method. To understand what we are talking about, here’s the brief description from Arbitron’s Website – The PPM is a unique, versatile audience measurement system that can track consumer exposure to any encoded broadcast signal. The PPM can determine what consumers listen to on the radio; what they watch on broadcast, cable and satellite TV; what media they stream on the Internet; and what they hear in stores and entertainment venues. The Portable People Meter is a mobile-phone-sized device that consumers wear throughout the day that works by detecting identification codes that can be embedded in the audio portion of any transmission.

Initially, PPM has been a good thing for radio in the markets which have used it so far – it has shown an overall listenership to be higher, and not surprisingly, has shown that more stations are being tuned into by a typical listener than had been previously thought. Overall, this has resulted in higher Cume for many stations (Cume is the total number of unique listeners who tune in each week). There have been criticisms about accuracy, but these are being dealt with by the industry. Conversely, other stations have experienced PPM-measured decreases in Average Quarter Hour/AQH listenership (the estimated number of listeners during any given 15-minute interval). Problem is, we use AQH to figure our CPM, so a lower AQH means a higher CPM. So what’s a person testing radio to do? Consider the Cume numbers, and where they rank relative to other stations in your key demo, alongside the CPM numbers, and test the stations that offer the best overall combo of CPM and Cume rankings. And given the margin of error for a new system, don’t sweat it if one station is percentage points different from the other you are considering.

Satellite Radio is a medium that, if you are seeking national audience, is a no-brainer to test. It still costs dramatically less than most traditional networks (some exceptions, such as Howard Stern and Opie and Anthony, apply, but even those programs are less expensive than in their terrestrial heydays). You have the added benefit of a two-line message scrolling along the dashboard while the spot airs. Satellite reaches a consumer who is likely making both car-payments and subscription payments – definitely one who is no stranger to continuity programs. Moreover, you can easily seek the talk radio audiences via channels you want at a fraction of what the brands cost on TV or traditional radio (CNN, ESPN, Weather Channel, Discovery Channel, Playboy, just to name a few). And frequency can be purchased with surprising cost-efficiency.

In an effort to increase revenues in non-traditional ways, most major ownerships have stepped up sales efforts with their station Websites. Features ranging from blogs, concert information, social networks, and in general, new ways to put the visual back into radio. It makes sense that their online audiences have matured and the Websites have become just as much a part of listeners’ daily routines as the stations themselves. There have even been direct-response success stories from station/network Websites. However, like the Websites themselves, the exact science is still evolving as to making it work. Streaming spots still have yet to show consistent returns, however response does improve when you add a banner link on the media player and create audio meant just for that audience (“Hey you..listening on your computer…look at your media player for one second and click the banner onto _________ dot com”). Intelligently placed banners have seen success, provided they appear with the same frequency and consistency you would expect any campaign to require. The stations who have adapted Sponsored KeyWord searches have shown success as well (For example, how would you like to own the Word “FLOWERS” on a top-rated station’s Website on Valentines or Mothers Days?). Blogs, particularly those by revered station personalities have not only helped generate leads for clients, but increased overall searched results to clients’ home Web sites. Email blast offers and surveys sent to opt-in listeners can also be nice additions to a marketing campaign in a test stage. Admittedly, your should NOT overpay for any of these features, and they are likely subject to negotiation for being relatively new and unproven. These can make sense to test when you feel the Website is offering a reasonable value for your dollar commensurate with your other marketing efforts.

Let’s not forget that Radio was the first electronic medium of them all. Historically, it is consumers’ most trusted advertising venue, with the highest ad-recognition and greatest likelihood for a response lead to convert. It is undergoing some changes and growing pains to adapt to the very broadcast world which it paved. Radio’s audience is still VERY MUCH there (when there is bad weather or breaking news and you are in your car, you are NOT getting up to the minute information from your TV or Internet connection). Now listeners can simply be reached as cost-efficiently as they have been in a long time, with rates we never thought we’d see again back in the dot-com driven days of 1999-2001. Just as the stock experts tell you to buy while the market’s low, and real estate investors tell you to buy real estate when the market’s soft, this is radio’s time for marketers to stretch their test dollars and take advantage of radio’s version of a “buyer’s market”.

Joe Rashbaum is President of The Radio Solution Company, a radio direct response agency and consulting firm celebrating 11 years of success. Reach him at (805) 279-3391 or inquire below.

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