A New Day for Radio

Back in the late 90’s I began work as a New Business Development director for a pair of start-up Smooth Jazz radio stations (it was a glorified title given to me by the owner of the stations that translated into a Production Director that worked with sales people on ideas to generate new direct business). At the time, I had devised a plan that was less than “sexy” but highly effective: spec spots. The goal was to add $250,000 in new business on top of the 1.2 million the station made the year prior by using the plan to target new advertisers. By years end – we had generated over $900,000 in new direct business.

When I would work with new sales people I’d recommend the book “Positioning” by Ries and Trout as a starting point, asking them to read it and provide their thoughts on the concepts described in the book. Of those that even bothered to take the time to read it – the feedback would be mixed. Either they came back and said “Wow! I get it! This book is fantastic!”, or they’d return with some half-hearted, shoulder-shrug comment along the lines of “Yeah, it was okay. It’s just common sense”.  Needless to say, those that had a ‘Wow!’ reaction ALWAYS out performed those that dismissed the book’s teachings as merely common sense.

The ‘common sense’ of the book revolves around a simple axiom that I’ve carried with me ever since – “don’t tell me how you’re better; tell me how you’re different”.

As we meet and talk with radio folks about the future of the industry, we dive into all sorts of possible scenarios about how the radio business model will be reshaped.  In the years we’ve been having these types of discussions we’ve run into far more of the shoulder-shruggers than we have the “Wow!” crowd… and you guessed it… the ‘Wow’s’ continue to out perform the ‘common sense’ folks.  The wow crowd is expanding their horizon beyond traditional spot and dot radio. They are experimenting, investing, learning and earning.

It appears clear that radio is faced with an either/or proposition going forward. Either they will merely accept the fact that they will be a smaller industry overall in terms of revenue, or they will need to revamp the business model to grow revenue in new and different ways.  Most we meet say they aren’t willing to accept the first option, yet at the same time we see no evidence that they are working on a concrete plan to embrace the second.

The Changing Model
Changing a longstanding business model is not as simple as saying “it needs to be done”. For example, one wrinkle is the fact that radio’s current model is influenced by a number outside industries – all of which are undergoing significant change themselves. The music industry, the advertising industry, the ratings industry, and the government itself are all struggling with change of their own.  Whatever decisions those industries make regarding their future, it will certainly help shape and develop the type of business model radio ultimately embraces.

However, it’s our opinion that radio cannot simply wait around for the others to define what they are going to do before putting some serious thought into what radio’s own future will become. Radio, at some point, will need to take the lead in the discussion of their destiny. That lead role will involve risk, trial and error, investment, and most of all…patience.

Ratings Don’t Matter
In the years I spent as a Program Director I cannot recall one single instance where a listener came up to me at an event or a remote and said: “the reason I listen to your station is because your station the number one station.”  In fact, even if your station is 13th in the market – I’d argue you’re number one in the minds of the people that listen to you regularly.

Put another way… people don’t love to use Google because it’s the number one search engine – Google is the number one search engine because people love to use it.

Seems to me the only ones that truly benefit from radio ratings are those that provide ratings, and those that use those ratings to beat radio over the head for a lower rate. So what’s the role of ratings in a new business model? Is it time for this measurement tool of the past to give up the ghost?

For those that believe radio cannot survive without ratings in their business model we invite you to consider how some stations beyond the top-five in your market, or stations in markets without ratings manage to operate successfully. They seem to be making money… albeit some more effectively than others.

One could argue that even though radio has generated a good deal of revenue from the ratings-based model, the model never truly made sense.  For example, if I’m looking to do a direct mail piece in a particular city the cost starts relatively low, and increases as I define the target in more detail. Yet, the opposite seems true in radio.

Let’s say I approach a direct mail company and they tell me they can deliver my ad to 300,000 households for 3 cents per household. The moment I tell them that I only want to reach a handful of zip codes, the cost per household increases. If I define a gender, the price goes up again. Add a specific age range and income level… the price continues to climb.

Now look at radio… a larger, wide-ranging, widely-defined CHR audience (The generic 300k households) cost more per spot than a smaller, more narrowly-defined Smooth Jazz audience. Why?

For those that would argue the radio/direct mail argument is an “apples-to-oranges” comparison, I’m afraid you may have missed the point. The reason we see articles about marketers shifting dollars away from traditional media in favor of new forms of media revolves around the marketer’s ability to target and track the consumer according to specific criteria.

It’s no longer enough to know how many people you have listening to your station. You must understand who they are, where they live, and what interests them beyond the format of your station. If radio is going to build a new future – defining your audience in more exacting terms, it seems to us, is the difference that will make radio better.

--Chuck Francis, VP New Media Strategies, Remerge. Remerge Media is a multi-media consulting firm, specializing in new media integration and simultaneous media solutions. Remerge works with radio (as well as other legacy media) clients to help them understand, integrate and generate revenue from new media through custom sales solutions, and providing traditional media sales personnel with highly specialized training. Remerge solutions provide a high rate ROI for traditional media clients, as well as their ad clients. The company is based in Columbus, Ohio. More info about Remerge can be found online at RemergeMedia.com