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1 Feb, 2013 By: Doug McPherson Response

Media costs are down but opportunities are up for traditional radio, as well as Web-based and satellite-based services.

 “Welcome to the new age, to the new age
Whoa, whoa, I’m radioactive, radioactive”
— “Radioactive,” Imagine Dragons

Should you be “radioactive” — that is, should radio be an active part of your selling repertoire? Is this the new age for radio? Not surprisingly, those in radio say yes to both questions. But do they give good reasons for saying so?

One line of reasoning is that TV — with its hundreds of channels — is so fragmented, advertisers can find respite in radio. Of course, the case could be made that radio itself is getting a little fragmented with the arrival of Internet and satellite radio stations.

In fact, Ed Mezyk, who is pro-DR radio, admits radio is fragmented. “It’s one of the most important changes we’re seeing in radio,” says Mezyk, vice president of advertiser services for Marketing Architects Inc., a DR marketing firm in Minneapolis. “But listeners are also more educated about products and services through company websites, blogs, social media and many other sources. And astute listeners will use all the tools at their disposal before deciding to buy, and often before contacting your company.”

Mezyk adds that fragmentation is different than a fading audience. “Don’t be tricked into the perception that this limits the effectiveness of the channel. The audience is listening and is just as responsive as ever. Increased fragmentation leads to increased targeting and effectiveness in performance,” he says.

Fragmentation doesn’t faze Michael Battisto, president of Target + Response, a DR agency in Chicago. “I’m guessing you expect me to say that the Internet has had a big impact on radio, but in reality, it really hasn’t,” Battisto says. “There are more stations than there were five years ago, and listenership in total has never been stronger.”

Battisto says average ad rates are about half what they were 10 years ago, and he calls remnant marketplace in radio “vibrant.” “DR advertisers can include radio into their ad mix because the cost isn’t prohibitive anymore to make it pay out,” he says. “With the decrease in ad costs and the low cost to develop creative, radio has never been more suited to DR advertising.”

Skeptics might say that’s all well and good, but where’s the proof? Fred Catona shares his experience of staggering numbers with DR radio. The CEO of Bulldozer Digital, a DR radio marketing agency in Blue Bell, Pa., Catona helped market the E-commerce site Catona says the first 14 days of the campaign brought 2.2 million requests for airline tickets. Within 18 months, generated $1 billion in sales.

“In one week, we sold $50 million in airline tickets,” Catona says. “And we built the second most recognized online E-commerce brand in 120 days. After 18 months, Priceline went public at a valuation of more than $10 billion, and in 24 months the value was more than $20 billion. Today, the stock is selling at more than $600 per share. That happened primarily because of direct response radio.”

Catona says his big discovery in DR radio success was the use of “self-empowerment.” Meaning, for Priceline, the idea of “Name your own price” was key. Catona also helped, the site that lets consumers uncover their credit reports. He admits he actually failed the first few times in the spots, but then tried the tagline, “Run a credit report on yourself,” and that worked. “Giving people a sense of control — and not being sold — is a huge winner,” he says.

Catona adds that his agency focuses on what he calls “digital convergence marketing.” It’s about using radio first, then blending it with social media, Internet marketing, mobile, etc. “You have to build trust, let the consumer get to know you, then they’ll like you — and then they’ll buy from you,” he says. “Radio is becoming digital and it’s integrating with the Web. You have 242 million listeners per week — so my prediction is radio will be the next big Google.”

An Ear for the Basics

So how do DR advertisers examine, analyze and begin to make sense of the many radio advertising options? Mezyk says while it’s important to keep an eye on the evolution of the radio industry, it’s just as important to keep an ear on the core direct response principles that drive results.

“Stay on top of all the changes, but don’t minimize the value of a strong, benefit-laden radio spot that tugs at the customer combined with a powerful offer that delivers a product that exceeds a customer’s needs,” he says.

Matt Geoffroy, marketing manager at Strategic Media Inc., a DR radio company in Portland, Maine, gives five reasons DR marketers should consider radio:

  • Lack of Overlap. “In conjunction with TV advertising, instead of a synergy effect, radio actually delivers different customers — customers you’d never get by advertising solely on TV.”
  • Reach. “More than 93 percent of Americans age 12 and older listen to radio every week.”
  • Lead Quality. “Radio listeners convert at higher rates than TV and generate higher average revenue per sale.”
  • Cost. “A DRTV campaign can cost more than $100,000. A radio campaign can be done for a few thousand dollars.”
  • Refine Back-End. “Launching in radio first lets you refine and improve sales, customer service and fulfillment without the pressures of large up-front ad development and media budgets.”

Making Radio Work

Peter Koeppel, founder and president of Koeppel Direct, a DR agency in Dallas, suggests starting in local markets during drive time, tracking response and then refining your message. Use non-celebrity spokespeople and real testimonials to dial in what works.

“Then once you know what offer works, graduate to local personality endorsement, and eventually, if you’re successful, national radio celebrities,” says Koeppel, a member of the Response Advisory Board. “The idea is to find spokespeople who’ve built up a lot of equity with their listeners so you can ride the coattails.”

But Koeppel warns to be sure the personality can make a “real and credible connection” to your product. “You want their endorsement to feel personal and not as if they are just acting as a shill for the advertiser,” he says.

For certain categories, Koeppel says it may be right to drive listeners directly to a website, but for others a toll-free number is better.

“The reason is simple: with cell phones as ubiquitous as they are and with many listeners in their cars, it is one more way for them to contact you and to act on their impulse immediately,” Koeppel avers. “There are some categories such as financial services, that may require more of a high touch, so you will want to have live operators who can answer questions.”

If you do use a toll-free number, Koeppel says it should be repeated no less than three times and ideally, be memorable, using repeater numbers or a number such as a date that is easy to recall. Also, he says response can be tracked to specific toll-free numbers or URLs, or you can use a trackable code such as the station identification to offer an incentive to consumers when they call or go online to order. “Traditional metrics such as reach and frequency can also be employed to ensure you are reaching your target audience,” he adds.

Insiders say radio advertising relies on its ability to paint a picture in the mind of the consumer that’s compelling and irresistible. “So products that promise results, like weight loss and personal development — things that let a listener imagine that they can benefit directly from — do well,” Koeppel says. “And in such a challenging economy, products or services that can help folks with their finances or provide economic gain may perform particularly well.”

Up Next in Radio

As for radio’s near future, Frank Pournelle, president CEO of Last Second Media, a direct marketing firm in Madison, Wis., predicts more improved offers. “Instead of reading the toll-free number four or five times in a yell-and-sell tactic, marketers will move more toward an incredible short-term opportunity available only from this special radio offer,” he says.

Pournelle adds radio will see more room for legitimate players because of Federal Trade Commission (FTC) crackdowns on certain types of products.

He cites judgments in August against John Beck Amazing Profits, the return of more than $5 million to consumers this year from FTC actions against Infusion Media Inc., AED Inc., and Abili-Staff Ltd., and the FTC’s case, filed in May, against North American Marketing and Associates LLC. “We see this type of consumer protection every few years and the result is an opening of radio media for brand name radio clients at lower cost,” he says.

Another Pournelle prediction: radio media aggregators will continue being pinched. “Companies, such as Bid4Spots, that help regionalize unsold national media are not adding any value to the chain in a so-called reverse auction. Being able to track media response and repeat at economical scale are the only two values that a DR agency can provide,” he says. “The media aggregators are not client advocates because they don’t focus on client profitability. They focus on selling media above a minimum price. Instead, they’re reps for media, who are on the other side of the business equation from successful DR advertisers.”

For Battisto, his eye is on continued growth of mobile signals in cars. “This is going to make it even easier for listeners to respond to advertising they hear while they’re driving,” Battisto says. “As a result, responsiveness of radio advertising will increase, causing cost-per-response to fall and radio to become an even more cost-effective and better cross-channel campaign component than it is today.”

Others say new audio entertainment offerings like Pandora, iHeartRadio, Spotify and Mogg will continue to emerge. Indeed, just a few months ago, mega-giant Apple announced it would offer its own digital radio service.

Geoffroy believes Spotify, with its established presence and brand recognition, is in the best position to challenge Pandora for listeners. “But we still haven’t seen a sustainable business model in digital radio,” he says. “Much of digital radio’s success for 2013 appears to depend on the automotive industry and deals struck with auto makers to install the technology in new cars.”

A wildcard in the digital audio space, Geoffroy says, could be Microsoft’s Xbox Music Service, which will come preloaded on Windows 8 and Windows RT (mobile) devices, or Apple’s offering. “From an economics standpoint, traditional radio remains in a class of its own because of its ability to attract advertisers,” he says.

Arbitron reports 93 percent of Americans age 12 and older use AM/FM radio every week, and the decrease in its usage has been negligible since 2001, Geoffroy says. He adds he believes traditional radio itself may not change much during the next 10 years, but where people listen to traditional radio will. As proof, he points to smartphone penetration, which in the U.S., passed 50 percent and is rapidly climbing this year — and none have radio embedded within them.

“Traditional radio will be forced to embrace the future,” Geoffroy says. ■

Apple to Take a Bite out of Radio

Apple reported late last year that it’s planning to launch a digital radio service to compete with Pandora, including customized listening and on-demand options, according to The Wall Street Journal (WSJ), citing three unnamed sources familiar with the project.

The tech giant, which has formed relationships with most major music publishers in support of its iTunes business, is still negotiating terms for digital music rights for its planned radio service, the same sources tell the Journal.

As with other digital music services, the central issue will probably be royalties, which have been a point of contention between Pandora and publishers. It still constitutes a major drain on profitability, as royalty costs more than outweigh advertising revenues.

While Pandora eventually broke off negotiations with publishers, opting to pay royalties on a default basis determined by federal statute, Apple is negotiating directly with publishers, according to the WSJ. The move could make royalties more expensive, but would also give Apple more options in terms of how listeners can interact with music. Apple would probably seek to offset costs with digital (and possibly display) advertising, and could also offer a subscription model.

Even if the business model remains unclear, Apple may feel compelled to establish a presence simply to round out the Apple-branded app offerings for devices, including the iPhone, iPad and iPod. Among other things, a digital radio service could serve as a discovery mechanism that helps drive consumers to purchase songs outright via iTunes.

One thing is clear: The marketplace for digital audio is growing fast. Pandora has signed up about 150 million registered users, at least 33 million people have used Spotify, and Clear Channel’s iHeartRadio has about 45 million listeners per month. Considering that much of this listening happens via Apple devices, a pre-installed radio app that offers a wider range of listening options might make headway against these established players.

About the Author: Doug McPherson

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