Why Radio Isn't Being Embraced By National Advertisers

For decades, the RAB and others have preached that selling is about being customer-centric. We've all heard it, we've all been trained to interview clients about their needs, and there is not one broadcaster on earth who does not know this to be true. So why is radio not getting its fair share of ad dollars nationwide? I've discovered what is probably the major reason.

A Dream Team
"What if," I thought, "I could put together a dream team of advertisers, and ask them why radio is not getting more ad dollars?" After all, we in radio think we have a strong story. We think we have decent relationships with listeners. We think we can move product. Unlike other legacy media, it appears radio has not lost its audience. I wondered what we could learn if we somehow got the most important advertisers in the world together in a room, just to talk about radio.

When I raised the idea, I was told, "It will never happen. Why would those people bother to take the time to help radio by answering our questions?"

"But what if I could pull it off?" I asked. "Everyone one in the industry would be there to listen. This could be the most powerful focus group in the history of radio. Every group head would be in the front row, not only to show their support, but to hear what these advertisers are saying."

I like a challenge, so I decided to do it.

A $100 Billion Panel
At Radio Ink's recent Forecast conference, this impossible task was accomplished ... almost. We managed to get five advertising greats in the room and on a panel to tell us exactly how radio can get on their radar. These men represented $100 billion in advertising and 75 percent of all advertising spending in America. They were:

Bill Koenigsberg, president/CEO and founder, Horizon Media
Tim Spengler, worldwide CEO, Magna Global
Doug Ray, president, Carat
Brian Terkelsen, CEO, Mediavest USA
David Verklin, marketing consultant (panel moderator)

Yes, we pulled it off. We got them there. It was historic. No one before has managed to get all five of these giants on a panel together. Each was willing to speak frankly about radio. As an opportunity, it may have been the most important hour in the history of radio. There was only one thing missing. The group heads in the front row.

Though there were several radio presidents and CEOs who stayed and listened, most of those representing radio's biggest companies were outside of the room. And they did not hear the most important advertiser focus group in the history of radio. Perhaps they had meetings or e-mails or pressing matters to attend to. Perhaps I didn't communicate the real power of this panel.

I'm not being critical of them. I'm sure some of these group heads and advertising executives already know and talk to each other. But if they had stayed in the room, and listened, it would have sent a powerful message.

Critical Feedback
Had the group heads been there, they would have heard that advertisers need to see metrics and measurement techniques that are focused on ROI. The panelists told us ratings are not the metrics they're looking for; they need proof of our ability to move product and engage customers. And they want the research to support it -- information they said no one in radio has provided. And they told us that other media are considerably more sophisticated about offering the proof of ROI agencies need. In other words, these agency heads were saying, "Show us the proof that will give us the confidence to invest."

Though they want radio to come with more ideas, they also said the discussion usually doesn't even get that far. Clients simply won't buy unless we first provide proof of radio's relevance and effectiveness.

These execs said radio is no longer on the radar of many advertisers -- it's not even part of the discussion. When radio does make the media plan, it gets little more than crumbs. Agencies find it hard to understand radio's value proposition, and they can't interest their clients in it, or their creative people. The panelists even said they don't feel they know how to get good radio creative.

Asked if they have radio departments, most said they have small "audio departments," but most of that attention is devoted to online audio.

Koenigsberg said, "The product benefit is just the cost of entry. The consumer wants value exchange. It used to be about reach, now it's about engagement. It used to be about frequency, now it's about relevance. It's no longer cost per point, it's cost per value point. Your story has to be reinvented. You have not figured out how to take the engagement factor and audience engagement and package your story."

Digging Deeper
After this eye-opening panel, I started exploring the problem further and found that what radio is missing is airtight econometric examples of performance or payback. Other mediums, including television and even print, are laser-focused on proving their ability to generate ROI. Radio is not. We've been on the sidelines too long.

When the Internet Advertising Bureau couldn't get advertisers to invest on the Internet, then-CEO Greg Stewart commissioned a cross-media optimization study with more a dozen advertisers, at a cost of millions.

Once the IAB proved to advertisers that the Internet could move product, they worked with the advertisers to identify the optimal spend -- which was more than before the studies. And Internet advertising began to explode.

I am not saying that these studies were the sole reason for Internet advertising's growth, but they played a large role. Stewart has since moved to the Mobile Marketing Association -- and again commissioned a study the power of the medium, which is opening doors that had been closed.

For radio to grow, we need to substantiate our claim that radio not only delivers a positive ROI, but delivers an ROI that is greater than other media options available to advertisers. We are not competing for ad dollars in a vacuum.

Earlier this year, when Facebook was under pressure to demonstrate its ability to generate ROI, the company attacked the issue head-on. According to a report in the Wall Street Journal, Facebook personnel were sent to work hand-in-hand with advertisers to figure out how they could deliver greater results. The reason advertisers are flocking to what we call the "shiny new toys" is not because they are new or shiny, but because they are accountable and measurable.

It's Selling 101: Speak the language of the person to whom you are selling. And as an industry, we are not doing that. It is incumbent upon all of us to not only bone up on the topics of econometric modeling, ROI, and payback, but to really focus on how we as an industry can enhance our performance in this arena.

Econometric studies cost a lot of money. But it's also generally true that if you pay a lot of money for insight, you will typically believe what it tells you and act upon it.

Where Is The Radio Econometrics Study?
There is no econometrics study for radio. Why not? We tell advertisers we haven't lost our audiences  -- and we haven't, according to Arbitron -- and that we remain strong. We talk about our ratings, but advertisers simply don't care. Pandora can not only give targeted data by neighborhood, it can tell you how many listeners clicked in response to an ad and how many of those went on to make a purchase. That is what advertisers are demanding.

And this is not only a national issue. A lot of business that is classified as "local" on your books is placed directly with your stations by national agencies.

Are We Living In The Past?
The bottom line is that radio's ratings, its audience strength, and its relationship with its listeners are of little value to advertisers unless we can prove it all translates to business. We're using 1970 sales techniques in 2013, and few are paying attention. Media alternatives that have studies to prove their effectiveness are blowing past radio.

We have to prove, via third-party studies, from firms respected by major ad agencies,  that radio can provide substantial payback for the investment.

This focus on ROI is being driven by technology, increased media alternatives, and "C suite" expectations. Chief media officers are under tremendous pressure to deliver results from their marketing ad spends. The average life expectancy for CMOs in a job is around 36 months. These are high-paying jobs, they want to keep them, and they realize they need to perform. So they choose their media partners the way we all choose stocks, investing where they'll get the best return.

It's Not About Ratings Anymore
Everything radio does needs to be about audience engagement and return on investment. Instead we're focusing on keeping our PPM numbers high by doing things that likely result in the opposite of consumer engagement. Do we really believe a spot buried in the middle of a commercial-laden stopset is going to drive business? Sure, it's good for PPM listening, but I suspect that if engagement were measured, it would show that is not the optimal environment for an ad.

Some might say Arbitron's study from last year confirmed that much of radio's audience is retained during an ad break, but I would argue that retention doesn't equate to engagement. After listening to Bill Koenigsberg, I suspect that he would agree.

There's a fine balance. We must be passionately driven to deliver results for clients. Ratings are not relevant to a client if you can't prove you'll accomplish their goals. We must start proving it. Saying it is so does not make it so.

Focus On Outcome
Advertisers care about consumers taking action. Radio must stop focusing on features, benefits, audience sizes, targeted audiences, and ratings. Those things only matter after we prove we can provide significant results. We must focus on outcomes. It's how all advertising is being evaluated today.
 
Clients only care about what you can do for them. Google Local and others are proving their value proposition and showing exact results. Your local focus needs to be about proof.

The old definition of insanity is to repeat the same behavior while expecting different results. And I believe that's where radio is today. Yes, we're seeing some digital innovation. All that helps, but nothing will bring change faster than a national radio study proving that radio moves the needle.

We all believe radio moves product. Now it's time for radio to step up to the plate and fund a study to prove it. The bottom line is that we need to have enough "science" to convince the CMOs that radio is the right place to spend their limited ad dollars. If we can show the cause and effect, radio's budget will never be cut. It's all about ROI.

 

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[Ronald T. Robinson]

That national advertisers are ignoring radio is truly a challenge. Now, i have argued that, on a local level, the travesty of shoddy creative has been the bane of radio for decades. The creative and sales departments have little understanding of how radio actually works and have failed - utterly - to provide the kind of messaging that would be most effective for the local advertisers.

However, when it comes to national advertisers, the dynamic shifts significantly. This is because the nationals are providing agency-supplied creative - supposedly outstanding creative, too.

My argument continues that even national creative is not particularly outstanding, although with some spectacular exceptions.

Our job, then, is to demonstrate, locally, that we can deliver the goods... consistently.

I suspect that, explicitly or intuitively, we have little confidence in out own medium. How could we? We take such shabby messaging to the street that the only advertisers who do really well when they use local radio are those who are also dropping their pants on the price so drastically that the savings on the products and services are often enough to generate sales. We have only taken part in providing the information, albeit in innocuous and irritating ways.

Writing off the nationals is just another form of surrender. Why? Because we're out of ammo.

[a Michigan broadcaster]

Personally, I'm far more concerned with what folks like Patrick Morin think about Radio. Morin, a local business owner in Oregon who credits Radio for his success, is interviewed by Radio Ink in today's radioink.com Top Story, "Debt Free Thanks to Radio." My station has never seen a dollar from the panelists who represent "75 percent of all advertising spending in America," and never will.

[Gerry Cunningham]

Responding to Keith, I agree 100%. Radio has always had a problem with the ratings sample size being way too small.
When I was a GSM I tried to sell the Radio "big picture" to advertisers and was successful in getting several national advertisers to buy Radio in my market. This sometimes resulted in their company using Radio nationally, but I think this tactic would probably be impossible with any of the current players. They wouldn't allow any long-range marketing; not the Wall St. vulture capitalist way.

[smitty]

Lew Dickey was on the phone trying to get a loan to stay in business thats why he missed the panel.

[Keith Williams]

A lot of what was said about radio's audience share isn't true. We have been losing audience share for some time. The problem is that radio hasn't begun realizing who they are broadcasting to now. A lot of people still don't believe that the rise in minority listening is real. If they did, they would provide better programming choices for them.

Another issue is hard numbers in measuring audience share. It's still to small, segmented, and unreliable. All the PPM is done is measure the behavior of the small samples that is measured.Don't believe me? Look up the San Francisco Chronicle story about a woman who is being measured with a PPM. You wouldn't feel that confident after reading that.

[Gerry Cunningham]

So what am I missing here; seems the giant consolidators like CC and Cumulus don't want a local sales staff and mistreat the ones they have. Looks to me like the Radio industry is so far off the mark running their own stations that any paradigm shift in how Radio is sold is most likely a pipe dream. The guys in charge today seem to think they can sell Radio by telemarketing. Tell me how that works out!
And this news that Radio doesn't know how to sell to AAAA agencies or direct to C-level execs is nothing new; it's certainly not "historic". Radio lost it when Television became a force and never recovered. Now you guys still in the industry must deal with no new listeners in younger demos and erosion of TSL (instead of beating every other medium just a few years ago).

[Ken Dardis]

Bravo to Eric for stating this as a must-do for radio. I can imagine the thoughts running through this panel's minds seeing the top radio executives showing that input from agencies isn't important enough to hear.

What's incredulous is that here you have agency leaders spelling out what it is they want radio to deliver - handing out a road map for business to radio - against scowls from radio folks trying to sell what isn't being requested. Agencies see this: "Pandora can not only give targeted data by neighborhood, it can tell you how many listeners clicked in response to an ad and how many of those went on to make a purchase."

Pandora also changes copy in mid-campaign to improve response. Whether radio execs care to embrace these concepts is not important because agencies are buying this technology from others.

Technology-served advertising that I've been associated with has focused on what's best for the client - improving response. Sellers of radio seem intent on convincing advertisers that they must appreciate the value of radio more.

Selling impressions is a thing of the past. Advertisers are buying response. Branding campaigns aside, it's that simple.

[Sandy Orkin]

Perhaps Radio cannot live by "reach" alone! Advertisers want results. They want radio listeners (consumers) to buy their product and/or service and unless their radio message can connect with the listener emotionally,i.e. allow the listener to identify with the message, then radio commercials will continue to "go in one ear and out the other" with no apparent definable results for the advertiser. Give the advertiser/agency results by helping their message creatively reach the audience, STICK with the listener, and motivate the listener to use that product or service, then RADIO may become a more effective medium and,indeed,embracable. It's not the messenger...it's the message! Just a perspective to consider? (Not the whole solution-but certainly a big part of it!)

Sandy Orkin- Radio Ranch

[Dennis Gwiazdon]

I commend you for calling us out, Eric. As long as our industry remains committed to spending millions of dollars to measuring only listening levels (that thess decision-makers have stated they don't care about as much as they care about ROI, i.e. results) we'll remain in the same holding pattern that radio has been in for decades. Make a similar financial commitment to a different kind of metric and the conversation with advertisers changes immediately. I just hope that we can band together and come up with the solutions needed. It would seem that the RAB could be the catalyst to make this happen.

[wayne ens]

Eric has always been a passionate believer in radio and radio C-level executives would be well advised to heed his advice and gather the facts to build a story advertisers will buy.
And that story is not just for the nationals.In a study we conducted of 540 local businesses in three different sized markets, 82% of advertisers said they advertise to "increase sales" yet less than 10% of the radio presentations we see address how their proposals will increase sales....an obvious disconnect.
The study Eric is proposing would fullfil many purposes, from not only proving radio can move product, but to helping broadcasters understand what kinds of programming and what types of advertising actually engages audiences and moves product....sadly, many radio people don't understand HOW to create formats, promotions or campaigns, that do produce results and can't think past old reach and frequency models.
Admittedly, ongoing credible studies of the nature Eric proposes are a very costly investment in our future and most of the high-dollar CEO's can't see a future (or even a job) beyond this quarter's share holder results.
Eric made the comparison that advertisers buy advertising like they buy stocks...they choose the ones with proven returns.
Maybe we should invest in radio the same way good financial advisors would advise us to invest in stocks....think beyond quarterly results and invest for the long term

[Dan Aron]

Amen. The sooner the industry puts forth the evidence the advertisers are demanding (and we all know it's there, but not how to quantify it), the sooner we'll be given the respect we deserve.

[Charlie Ferguson]

I can't help but wonder if the RAB would be willing to share their call log with us. If our industry is going to produce a study to prove the ROI our clients are getting, they should ram-rod the project.

[Rod Schwartz - Radio Sales Cafe]

One additional thought:

"We all believe radio moves product." Bet most of your readers have more than a belief that radio moves product, but can document case histories with some form of a client brief, specific budgets, schedules, creative, and results. If you were to collect just one such success story (with documentation) from each of your readers, you'd have the makings of a powerful empirical body of research that could be presented to the CMOs and other decision-makers who need to see and hear it. Wouldn't this seem to be a worthwhile step that we could take as an industry without resorting to funding yet another study. (Speaking of studies, what's being done with the Radio Ad Lab's research these days? They presented some good stuff on Radio's ROI.)

[Chuck Smeagul]

Getting stats for an online ad campaign with geo-location, click tracking, user profiling, etc is pretty simple to do. The long-standing problem for radio is/was/will be how do you create hard numbers? The old standard of having people filling out 'listener journals' has been proven unreliable at best.

I don't disagree that something needs to be done to prove the power of radio, but it's significantly easier said than done. How do you propose we do it? Just saying we need to doesn't solve this dilemma.

[Rod Schwartz - Radio Sales Cafe]

Eric:

Did you record this historic session?

Are you making this important presentation available to radio group heads, owners, managers, and salespeople?

This would seem a reasonable first step.

Thanks for considering.

Rod