Is the RAB Insane?

A new report from the RAB reveals the persistent lagging of Local revenue compared to National in the United States. Specifically, National sales is ahead 14% so far this year compared to Local’s 3% improvement over the disastrous previous year. Overall, at the end of the 3rd quarter radio is up 6% over last year. To pump up Local sales, the RAB plans a “Revenue Road Show” into markets 50-100 during the first quarter of 2011. Their strategy is to provide training and educational sessions in marketing, sales techniques, creative, research and business development.

The German Philosopher Friedrich Nietzsche said that “Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule”. Could this be the case with the RAB? Aren’t the above mentioned activities the same things the RAB has already been doing for some time? And doesn’t Albert Einstein offer that Insanity is “doing the same thing over and over again and expecting different results”?

Of course, the RAB is not insane: in reality they are very helpful to many and there’s no equating RAB sessions with sanity. There’s no suggestion that a system that fails at solving a sales problem is the same as an insane person who misunderstands his or her own irrational behaviors. But the metaphor is useful if it directs your attention to this: to become more successful in attracting additional direct, local business – to get different results, the first step is to acknowledge the cold, hard reality that stations are going to have to try something new.

Here then are 4 new suggestions for developing more direct, local business – all based on the concept of getting clients better results from their radio campaigns. If you subscribe to an on-line research facility like MediaScore, you can do all the below for free.

1. Determine the Underlying Cause

An unsuccessful client usually has not been able to correctly indentify a problem they are having; otherwise they would have probably already solved it. So the information stations get from client interviews is based on the client’s perception of their problem not the reality. For instance, a restaurateur might believe his customers want cheap meals delivered fast. But independent research shows his customers actually wanted a good meal delivered quickly...and the cost of the meal was actually low in importance. So if the restaurant advertises a cheap meal delivered fast, they are not delivering a benefit that customers actually want.

Objective research telling stations the benefits sought by customers to a specific business and who (if anyone) already satisfies those needs can now be acquired at little to no additional cost through on-line companies like Media Score.

2. Evaluate the Creative Message

It is essential your client’s commercials communicate the right thing to be successful. To find out if they do, you have to ask your listeners a few questions. Again, this can be done inexpensively through on-line research.

 Familiarity – are you familiar with this commercial? The more familiar a message is the more accurate the evaluation will be.

 Likeability – do you like this commercial? It’s amazing how this influences what customers think of your product/service. Using a 1 to 9 scale, an average score over 7 is a hit commercial.

 Message received – what is the commercial telling you? People might like a commercial yet don’t know who it’s for or what it’s offering. You should receive the correct message from at least 2/3 of your respondents.

 Proclivity to purchase – would you buy this product or service based on this message? Yes, many companies go broke betting on products that people said they would buy - but don’t. It’s not whether there is a market for the product (your original strategic research would have told you that) rather it’s to see if the commercial is compelling enough to motivate customers into action.

3. Ensure Proper Frequency

The effective number of times a message needs to be heard is between 3 and 10 times. Any less than a frequency of 3 is wasted - as is any over 10. A frequency of over 15 starts to yield negative results (“if I hear that commercial one more time,”). The reason for a spread in effective frequency between 3 and 10 is that some client offers are much more attractive to a person’s needs at the time. The goal is to increase the effective frequency of a campaign and reduce the wasted and negative exposure. To do this you must analyze the frequency distribution of the planned campaign, not just accept average frequency.

A heavy campaign might reach 95% of your station’s target an average of 6.5 times – seemingly ideal. But a frequency distribution analysis might reveal that although 95% of the campaign’s reach was heard one or more times, 18% of your station’s listeners heard the message less than 3 times, 42% between 3 and 10 times, 18% between 10 and 15 times and a further 22% heard it more than 15 times., So the effective frequency of the campaign would only be 42% in spite of a significant client investment.

By reworking the campaign a sales person should be able to increase the effective frequency while cutting the cost of the campaign substantially; enough to add a second radio station to the promotion, delivering even better results for the client.

4. Stop Taking Bad Deals

Stations sometimes take business they know won’t work for the client. Manager’s need to meet quota and compensation by 100% commission encourages stations and reps to take business quickly and move on to the next sale - but this is another matter for another day.

The 3 Success Essentials from Eureka! Ranch

How would you like to look into your client’s business future before they leap into a major advertising campaign? What if you could input their product idea, marketing plan, sales presentation or service into a computer to find the success rate of the idea before investing precious time and hard earned money?


Doug Hall is the author of “Jump Start Your Business Brain” and founder and CEO of Eureka Ranch, a Cincinnati Ohio “invention & research think tank” with offices in London, UK and Monterrey, Mexico. The Ranch specializes in creating new products and services for corporate clients including American Express, Ford Motor Company, Nike, Inc. and The Walt Disney Company. Doug's technology is in the form of a marketplace simulation computer that forecasts the probability of success for your business ideas. He calls this artificial intelligence Merwyn Technology.

The technology wasn't built overnight. The research and development team at Eureka Ranch spent 6 years and $20 million to create Merwyn Technology. Through pain staking analysis, Doug has distilled an amazingly large number of variables down to the following three essentials that he says make up 75% of the information you would get from his full analysis – one that could cost hundreds of thousands of dollars. In order to achieve maximum results for your clients, their campaign must include the following.

Distinct benefit

Their product or service offering must have a very distinct benefit for the target. Features are not benefits. Organic is not a feature. Describe what they will feel with your product or service. For example, a concert series was promoted as “An evening with the music of Bach, Chopin and Liszt” with little success. The name was changed to “An evening of romance” and sales increased 50%. The same series improved attendance over 100% over 2 years (who says sex doesn’t sell!)

Credibility

Their product or service has twice the chance of success if it is believable. In no continent is trust in a more dismal state than in North America. For example, in the United States, government, business, and media are all distrusted by respondents (ages 25 to 64) to do what is right, even with a new administration elected to power. Trust in U.S. business—at 38% down from 58% last year—is the lowest in the Barometer’s tracking history among informed publics ages 35 to 64—even lower than in the wake of Enron and the dot-com bust. What do you have that people have a reason to believe? People have a high degree of skepticism about sales pitches so be real, tell them the truth and do what you promise.

Dramatic difference

The product or service has 3 times the chance for success if it is dramatically different. Obviously this is the most difficult thing to have but it is very important. Your product or service will die if it doesn’t offer something. If you have no difference, then you are a commodity. How low will you sell? Profitable business is not for wimps. Hard to execute should not be a deterrent. It should be an opportunity.

If the client’s product or service doesn’t meet all these requirements, figure out how they can - or they will probably fail and so will you at developing a repeating customer; you will only get a sale. Get over how difficult it is though; the low hanging fruit is all been picked.

Help Retailers Sell to Build Direct, Local Business

Paco Underhill’ book “Why We Buy” is a must read for every sales executive that sells radio to direct local clients. In his book, Paco lists dozens of things retailers could do to encourage business; and dozens more mistakes retailers make in laying out their store.


Included are points as fundamental as these:

• Forget about signs on the door to a store - people don’t read them unless the store is closed - they’re looking to see if you push or pull the door.

• Train store staff to offer baskets: people only have two hands so that limits their amount of purchases. If a customer has three items, ask them if they want a basket. People will usually accept and a basket will increase both the number of purchases they make and the total amount of their average purchases. Also scatter baskets throughout the store for easy use. People might only have two items and think they can’t pick up another - especially women on cool days where they’re holding a purse, possibly an umbrella and a coat. They don’t have enough hands to make more purchases.

• Signs should be placed in areas that reflect contents. The most effective level is eye level or very close to it as people are fascinated by other people’s faces. If it is in a zone where people linger, the sign can be slightly longer. A sign in a quick moving area should be no longer than two or three words and be succinct and impactful. Don’t place a sign for people on the way to the bathroom; they have more important things on their mind.

• People always walk to the right in North America so design your store flow that way. If the predominate shopper in the store is females do not have a men’s display to the right of the entrance.

• If the product or service has appeal to kids, place a hopscotch board on the floor beside where you want people to linger. Research shows kids will stay there an average of 14 seconds, a long time to go without a purchase.

• In a women’s store, don’t place a seat where it will be near a display of merchandise that is uncomfortable for men (a bra section for instance.) Women will avoid the area.

• 65% of male shoppers who try something on buy it - as opposed to 25% women. So make sure in a men’s clothing store the fitting rooms are clearly marked and have easy access. If a man has to search for it, he may decide its not worth the trouble and leave.

Remember we are trying to make our clients advertising effective. If our advertising brings people to a store and they leave without buying something, who does the store owner blame?

Right.

You.

How Basic Burgernomics Can Work for Radio

In my last blog, I wrote about the power of three as a tool for getting better prices for products and services. Simply put, if you want to sell more, provide three choices. This timeless strategy is being used again by the big burger chains of the world with superior results.


The Saturday edition of The Globe and Mail newspaper this week ran an article in their business section reporting how McDonald’s stock was up more than 30 percent over the past year - in spite of the recession that continues to grip the United States. In the article it held how fast-food chains used to believe that no one single item should cost more than $5. But McDonalds recently broke that barrier in offering a $5.98 burger (Canadian) in their Ontario outlets.


What has this to do with the power of three? Scott Hume, editor of Burgerbusiness.com stated that burger “chains are using a barbell strategy, mixing low priced items with premium price items” to boost prices. That’s the beauty of the power of three.


The power of three dictates that when offering 3 choices, the most expensive choice should go beyond historical pricing for an item. That’s what McDonalds did with their Smokehouse Deluxe Burger. They priced it at 20% more than common practice. And they ended up getting it.


In my theatre example, 20% of the patrons at the theatre ended up purchasing the newly created super size drink. And their surprising bonus was that 60% of purchasers chose the medium size drink (which was actually their old large size). In the past, the same size drink accounted for only 20% of their sales.


It seems the timeless strategy of the power of three, with its super sized third choice, is being understood more and more. . As Mr. Hume went on to say about burger chains, “Increasingly, they’re tilting the balance toward the premium end”. Why?


Because people love excess in burgers, soft drinks, computers, cars and just about everything else. Radio should consider this strategy as well. For a more complete look at the power of three, take a look at my Last blog, “How to get Better Results for Clients ”.

How to Get Better Results for Clients

If you want to sell something at a higher price, another strategy is to offer more than one size. Three sizes, in fact. Consider this theatre example in value pricing.


Years ago, theatres would offer two choices of drink sizes, large or small. As it turned out, eighty percent of the customers at the theatre always ordered the small drink. This went on for many years at every theatre across North America. Eighty percent of the people bought the small size and twenty percent bought the large size.


Then theatres introduced a third size, a supersize. Following that, twenty percent of people bought the small size, sixty percent of customers bought the regular size – which is actually the old large – and twenty percent of people bought the supersize. This was something theatre owners never anticipated. Now they had eighty percent of the people ordering the old large size or an even larger size, the supersize - all because they introduced the third choice – the supersize.


This is human nature. If you sell one size (or one campaign choice) – which most stations do – the customer has a choice between only ‘yes’ and ‘no’. And because they don’t have anything else to think about, they focus on the price. They try to get you to lower it.


Now if you have two sizes, that’s an improvement. The customers are choosing between the small and the large, so they’re more likely to buy something. There’s one problem: Most people will choose the small size.


Remember that, in the theatre’s case, 80% bought the small size. They chose the small size because most people think small, they are trying to save money or they are cautious because they aren’t sure if they are making the right decision. So they play it safe and buy the small. It is almost always eighty percent small when you offer only two sizes.


If you offer three sizes, however, the whole game changes. Customers will start by looking at the large size first, or the most expensive or most elaborate offering. They will look at it first because it is so dazzling, so beautiful, so powerful or so huge. Then they will look at the price and realize it is out of their league. So they will then look at the small size. But the small size doesn’t look so great compared with the supersize. It looks cheaper, smaller, and unappealing. So then they look at the middle size and that looks just right. It’s not too small or too large. It’s not too cheap or too expensive. And because it is called the regular, it is also the safe bet because it means that it is the one most people buy. Robert Southey, author of Goldilocks and the Three Bears must have been the world’s first consumer purchase researcher when he wrote about this effect back in 1837: Goldilocks selected the middle size with every choice she made.


Most people will buy the middle box because it is the one they think most people buy. So here’s the strategy: if you have something you want to sell most of the time, position it in the middle, make a small version, and a supersize version, and most people will buy the one in the middle.


But what about the supersize? Why do some people buy that one? Well, that’s the bonus of using the power of three. Most people will buy the regular middle box, but some people will go for the super-size. And the irony is, you weren’t even expecting to sell the supersize. You simply created it to get more people to buy the middle one. By adding the more profitable supersize option, you can also charge more for the regular size.


Suppose you were going to charge five dollars for your regular size. Now you can charge ten dollars - because the supersize costs fifty dollars. The ten-dollar size will look reasonably priced compared with the fifty dollar supersize. So you can make more money. As well, no one will ever say you charge too much because you aren’t actually charging too much. You are just giving them a choice. The customer has to decide if they are the kind of person who drives a Volkswagen, a BMW, or a Maybach. They decide what kind of person they are – or want to become.


The power of three will work in every business so you can use this strategy to help your clients or to package your presentations to the client. It will work with watches, travel packages, fast food, consulting services, diapers, and private jets or radio campaigns. The principles are universal. You just have to spend the time developing the three boxes. The strategy works because you are giving your customers and prospects a choice. That’s what marketing is all about – choice. Let the customers make up their own minds.


As well, it’s important to remember that the number three is critical. Otherwise you might be tempted to give people four choices. Yes, they get more choice. But too many choices can be overwhelming. They might not be able to make up their mind (more about this in my next article). As well, with four boxes there is no middle. With four boxes, you can’t choose the one in the middle, so it’s harder to make the easy, safe choice. With four boxes, people tend to get confused. And if they get confused, they might not buy anything at all.


Here’s an example of what a radio station might do to propose 3 solutions:


1. Determine the least expensive, EFFECTIVE campaign for your client (say a 13 week radio only campaign)

2. Develop a campaign that will really work for your client that you feel is the way you would spend your own money if you really wanted the campaign to be successful (say a 26 week campaign with a supporting internet strategy)

3. Develop a full blown campaign (say 52 weeks, including radio buys, internet strategies and other media coordination) that will blow your client way with its magnificence.


Make sure the last option is over the budget they told you. Always include an option that is over budget.

“New Media” Is Not the Problem

Radio is still hanging in

As reported in December 2009 Radio Inc., an updated report from Bridge Ratings, which has been tracking how consumers use multiple media since 1998, shows that neither satellite radio nor Internet streaming appears to be having a lasting effect on radio's cume or on loyalty among listeners.

Bridge looked at time spent with terrestrial radio, satellite radio, Internet radio, MP3 players, and HD Radio and reports that "terrestrial radio continues to dominate overall market penetration for the number of people listening for five minutes or longer in a typical week despite the number of options available." Radio reaches 92.3 percent of Americans in an average week, compared to 40 percent for MP3 players including iPods.

In a chart comparing radio's 12+ cumulative audience and its "favoriteness" rating, Bridge combined the numbers for cume and favoriteness to create an index between weekly tune-in of five minutes or more and listeners' preference for radio.

"By 2005," says Bridge, "the cumulative impact of all this new media had severely impacted consumers' preferences and though the weekly cume audience for AM/FM radio maintained fairly steady numbers, the relationship between radio's weekly listeners and their loyalty sagged. With a combination of consumer fatigue and the 'oh wow' factor associated with much of the new media's newness, this relationship has improved."

A better plan

So it seems radio is still alive but suffering from becoming over commoditized. We are drenched in ‘me too’ formats. We recognize the signs of trouble in our industry. We know that neither the new media nor the economy is hurting us as much as we like to use them to rationalize our lack of our rightful prosperity. Lest you think that all is doom and gloom, however, you’d be wrong. The future is bright for those brave enough to innovate, rethink old clichés and have the courage, wisdom and discipline to enter this next era of boundless opportunity for radio broadcasting.

My next  posts will provide insight on how to grow your station' revenues dramatically. They will proffer a wide variety of ways to fill our radio station’s “pipeline” of new and more valuable clients. As a result radio will grow both revenues and profits by:

  

• Getting much better results for current clients.
• Getting new and better clients.
• Earning more money from both current and new customers by pricing more effectively.
• Providing clients vastly improved customer service.
• Reorganizing your sales and marketing departments to better serve clients.
• Compensating sales departments to be more efficient and better aligned with client’s needs.
• Developing innovation to deliver better products and services.
• Growing your station’s audience in order to make your messages more effective for your clients.

 The first step is to begin getting better results for your clients.

Commoditization – The Scourge of Radio

Lew Dickey, Chairman of the Board, President and Chief Executive Officer of Cumulus Media, told people at the last SNL Kagan Summit that radio has been...“relegated to being a price taker” in negotiations and that it needs to “de-commoditize our business” and start lifting rates. There’s a revelation.

Success always gets copied

The A/C station dominated their target segment in the market. It had a remarkable rise in fortunes over the years, employing superior strategy to take over the number one position for adults 25 to 54, the prized demographic among advertising agency media buyers. Within five years of its re-launch as an adult contemporary station, it was the fastest-growing, most profitable player in the market. Before this, the industry was generally stagnant, dominated by big players churning out profitable, predictable radio stations. The station changed all that.

They used auditorium music testing to discover their audience’s favorite songs. They pioneered the concept of call-out research to make sure their new music was correct for their audience. They also ran their business in what was then considered unconventional ways.

They tested their television advertising to ensure the message was right on strategy and communicated the right feel and product features. They worked with consultants to have on-air personalities transform their offerings to better align with the tastes of their audiences. They used psychological testing to ensure they had the right people in the right positions. To entrenched players in the industry, however, their efforts were the work of boring nut cases.

Their listeners, however, were thrilled. “We brought A/C stations to the forefront of success,” their management team gleefully proclaimed, and the advertisers agreed, gladly paying them a premium to please the lucrative adult demographic.

The station grabbed margins and market share, while airing consistently great programming. For years, the station grew at a double digit rate, becoming one of the largest players in the market. Every year, it improved its research, signal, cost-efficiencies, and service. Much larger stations were forced out of the format during that time. Pricing was not a big issue. Margins were big. Salaries were high. Life was good.

Then, sales peaked and slowly began to erode in both sales volume and impacted the bottom line.

The reason was simple: following the station’s success, everyone else did research. Everyone hired talented personalities. Everyone cut costs and reduced staffs wherever they could (and then some). Everyone’s stations were good enough to deliver audience pretty much the same. Radio became a commodity.

The market was glutted with good stations. Customers, both listeners and clients, now took it for granted. Clients could reach the very same people on other stations - so they looked for the lowest price.

As a result, the station also had to start competing on price. Because all the major players were researching, programming, and selling more efficiently, there was little room to squeeze out more costs. What’s was going on?”

Eventually everyone becomes a commodity

As Dr. Oren Hirari says in his book, Break from the Pack - How to Compete in a Copycat Economy,

”Welcome to Commodity Hell. Or more accurately, welcome to the ‘Copycat Economy’, where everyone has access to the same resources and talent,” Harari goes on: “Two principles keep companies trapped in the pack and snared in the ‘Copycat Economy’, and make up the most challenging double whammy affecting your organization’s competitiveness and very survival:

       1. The inevitability of perpetual imitation.
       2. The commoditization of everything.

Both blights are affecting the radio business at an accelerating pace. Past competitors find it easier to quickly imitate market leaders; new competitors find it easier to improve on them. Listeners can choose among a glut of stations who are basically offering similar audiences, formats, and services. “Buzz,” prices, margins, and customer loyalty begin to drop as clients shop around for the best deals. Some stations might be “better” than others, but not enough to matter when the others are all “good enough.” What happens then is quite predictable.

When clients see little difference in the availability and perceived quality of radio's services, they have a rational response: They buy what’s cheapest. When stations no longer can maintain their competitive edge, bad things start to happen over and above falling financials. Critical station intangibles like excitement, joy, and optimism begin to falter. Stations make stupid, reflexive choices, like slashing any costs possible to make this quarter’s numbers, or throwing budget, incentives, and threats at the sales and marketing people to jack up revenues—all compulsions that are meant to push them forward but actually mire them further among their competitors - because they are doing the same things. Dealing with clients becomes less a creative, collaborative, value creating process and more of an uphill battle focusing primarily on commodity discussions of price, specs, and contracts.

Such are the traps of commoditization.