Radio Advertising - a sales story

Michael Hedges - September 3, 2007

A diminished future for radio advertising is again headlined by yet another report on internet ad spending. Yet the figures belie the story. In fact, the story is the story.

Internet marketing research company eMarketers released last week its assessment of US ad spending. Radio will be the next media sector to fall to the internet. Online ad spending will, according to the study, rise to $21.7 billion (€15.9 billion), up 22% from 2006, while radio advertising will fall short with only $20.4 billion (€15 billion), growing a paltry 1.5%.

More painful – for radio broadcasters – is the prediction that in 2011 radio advertising will only increase slightly more than $2 billion while internet ad spending will more than double.  Private equity firm Veronis Suhler Stevenson recently predicted the Internet beating television as the top ad medium by 2011.

The internet, Web 2.0 and all other forms of new media are challenging every aspect of ‘old media’ – that which existed prior to 1999. Every segment of business, government and society is rethinking plans, strategies and fundamental thinking to embrace the internet as a tool, threat or temptation. None of this is bad. A little change makes the heart beat faster.

Big media and big advertising – not to forget big consultants and researchers – are lost in their own bigness. The vast majority of new ad spending flows to or through Google, therefore; search engines with global reach must be the path to the future. The essence of Web 2.0 advertising is its technical efficiency. Advertisers can target (almost) to the individual and pay only when there’s a pay-off.

American advertising and its radio business are unique in the world, as much for the history as the sophistication. Radio advertising in Europe – ‘Anglo’ and Eastern countries excepted – is offered, rather than sold, by aggregators that compute a price for rated and projected audience delivery and take orders. Broadcasters live with their slice of that revenue less, of course, the slice taken by the sales-houses.

It is a remarkably efficient system in that cost of sales – hated by all accountants – virtually disappears. Accountants also hate cost of marketing, cost of promotion and cost of talent, but that’s a different story. Artificially low advertising rates are among the consequences for Europe’s radio broadcasters, particularly those independent of the huge public channels (yes, they ‘offer’ advertising, too) and the biggest media companies (most of which are newspaper companies). In this system there is no room for a good sales story.

The ‘Anglo’ version of radio ad sales is local, retail selling rather than the ‘industrial’ sales model. American, Canadian, Australian, British and Irish radio broadcasters have honed their ad sales methods on years of struggling with newspapers, television, direct mail, outdoor and all the rest. Interestingly, when these ‘Anglo’ broadcasters took the risk – another notable skill – and came to Eastern Europe over the last decade and a half this retail sales model became the norm. The result has been robust radio ad sales rather unlike that in Western Europe.

If American radio ad revenue is faltering, be patient. A turn-around is already apparent in the UK after several dreadful years. Radio salespeople are characteristically tenacious and great storytellers, the crux of the ‘Anglo’ radio sales model. A good sales story – the narrative, in brand-speak – is worth more than rating points.

So, here’s a good radio sales story. It’s from Bob Christy, General Manager of a Southern California station group and Fairbanks School of Broadcasting alumni.

“KWIZ was on top of the market in the days of the Anaheim (California) book (survey area) and KWIZ had every car dealer in Orange County on the air with one exception. The dealer had become an in-house joke at KWIZ and he was the ‘test of manhood’ for all the new sales people. A new staffer would be assigned the account, go in make the call, get publicly embarrassed on the show room floor by the dealer and tossed from the dealership.

“A new guy was hired and he took a different track; He wrote the dealer a letter saying that he had a way the dealer could make an additional 200 dollars per car. The idea had absolutely nothing to do with radio advertising. Intrigued, the dealer invited the salesperson over for coffee. When the guy arrived, the dealer immediately went into his ‘radio doesn’t work and never will’ act the salesperson calmed him down and restated that the idea of an additional $200 per unit had nothing to do with radio advertising or any other kind of advertising.

“Finally, over coffee the dealer asked, ‘Okay, what is this big idea of yours?’ The salesperson explained, ‘…you have around 200 cars in stock and if you remove all the radios and sell them for $200 each, you make an additional $200 per car, if I were you I’d get the shop guys on the project right now!’

“The dealer said, ‘Who the hell would ever buy a car without a radio?’ The salesperson responded, ‘My point, exactly!’

“The dealer became a long time client!”

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