Today's guest blog from our own Paul Jacobs talks about consumer shopping trends and advertising.
While reading a recent edition of the Sunday New York Times, I came across a sobering graphic that maps out trends in consumer spending across many retail categories. Since 2003, the only sectors that have increased are warehouse stores, liquor stores, restaurants and bars, and computer stores. Generally speaking, the first two don't spend a lot of money in radio, and the third likes to trade. Not a good story for radio.
What categories are down? Everything else - grocery, clothing, building materials, furniture, department stores, and of course, car dealers. All of these have traditionally been the foundation of radio revenue.
In this environment, one of the most frequently asked questions I hear from our radio clients is: "What are the hot categories that our sales staff should be focused on?"
Unfortunately, that's the wrong question. There's been a huge shift, not only in advertising by category, but in spending across media platforms. That's what radio needs to focus on today. It's not just about ad categories any more - it's really about what sectors are spending and where are they committing their ad dollars.
At the Dickstein Shapiro session at last month's NAB, they showed data that told the real story: Radio's share of the advertising pie is down to 5.7%. In the "glory" days of consolidation, that number was north of 7% and all of the soothsayers in our industry expressed confidence that because of deregulation, radio's piece of the advertising pie was sure to grow.
Sadly, that hasn't happened, and in fact, radio has lost valuable ground. While there are too many reasons to mention, it's time that the leaders in radio sales wake up to the reality that prospecting and selling radio has changed for good. The skills that were valuable in the past - great relationships with big media buyers, for example - have declined in importance.
The traditional strategy looked something like this:
Ad agency/media buyer/account executive = big budgets via expensive lunch and concert tickets
That model is a thing of the past. Yet, stations continue to write big guarantees to steal a salesperson from a competitor despite the fact she has yesterday's skills that were much more valuable during the Clinton administration. This is an ineffective strategy that fails to get at the shifting opportunities and challenges of today's advertising and marketing world.
It's time to recognize that if radio wants to turn around its revenue momentum and stay in the game, it needs to accept certain realities:
1. Media buyers are less powerful than ever before. They manage shrinking budgets, and treat radio like a commodity.
2. Ratings don't mean as much as they used to. We keep hearing from top-rated radio stations that simply cannot monetize their ratings. This is a sure sign that the old model is in trouble.
3. Salespeople who had been successful selling in the traditional way have declining value if they cannot adjust to the new realities of creating marketing solutions to clients.
4. New selling strategies are imperative - we are no longer selling "radio." We are selling multiple platforms wrapped around a branded lifegroup that meets customer needs with verifiable results.
5. The old categories won't lead us back to the promised land. As Tom Daschle has famously said, "The windshield is bigger than the rearview mirror." The past model is shrinking, and there's no guarantee it will ever return. Calling on the same clients for the same accounts is a recipe for continued revenue declines and an even greater loss of advertising share.
Of course, it would also be helpful if the industry's leadership and the RAB got serious about marketing our industry in a more strategic, aggressive fashion, but that's for another posting. And as Fred suggested at the "Stimulus Czar" session at the NAB, an industry S.W.O.T. analysis to focus on radio's current strengths and weaknesses, while identifying the best opportunities and looming threats is long overdue.
At the end of the day, if we don't make major moves in our sales and marketing strategies, we're in real trouble. The industry is going to follow the (shrinking) money train into that dark tunnel.