Big Frank Left You Off The Buy

Last week, old friend and thought-leader Dave Martin fired off a tweet that included a link to a new concept - Groupon Now.  It is important that everyone in radio sees this, so take a look, and then let’s talk about its implications.

 

>EMAIL RECIPIENTS: CLICK HERE TO VIEW GROUPON NOW VIDEO<

We have discussed Groupon many times as part of a larger and ongoing conversation we’ve been having with clients about coupons, the economy, and the changing retail psyche of Americans.  It is part of a major trend in the way the entire structure of advertising is changing, including the role of media outlets as how consumers shop.

Our Tech Surveys for Rock and Public Radio have each pointed to this phenomenon, and we have urged broadcasters to step up and launch initiatives that aggressively utilize coupons and deals.  Similarly, our “Marketing To Men” study underscored the potential that radio has to realize revenue via discount couponing programs.

A recent blog post that was catalyzed by Jelli’s Mike Dougherty discussed the concept of adapting the radio sales model to something more desirable and current than traditional radio advertising: deals rather than spots.  We thought he was onto something before we saw this Groupon Now video.  After watching it, you may agree that new thinking about the traditional advertising model is imperative.

This Groupon Now service hasn’t been activated yet, but it is a potential game-changer that could rock the local radio sales paradigm.  Too often, there’s the myth that the Internet is global, but in fact, a key to cashing in on the power of the real-time web may in fact be right there on your main drag and in your urban and suburban strip malls.

That’s how Groupon sees it, using geo-location, timely coupons, and speedy scanning to bring together consumers and local businesses in an “anywhere/anytime” setting.

Guess who’s not in the picture?

That’s right – the beleaguered radio rep who is still primarily selling “reactive” advertising – packages of :30s and :60s.  Radio becomes the dreaded “middle man.”  And it sure seems like other traditional media - TV and print - will feel the impact of this type of direct marketing concept, too.

In the same way that Kindle and book lovers bypassed Barnes & Noble and Borders, Groupon is connecting real people with aggressive retailers to generate revenue and create win-wins.  Sadly, there’s a “win” missing here.

Radio's time-honored concept of connecting customers to retailers continues to revolve around tired remotes, street team, the station van, a card table, banners, and minor giveaways.  When stations do many of these each week, they lose their potency.  And local advertisers are well aware this model is no longer as effective as it once was. 

The Groupon Now concept is proactive.  You tap the “I’m hungry” button and nearby restaurant coupons appear.  If successful, Groupon Now combines the natural inclination of the consumer to search out great deals on an immediate basis with the needs of area businesses to generate store traffic – right now.

As radio bypasses many small businesses like Big Frank because “they can’t afford us,” Groupon takes them all, generates store traffic in a controlled, analytical environment and continues to win over fans with a scalable model.  With no sales commissions.

As Paul has pointed out in this blog, competing for the same 7% share of media dollars with 30 other stations in the market misses the other 90-something percent of the pie.  And because many radio outlets have been slow to adapt to the couponing/“make a deal” mentality, the door is open for Groupon, Living Social, and the many imitators that will surely follow.

Now some companies and clusters have gotten aggressive with couponing programs, adding them to the menu of marketing alternatives.  But no one, to our knowledge, has committed to creating their own version of Groupon, available in the local marketplace.

In preparing this blog, I started surfing around our client stations as well as other well-known radio brands to see what is happening on the couponing front.  Some broadcasters are developing bona fide programs, while others are giving lip service.  So despite some concerted efforts, I happened across too many examples where upon visiting the coupons or deals page, I was told that there weren’t any available at this time.

It makes you wonder whether a consumer would ever visit that station’s page again.

There is nothing in Groupon Now that any local radio station, cluster, or company couldn’t develop themselves.  But as we continue to talk to broadcasters about coupons and deal programs, several lament the same thing – the sales people have a hard time putting deals and discounts together, and attracting retailer buy-in.

I don’t know about you, but I didn’t see a single account rep in that video.  And that’s the point.

Radio could do this, and here's a list of the requirements:

• A great mobile app (I know where you can accomplish that part of the equation)
• A vision (Groupon’s done the heavy lifting for you)
• A powerful, responsive cume
• An active database, solid personalities, and brand equity

With these assets, many stations could be off to the races, successfully challenging, if not beating Groupon Now at their own game.

But to win the race – much less to compete in it – you have to get to the track.  And Big Frank’s not going to wait around.

Dave Martin has written a blog on the same topic.  You can access it here.

Comments

[Danny Czekalinski]

WOW! That was my first reaction after watching the video on Groupon Now. The one strength that radio always had was "instant gratification." Voice tracking chipped away at that and we did nothing to be forward thinkers. Why would I get in my car on a hot Saturday afternoon to spin a prize wheel at a automobile parking lot to win a coupon for a free ice cream at a store 15 miles away? Concepts and ideas evolve. Remember fifteen years ago when people where standing in line at Blockbuster video to return their "rewinded" videos? We, as an industry, better get into a different mind set or we will end up just like the 45 adapter.

[Fred]

Danny,a different mindset is exactly what I was going for here. Thanks for reading our blog & taking the time to comment.

[Rod Schwartz]

Groupon's success is indisputable. Like Google, they weren't first out of the chute, but they've done their homework and figured out how to do it better/faster/smarter and are enjoying the fruits of their labors. All the wannabes crawling out of the woodwork, hoping to snag their piece of the pie before the other guy, suggest that this phenomenon is going to be in the spotlight for a while.

That said, it's still a novelty. As you point out, it's not a new concept, just a new means of distribution. But once the novelty has worn off (as inevitably it will) and the dust has settled, it's still just another coupon.

For most local businesses (Radio's traditional local/direct prospects), deep-discounting isn't a sustainable model for healthy growth. OK, Big Frank's burgers are $5 on the menu. Get yours for $2.50 with a Groupon Now. Frank keeps $1.25, Groupon keeps $1.25. Does Groupon care whether Frank makes a profit at all? Or are they too busy pitching Bill's Burgers across the street to match Frank's offer?

Consumers will, of course, always be drawn to 50-80% off sales like ants at a picnic, just as they are drawn to another attractive extreme-deal promotion: the "Going Out of Business Sale."

Is Radio irrelevant? Only if we allow ourselves to be. With all due respect, "deals vs. spots" seems too simplistic a distinction. Sure, some sellers are spot peddlers rather than solution providers, but there are plenty of the latter in our business. Drop by Radio Sales Cafe and see for yourself.

Where Radio needs to get serious is in its insistence that all sellers and copywriters learn how to craft messages that engage and mean something to the listener. Tired cliches, superlatives, and adspeak serve no one. But when we get the message right, there's no more powerful medium for delivering that message economically and effectively than Radio.

[Fred]

Rod, thanks for taking the time to leave your thoughtful comment. Deals vs. spots IS too simplistic. But it shouldn't be an either/or. There's no reason why radio shouldn't rethink its ad model to get in better sync with the audience & with what's happening in the retail world.

Radio could do this as well, if not better than Groupon or Living Social, and that was the point of this post.

You hit on one of the major problems - creative, copyrighting, and time. Salespeople who aren't properly trained are writing copy. And production guys are cutting spots for all 5 stations in the cluster. No wonder stopsets sound the way they do.

And the tired remote and van stop are part of radio's breakdown at the retail level. Let's find a way to rethink the old model & create an ad model that is contemporary, effective, and delivers ROI to the station, the advertiser, and the consumer.

Thanks again for reading our blog & for contributing.

[Mike Stern]

I agree with Paul that fighting for the same seven percent share of media dollars isn't the answer for our industry. However I'm skeptical that Big Frank is.

The problem isn't that Big Frank can't afford us. It's that we can't afford him.

The sales process at most stations won't support sales reps prospecting for clients the size of Big Frank's burger joint or stand-alone yoga studios.

Station sales goals aren't getting smaller and neither are sellers individual budgets.

Sellers and sales managers won't hit their goals or make their bonuses chasing down Big Frank, so they have little incentive to do so.

However, I'm intrigued by your statement that Groupon is aggregating Big Frank and his friends with no sales commission.

Is their sales process automated?

If it is, could a certain app company we all know stretch out and develop an automated buying platform for radio?

Because otherwise, I can't see how the economics of chasing smaller accounts will work for radio.

There are much bigger dollars being spent on digital and social marketing that could be greatly enhanced with the addition of a radio component.

Let's go get those dollars and buy a burger at Big Frank's with the commission.

[Fred]

Ding, ding. Yup, this is essentially non-spot inventory sans the salespeople. These little retailers may not have a lot of money, but aggregated, it is substantial (Groupon's doing pretty well). Radio could offer a better rev share split, combined with that cume, and low overhead - and look out.

But it demands thinking differently about the advertising model, and thinking about the coupon opportunity as a different platform as part of the integrated hole.

As for that app company, who were you thinking about? :-)

Thanks for reading & contributing, Mike.

[Eric Holmes]

Well, this has actually been going on for about two years with FourSquare. They use your location to show you offers nearby. So It's not a new thing. Definitely cool though. I'm going to download it right now.

Thanks Fred!

Eric

[Fred]

It's pretty seamless, and while Foursquare is more social, this is commerce. And it's right in the grille of local media focusing on retail ad dollars.

[Mike Anthony]

Fred -

The problem is Big Frank and 80% of other small businesses in most markets are never called on by radio.

Groupon and others have become billion dollar businesses working with the 80% that radio thinks is too small to bother with.

You won't really understand the Groupon-effect and why they work so well until you know emotional connection they have made with the users of these deals.

Groupon understands that 80% of retail sales happen within a 14 minute drive of where people live so they love dealing with the local small businesses that make neighborhoods special. Groupon is going mobile because they know that 50% of consumers will share their location if there is a reward/deal for them to take advantage of.

Radio used to be about communities and people. By taking our eye off the prize...someone else is making time our listeners and getting the revenue.

Learn from Groupon and why their focus on discovering new products, services or experiences at rediculously great prices on a local level works so well. Groupon tells all local businesses you'll never need to spend a dime to advertise again. And they believe them now.

Fred, I mentioned this to you in person yesterday but think its worth sharing again on this forum...Internet entreprenuers wake up each day and think "what problem can I solve today"? while broadcasters wake up each day thinking "what can I sell today"?

The ad model is not a growth model anymore. Radio what's Plan B?

[Fred]

Mike, the Groupon experience works differently than traditional advertising as you point out. The "Great Recession" retaught consumers how to shop, and Groupon came along at the right time to take advantage of a new American shopping mindset.

You are correct that part of radio's challenge is to think consumer experience (and yesterday's blog was a good example of this) rather that "What's in it for us?" and "How can we monetize this?"

Great to see you in Silicon Valley, and thanks so much for contributing here.

[Paul Jacobs]

Mike, you've nailed the problem. How many advertisers does an average radio station have on the air in an average month? 100? 200? And how many business are in their market looking to communicate with customers?
The radio sales model must come under scrutiny if the business is to grow, much less survive. Fighting over market share of a 5% piece of the pie is insane. But we are in danger of becoming a brick and mortar business in the digital age - exactly the place we don't want to be in.

[Lauragonzo]

Absolutely a must-read for any media sales agent.

[Fred]

Laura, you've spent time in the trenches so your comment really resonated for me. Thanks for the kind words. This "Big Frank" blog has caused a lot of conversation in the business.

It is also a reminder to me of something that James Cridland talked about at Convergence this past week - the need for radio in the US to (somehow) speak with a single voice. This is a tall order, but it's essential for the health of the industry.

[Angelica Balderas (Angie)]

Are we bringing "relational" or "transactional" consumers to our customers with this platform? Ask any successful restaurant owner what the retention rate of heavily discounted coupons is? They don't stay there are off to the next deal. I don't have my head in the sand about where this is going either we just need to figure out how to marry the relational (which has been always radio's strength ) with the transactional.

[David Martin]

Fred, Paul and digital ninjas of Jacobs Media: Kudos on your post. Good thoughts well reasoned. Thanks too for the mention. Honored.

Allow me to suggest what we have here is but the latest symptom of a bigger strategic problem. We have an urgent need to reimagine and reinvent our sales process. For decades our shares have remained in single digits no matter the industry initiative. Pick one: Making the case against the daily newspapers, selling subcarriers, co-op, RDS, yield management, NTR, et al. The truth is, as that great American philosopher Pogo once said, "We have met the enemy and he is us."

Too often radio folks are getting up and going to work with one shared intent - killing the radio guys across the street. This brutal internecine warfare has gone from art to something approaching 20th century science. We use competitive intelligence to assign our sellers switch-pitch targets. We use Miller-Kaplan and other market revenue data as a report card for performance. We're devoting precious resources on getting better and better at a game that may soon be played less and less. My take is this single-minded focus, this obsessive tweaking of the numerator seriously impairs our visual acuity of reality as it is. We fail to see the total ad spend in the market which is actually huge. Too often we're not seeing the forest or the trees because we (and our radio competitors) are laser-focused on the bark of a single tree. The result is iatrogenic - our own solution sets, those designed and practiced to help are - in reality - making things worse. I'll make the case that this is a genetically transmitted blindness that holds us back. Moreover, at its core, it's a leadership problem.

As you are aware, I remain very optimistic about what the future holds for the first tribe of wireless. We can do better. Let us invest some of our thinking and other treasure into changing the denominator instead of putting everything we have into optimization of our legacy systems. As Sir Ken Robinson reminds "We will not succeed in navigating the complex environment of the future by peering relentlessly into a rear view mirror. To do so, we would be out of our minds."

[Fred]

Couldn't agree with you more, Dave, and thanks for doing the tag-team with us on Groupon Now, as well as turning us onto their video in the first place.

It is that relentless insular focus that is limiting radio's future. And like you, we are very supportive of the industry and just wish that we could get out that Poco mentality.

Too often, true competitors like Pandora or Groupon are sneered at, mocked, or simply ignored. Denial is a powerful drug, and really since the dawn of the Internet, it's been a battle to confront demons and reality.

Part of the problem is that there are so many concerns and initiatives that demand focus and attention. And radio has a tendency to get side-tracked into its own agendas, rather than consider the world from the consumer's point of view.

Until that mindset changes, it's going to be a lot of head-to-head competition for radio dollars and radio ratings - while the rest of the world moves into faster, cooler, and frankly, more profitable spaces.

Visionary leadership is part of it. Speaking in a singular voice as an industry is, too. That also demands a very different way of thinking.

[Fred]

Angie, thanks for the comment. Yes, there are inherent problems with the coupon structure & retention level. But this is a hot area (thanks in part to the economy) and it's attacking the local retail world.

Radio could easily integrate more aggressive couponing programs into its current platform. And the Groupon Now direct model - retailers to consumers - has its attraction.

It is truly a matter of thinking differently, and a willingness to morph the existing model.

Thanks again for taking the time & joining in the conversation.

[Tim Stansky]

Great convo thread from a very deep bench here. I keep recounting it and arriving at this - couponing is a one of many impactful tactics that should be used properly to deliver for the client, but not so as to become a low-return distraction that kills the average sale and ROI of hours invested in local / direct deals. I've found that such tactics woven into better long-term strategies such as CSS' "Customer Focused Selling" create higher-margin, better revenue. The key is finding that competitive, affordable and manageable turnkey tactic system that becomes embraced by commissioned salespeople and those who execute.

[Fred]

I think you've hit it, Tim. Stations still have to focus on the mother ship for sales. But couponing can provide that lower tier of business that attracts advertisers who may not be able to afford a :60 - while taking advantage of the coupon phenomenon in a way that isn't distracting. Maybe a tall order, but a great opportunity.

Thanks for taking the time to read our blog.

[Links of London Outlet]

Don't know what is wrong what is rite but i know that every one has there own point of view and same goes to this one