Tag Archives: Advertising

Analog vs Digital

113Roy H. Williams writes a weekly article called the Monday Morning Memo. I’ve been reading it since the days when Roy used to fax it. Today it arrives every Monday morning via email.

Does it arrive via analog or digital?  Probably digital.

The fax days were when it arrived analog I’d guess.

The Other Kind of Advertising

Recently, Roy’s MMM was about “The Other Kind of Advertising.” What got my attention was that Roy made the comparison of analog world versus a digital world as the difference between Newtonian physics and Quantum Mechanics.

I was a physics major as an undergraduate in college.

In teaching at the university, I have often used elements from my physics education to give a better foundation to my students about universal principles that form the foundation for effective communication.

The Power of the Human Voice

When I speak to you, am I talking in analog or digital? You don’t care, do you? You never really even gave it a thought until I brought it up. What does get your interest is what I’m speaking to you about.

Radio gives the human voice amplification.

Word of Mouth is the Best Form of Advertising

Anyone who’s been in advertising sales has certainly been told over and over and over, that the best form of advertising is “word of mouth.”

My response to that has always been, “I agree with you!”

That’s why you should be on the radio because we are word of mouth, only we have the biggest mouth in town.

There are No Wrong People

Roy has preached for years, there are no wrong people to be reached by advertising, only wrong messages. Great advertising not only engages the mind, builds curiosity but causes people to share with other people what they’ve heard. That’s the magic of persuasive storytelling aka radio advertising.

But the Data Says

Google Analytics got everyone thinking that targeting was the most important thing in advertising. The new digital world of advertising was all about “reaching the right people.” But is that really effective?

The data for my radio stations back in northern New Jersey said that we reached the most people who were employed. So why would anyone run “Help Wanted” ads on my radio stations? Wouldn’t they, by definition, be the “wrong people?”

Turns out, that would be wrong.

People who are employed are the very ones that know people who aren’t. And then there are people looking for a better job or a job that’s closer to where they live.

Often people who ARE employed are not happy in their current job and radio help wanted ads may entice them to make a change.

Belief Systems

If you have a deterministic belief system then you are like a Newtonian physicist. If you have a probabilistic belief system then you are like a physicist who works in the world of Quantum Mechanics.

In advertising, the first group would be marketers who use predictive data and the second group would be marketers who base their decisions on outcomes.

And just like with Newtonian physics and Quantum Mechanics, both are true.

Newtonian physics was used to put Americans on the moon and return them safely to earth. But it won’t explain how your computer or smartphone work. For that you need to use Quantum Mechanics.

String Theory

One of the goals of physics is to find a single theory that unites all of the four forces of nature. These are; electromagnetism, gravity, and the strong and weak nuclear forces. In other words what ties both Newtonian physics and Quantum Mechanics together. String theory maybe that unified path.

I believe that when it comes to effective advertising, we have already found our unified theory that ties analog and digital communication together.

The message is that string, that single element that makes both analog and digital equally effective.

The person who creates that message is critical.

Who is that person(s) in your organization? Do you even have someone dedicated to this creative, innovative, demanding, hypercritical position?

Sadly, many – dare I say most – radio stations don’t today.

Lightning In A Bottle

If creating persuasive radio commercials is part of your job description, let me give you a little help. Let me turn you onto some “Lightning In A Bottle.”

Blaine Parker is a Mercury Award Winning radio creative genius. He’s just published his latest book that reveals the 3 easy rules for writing more profitable radio commercials.

WARNING: This book is short & expensive!

Full disclosure, Blaine asked me to write the forward to his book, so I can truthfully reveal to you I’ve read it and believe in everything Blaine has written to be seductively effective.

I have no financial interest in the sale of this book. My financial interest is in you, your radio station and your advertisers to effectively tell their story and get results.

You can buy “Lightning In A Bottle” on Amazon by clicking HERE.

Analog or Digital, Who Cares?

I wrote today’s post on a digital computer. You received it via email or are a subscriber to my weekly blog articles (subscriptions are FREE) via the internet.

But whether I shared all of this in a face-to-face conversation or via AM/FM radio or via HDRadio or via an internet stream, the message conveyed would be the unifying element that either caused you to read all the way to the end or bail out early.

And powerfully, persuasive messages do not cause you to remember every word, but they will forever change how you feel about a product, service, business or person.

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What Are They Thinking (about Radio)?

93My Capstone Class students read several books on management during the semester. Some are on personal management, self-improvement type books if you will, because how can you manage others until you can first manage yourself.

One of the books we read is Barry Drake’s “40 Years and 40,000 Sales Calls – Thoughts on Radio and Advertising based on a Lifetime of Customer Contact.” I highly recommend this book as a MUST READ for anyone considering a career in broadcasting or is currently working in broadcasting or is curious about what such a career is like.

When we finished the book and our discussion of the book, we did a Skype session with the author, Barry Drake.

AMAZON Synopsis

Just in case you aren’t familiar with Barry’s book, I will share with you the Amazon synopsis:

“Barry Drake retraces the steps of his forty year broadcasting career to delight readers by telling stories and bringing to light things that have changed and so many things that have not.
Growing up in a media household, Drake saw the birth of television and the impact of local radio personalities. He picked up knowledge of business working in fast food and retail.
In radio, Drake began in the day of AM domination and participated in the rise of FM. Later he went on to head companies in radio and television.
40 Years 40,000 Sales Calls is loaded with Drake’s opinions on the current state of the media, radio in particular and what advertisers want. What makes this book unique is that the opinions all come from direct contact with advertisers. There is no B-school philosophy. Just real world knowledge obtained over forty years of real world work.

One hundred percent of the net proceeds from the book’s sales go to the Broadcasters Foundation of America to assist broadcasters who are in acute need. The Foundation does not endorse or subscribe to the views expressed in the book.”

So What Questions Float in Student Minds After Reading this Book?

You might be amazed as what goes through my student’s brains.  Let me share with you some of their questions:

  • How do the RAB (Radio Advertising Bureau) sales modules for the RMP exam compare to his own personal selling strategy?
  • Where does he think he’d be if he didn’t grow up in a radio heavy household (both Barry’s dad & mom worked in radio)
  • Barry said he fell in love with radio when he saw “the magical relationship between the radio station, the radio performer and the listener.” Now that we’ve entered the age of digital and voice tracking, is that relationship still magical in your opinion?
  • When you are selling to a customer what is the most important step in building a relationship with your customers?
  • How do you think broadcasting and broadcast sales will change in the next 10-20 years? Where do you think the radio industry is going?
  • Do you have any regrets in choosing a broadcasting career?
  • Do you see local radio becoming more popular than syndicated radio?
  • Did you ever want to switch careers?
  • What defines a leader?

I think you can see from just a sample of the questions my students had, we covered a lot of ground in that class session with Barry.

Barry Drake’s Wisdom

Barry says the biggest issue going forward will be competition for people’s time. Time will be at a premium in a world with unlimited media choices.

To be successful you will need faith. Faith in yourself, in your career and that everything will work out just fine if you dedicate yourself to your work with everything you’ve got.

You become what you think about, so focus your thinking on where you want to go.

Radio is “show” plus “business.” The business needs new ideas and innovation and that will soon be in the hands of graduating students.

Building Relationships

Barry said there are three things to building advertising relationships with radio station clients:

  1. Show that you care
  2. Bring lots of ideas
  3. Respect the value of people’s time

Leadership

A leader is anyone other people will follow.

A leader must have integrity.

A leader must do what’s right and what’s best for the enterprise, even though they realize not everyone will be happy with some of the decisions that have to be made.

A leader must earn their people’s respect every minute of every day.

Be aware of everything going on all around all of the time. Read all the trades, read the latest news about business and anything else that will impact your business and that of your radio station’s advertisers.

3 Things You Need to Be Successful

  1. Role Models are critical (Pick one for yourself, someone you can emulate)
  2. Find a Mentor (Have at least one. More is better.)
  3. You’ve got to have a horse to ride (In other words, you have to have an opportunity to apply your skills. Join a company you believe in, that has people you like working with and a mission you are ready to commit to.)

And in case you were wondering about that one student’s question about whether Barry ever thought about switching careers, the answer was:

“NO! Never once.

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Just In Time Learning

66In a post I wrote about “Where You Should Be Recruiting Radio Talent” I mentioned a concept of “Just In Time Learning” that struck a chord with many readers. Commenter’s said they found the idea interesting and something they had never heard or thought of before. So I thought I’d expand on that thought with a little more detail and why it’s time has come.

Toyota’s Better Idea

Manufacturers used to stock everything they would need to build a product in warehouses. It was expensive and often wasteful. Then the idea of having parts shipped just-in-time to be assembled into a finished product was introduced.

Originally called “just-in-time production,” it builds on the approach created by the founder of Toyota, Sakichi Toyoda, his son Kiichiro Toyoda, and the engineer Taiichi Ohno. The principles underlying the TPS are embodied in The Toyota Way.

College Degree Credential Creep

Once upon a time, college was an optional final stage of learning in the United States. Today even a Starbucks barista probably has a college degree. So what’s causing this college degree credential creep? In many cases the reason is that employers feel that by requiring candidates to have a bachelor’s degree they will see a higher quality group of candidates. It has nothing to do with what job skills are actually required. It’s used mainly as a screening tool. Unfortunately, two-thirds of the workforce in America gets screened out when a B.A. degree requirement is inserted into the advertisement. Burning Glass researched how the demand for a bachelor’s degree is reshaping the workforce and you can read more about all of this here.

The 20th Century College Education

When the 20th Century began, America had about a thousand colleges and those colleges had less than 200,000 students enrolled in them. By mid-century the number of colleges exploded and colleges that once had about a thousand students expanded to universities with enrollments of tens of thousands of students.

Unfortunately our 20th Century higher education system simply wasn’t designed to deliver what’s needed in a 21st Century world.

Your Teacher, Your Doctor and Your Barber

In our high tech world, things can quickly scale. Productivity grows quickly. But a teacher still teaches at the same pace. Your doctor can only see patients at the same pace.  And your barber can only cut hair at the same pace as each of these professions did in the 20th Century.

When something can’t scale, the price to provide the service goes up.

In the case of higher education, this price problem has been compounded by states reducing funding to their colleges and universities, resulting in public colleges being funded more and more by student tuition and lots of fees. This has resulted in a trillion dollar student loan crisis in America.

Certifications vs. Degrees

For the radio industry, the answer may be professional certifications versus bachelor’s degrees. Students simply can’t afford to go to college for four to six years and come out with tens of thousands of dollars in student loan debt to take an entry level radio job that will pay them fifteen to eighteen thousand dollars a year. Even worse, most likely the job you’re most looking to fill – sales – a college grad won’t have received any course work in learning about. Broadcasting in college is focused on teaching all of the low demand jobs in radio and the classes in the high demand jobs are either non-existent or being eliminated.

The Radio Advertising Bureau offers professional certifications in selling starting with their Radio Marketing Professional (RMP) certification. Burning Glass says that jobs in fields with strong certification and licensure standards have avoided the problem of “upcredentially.” They write: “This suggests that developing certifications that better reflect industry needs, together with industry acceptance of these alternative credentials, could reduce pressure on job seekers to pursue a bachelor’s degree and ensure that middle-skill Americans continue to have opportunities for rewarding careers, while continuing to provide employers with access to the talent they need.”

Radio’s Recruitment Mission

The National Association of Broadcasters (NAB) and the Radio Advertising Bureau (RAB) need to spearhead the radio industry in creating bonafide certification programs for all job classifications that will be accepted by the radio industry as the equivalent (or better) than a bachelor’s degree. These programs need to be offered to high school aged students and recent high school graduates.

Certification programs can be designed to provide the kind of just-in-time learning needed for each radio position. When a person shows they’re ready to advance additional certification training can be taken to prepare them for the next higher position.

Done in this way, the training will be up-to-date, cutting edge instruction to insure the student is learning exactly the skills needed for the position they will be moving into.

Time for Radio to Think Different

The radio industry will need to attract new talent in order to stay viable and continue growing. Embracing a better form of training for the skills needed and making this a requirement versus a college bachelor’s degree is 21st Century thinking.

Many of these programs are already in place, but industry recognition and acceptance of them lags in comparison to requiring a college degree.

It’s time to think differently about how we find, train and grow the radio talent of tomorrow.

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Welcome to the Social Capital Age

64We live in interesting times. The internet has changed our world in a revolutionary way. In its current form the internet is now over twenty-years old. There are college students today that don’t know a period of time when there wasn’t an internet.

The 5 Media Revolutions

There are only five periods in world history where communication has undergone such a massive change to be called a “revolution.” The first would be the invention of the printing press and movable type. The telegraph and telephone would be the second time. The ability to take photos, record music and voice and create motion pictures would be third. Radio followed by television would be the fourth time and the digital/internet period – the period we are living in today – is the fifth communications revolution.

Each communications revolution brought with it a period of adjustment and made the world a little more connected. Entrepreneurs who could envision the future would leverage each media revolution to their economic benefit.

The Post-Digital Age

Once upon a time, people spoke of the electrical age and the computer age. You don’t hear anyone say that anymore. Slowly fading away are people calling things digital or internet. It’s when people begin to take a new innovation for granted that it begins to have social impact.

Social Capital vs. Technical Capital

In the previous four media revolutions, technical capital is what separated the winners from the losers. What makes the fifth media revolution so confounding to media professionals is that every new media device sold today creates not only a media consumer but a media producer as well. By 2020 it’s estimated that there will be nearly eight billion people living on planet earth and 65% of them will be connected to the internet. That means there will be over five billion people who will be able to create content and distribute it over the internet.

“The moment we’re living through

 is the largest increase in expressive capability in human history.”

 –Clay Shirky

Professor Shirky also says that as these new social media tools get technologically boring, they get socially interesting. In other words, as the value of technical capital goes down, social capital’s value increases.

NPR Sees Large Ratings Increase

On Tuesday, October 18, 2016 NPR reported that its multiplatform journalism has seen a tremendous audience growth. NPR President and CEO Jarl Mohn said it showed that NPR was doing a far better job of its public service mission, community engagement and local impact.

What NPR is very effectively doing is increasing the value of its social capital. It is focused on its listeners who have an appetite for strong reporting and a need to be in the know.

Today’s media landscape allows one to convene an audience, but not control them. It takes discipline to understand this change in our 21st century communications world.

Advertising’s New Challenge

Older media folks still think of media in terms of radio, TV, newspapers, magazines etc. Today any person over ten doesn’t make this kind of distinction.

Radio to my college students is anything that they can get through any media device that is primarily audio-only. Satellite radio, Pandora, AM, FM is all radio to them. Likewise is the idea of ecommerce, mcommerce or brick-and-mortar, for today’s consumer it’s just buying stuff they want, when they want it.

Birds of a Feather, Flock Together

The concept of reaching a mass audience through target demos is over. It’s no longer about age, as it is state of mind. Today the game is about reaching a unique audience that is socially connected by their interests. Shared interests are the new “local.” The future is in the careful creation of the ad itself, which speaks to the interests of the consumer and then placing it in a media environment that is in sync with the product or service being presented. Podcasters are doing this quite effectively.

Media that defines what it is, monitors all content to be consistent with that definition, will be the media that wins for both its audience and its sponsors.

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Reflecting on Radio Show 2016

60The radio show was close to home this year, just down the road from my university, in Music City USA, Nashville, Tennessee. Plus, the Tennessee Association of Broadcasters decided to roll their annual convention into an opening event at the Radio Show. So as soon as I finished my morning class, I was on the road to Nashville.

Tennessee Association of Broadcasters Kick-off

Whit Adamson, President/CEO of the TAB, put together an amazing opening reception and event inside the Country Music Hall of Fame. We were welcomed by TN Governor Bill Haslam who declared it “Radio Week” in the State of Tennessee. Then the Mayor of Nashville, Megan Barry, gave us a warm welcome to Nashville where she declared it “Radio Week” in Music City. The “red carpet” was fully rolled out for the radio industry and attendance would set a new record for the Radio Show.

Pillsbury’s Broadcast Finance Forecast Leadership Breakfast

The good news is radio is the “King of Audio.” The bad news is that revenue growth for radio underperformed ad spending post-recession. Radio’s 7% share of all advertising is predicted to decline to 6% by 2019. Why? Digital ad spend will grow significantly (40%) by 2019. And radio will struggle to reach mobile users.

The big takeaways from this session were: Investors want to see new growth catalysts like NextRadio, more event revenue and growth in digital/mobile ad revenues. Investors want no more than 3 to 4 times leverage with more industry consolidation. All of this investors feel will yield more “free cash flow.”

Investors worry about audience fragmentation and Millennial reach, radio’s competition in the car dashboard, the challenges coming from digital/internet, continued uncertainty over royalties and excessive leverage.

Focusing on Your Career Future

The room here was filled with young people. Radio mentors from all areas (except engineering) met with tables full of students and recent graduates to talk about the many opportunities available in today’s radio industry. The mood was once of excitement and enthusiasm.

Brittney Quarles and John Focke both would share their personal radio journeys with students as they shared advice such as: “the industry is small, don’t burn any bridges” and “find a champion for you and your talents” and “be careful who you share your dreams with.” The right mentors are essential to your career.

Beyond Basics – The Prosperous, Professional You

John Bates, Elizabeth Burton and Heather Monahan led a session in how to reach beyond your limits and build a better “Brand You.”

John Bates shared “3 ways to inspire and connect”: 1) logic is not the way, 2) human eyes connect you to another person and 3) be authentic. For example, people don’t connect with your successes, but your messes. You message is your mess. But above all else, “Make A Difference.”

Elizabeth Burton drilled down the importance of your online brand and that today your online activities build your reputation.

Heather Monahan told us that people take only 10-seconds to make an opinion about you when they first meet you. 50% of communication is nonverbal and your attitude is everything. And if you want to know what your personal brand is, ask others this question: “What value do I bring to you?”

The Digital Dash – Improving the Consumer Experience

Fred Jacobs, Steve Newberry and Scott Burnell (from Ford) all shared their perspective on radio in the car. The first big thing is car manufacturers don’t call it a radio in the dash anymore (and probably haven’t for some time) but “the center stack.” Into this part of the dashboard, everything a car owner wants can be accessed.

Steve Newberry (former NAB joint board chairman) really brought the whole issue home with his analysis of the technology revolution by saying there are two kinds of events: disruptive and modifying. Disruptive events would be things like television and FM radio. Modifying events would be things like cassette tapes, CDs and MP3s. Disruptive events change the landscape and prevent an entity from doing things the way they’ve always been done. Television stole radio’s programming and added pictures and radio had to reinvent itself with new kinds of programs. Modifying events such as records being replaced by cassettes and 8-track tape, then CDs replacing both of those to be replaced by MP3s merely modified the way people listened to their own music libraries but not how they used radio. The new digital/internet connected world is a disruptive event and radio needs to once again adapt to this revolution in communication. The future is bright if radio is agile and adapts.

Perception vs. Reality – The True Power of Radio

My first Arbitron rep was Pierre Bouvard. He’s a fountain of information. His presentation on “7 Things Brands Have Completely Wrong About Radio” tells the story in great detail and shows the challenges faced by radio sales people today.

Podcasting

Steve Goldstein did an amazing presentation on podcasting by starting out with this Thomas Edison quote from 1922 “The radio craze will die out in time.”

Today mobile is eating the world. 20% of audio listening comes from the smartphone. For radio, podcasting is all about retention, growth and relevance.

Podcasting is no longer niche. It delivers the demos advertisers want. Podcasting is different than broadcasting. There’s money to be made in podcasting and radio has the perfect megaphone to promote podcasts to its audience. That’s radio’s “secret sauce” that podcasters wish they had access to.

Radio – The Local Media Company of the Future

Gordon Borrell and his research company are doing some incredible studies on the future of advertising. He immediately got the audience’s attention when he said in the last ten years $56 Billion has disappeared in advertising expenditures.

Banner ads are dead. But digital is not.

Local advertising growth is forecast to increase 7.6%, but non-digital will see a 6.9% decline in ad spend and digital will see a 22.4% increase in ad spend. In fact, 2017 is the year that digital advertising will eclipse all traditional media.

Borrell said when advertisers cut ad spend in one medium they spend it in another medium. Radio will continue to be bought, but only those stations who have well-trained representatives that understand the realities of today’s advertising and can put together a total marketing plan that goes beyond simply radio spots. Advertisers will partner with any media company who has reps that listen.

The good news is traditional media – like radio – is still necessary to drive digital advertising goals and deliver maximum digital R.O.I. (Return On Investment).  You can see Gordon’s full PowerPoint deck here.

Final Thought

The mood in the halls and in the sessions at this year’s Radio Show was very upbeat. The things being discussed and presented did not shy away from the realities all ad supported media face.

Anyone who attended came away with lots of action steps that need to be implemented immediately.

Radio currently is the #1 Reach & Frequency medium in the United States of America.

There’s no time to waste. It’s time to roll up our sleeves and “Make A Difference.”

Radio’s future depends on it.

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Millennials Love Radio

52News is about the exception. A car driving down the main street of your hometown is not news. But let that “radio on wheels” run into something and that’s news.

It’s the same with radio listening. The fact that 92% of the population of America listens to radio every week is not news, but finding out one of them listens to something other than radio grabs the headline.

Millennials Outnumber Boomers

It was just a year ago that Millennials outnumbered us Baby Boomers. That was news, because the Boomers have ruled the roost for several decades. So how does radio listening stack up for the Millennial generation? 91.3% of Millennials are reached by radio every week. 94% of GenX’ers are reached by radio and us Boomers come in at 93.5% reached by radio every week according to Nielsen.

Millennials Don’t Hate “Old Media”

MediaLife magazine just reported on what’s really happening with Millennial media usage versus what many believe is happening. Example: Newspapers – more Millennials read a newspaper once a week than use a tablet. Another example: Radio – more Millennials crank up the radio (80%) than have an MP3 player (45%).

What Millennials Aren’t In-Love With

What you might find surprising is that Millennials aren’t swooning over Satellite Radio, smartwatches and connected cars. In fact, Millennials would rather ride share or use public transportation than even own a car.

Time For Another Paradigm Shift

It was Thomas Kuhn who is credited with coining the term “paradigm shift.” He defined it as changing from a set of beliefs or views that members of a community all shared.

It’s hard to predict the future and many of the models people develop to predict levels of risk really miss their mark. Two examples are the Fukushima nuclear disaster where the “experts” said a twenty-foot wall would protect the plant from any Tsunami. However it was a twenty-four foot wall of water than would take out the plant. And everyone knows that insurance companies are in the business of predicting risk, its how they come up with the premiums people will pay them. So how did AIG miss the financial collapse in 2008 that would bring down the company?

The Lesson of Procter & Gamble

Procter & Gamble aka P&G is a huge company. They primarily make cleaning products; soap.

When commercial radio was born in 1920, P&G was quick to move their advertising monies from print to radio.

When TV came along, again P&G would lead others in moving their advertising monies to TV. (The radio & TV “Soap Opera” name comes from the creation of serial dramas that were created by P&G to sell their soap products in.)

When the internet came along, P&G was a leader in moving their ad monies from traditional broadcast to online.

Except this time, it didn’t work as it had in the past.

The Wall Street Journal ran a story entitled “P&G to Scale Back Targeted Facebook Ads.”

“Procter & Gamble Co., the biggest advertising spender in the world, will move away from ads on Facebook that target specific consumers, concluding that the practice has limited effectiveness.

Marc Pritchard, P&G’s chief marketing officer, said the company has realized it took the strategy too far. ‘We targeted too much, and we went too narrow’

P&G could be the bellwether on how consumer goods companies and big brands use digital advertising. Over the past year some marketers, specifically consumer product companies, have discovered they need to go ‘much more broad’ with their advertising”

Bob Hoffman, “The Ad Contrarian” has been predicting this for some time. He recapped his prediction on a recent one of his blogs that you can read here.

Advertising Is Sloppy

The problem with today’s “targeted advertising” is that it misses lots of targets. Great advertising works, in part, because it’s sloppy. By that I mean it produces results because it reaches a large and diverse audience through a mass medium like radio.

Radio is the number one reach and frequency medium in America today.

I’ve advertised on radio stations I’ve run for help for positions we had open. What never ceased to make an impression on me was how many people I’d interview who came in for the advertised position and had never heard the ads. How did they know about the opening? A friend of theirs who heard the ad told them about it. That’s what I mean by advertising being sloppy. That’s what I mean about hitting the target even when you are not aimed at it.

Great Ad Copy

The one thing that is critical is your advertising copy. Great copy will produce results on virtually any radio station. It’s not about being on the most listened to station in the market that will produce results for the advertising client, it’s the radio message itself that will make the difference. Next, it’s the ability to deliver that message consistently day-in and day-out, fifty-two weeks a year.

Breaking News

Radio has always been the advertising medium that gets results when used correctly.

To be successful, you need to build your brand in the mind of the consumer. Radio let’s you whisper in the ear of the consumer every day.

Radio will not only help you build your brand but keep it top of mind too.

The “breaking news” is target marketing is OUT.

Mass media sloppy advertising is IN.

 

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The Day the “Dumbest Idea” Invaded the Radio Industry

shareholder valueLast week I wrote about killing the goose that lays the golden eggs. It was my way of comparing the Aesop fable to the world of American radio. It got a lot of discussion. But I felt that while I touched on how radio operators twenty years ago wanted to harvest all the golden eggs immediately versus waiting to get one each day, by virtue of a last minute insertion into the Telcom Act of 1996 that basically removed the ownership caps on radio, there was – as Paul Harvey used to intone – ‘the rest of the story’ to be told.

The rest of the story involves “the dumbest idea.” I grew up about a decade after World War Two ended. This was the period when America enjoyed an extended period of economic growth and a shared prosperity. By “shared prosperity” I mean it was a time when the workers who produced a product or service shared in the profits produced by the company. Managers and workers would see their income grow together. As everyone’s pay increased, there was more discretionary income to spend. This was the rise of the middle class in America. All boats were rising with the economic tide.

In 1968, I started on-the-air at one of my hometown radio stations while in the 10th grade in high school. I was paid the minimum wage; $1.60 per hour. Did you know that 1968 was the year when someone making the minimum wage had the most buying power for that rate of pay? The equivalent in 2012 dollars is $10.34 per hour. So what happened?

Somewhere in the 1970s things changed. Firms began to focus on themselves. The productivity gains produced by the workers were no longer shared with the workers. Since no one complained, this new way of doing business continued.

The 1980s really saw this new operational style take hold. And as it did, incomes for the middle class stagnated. When the middle class incomes stop growing, the ramifications on the rest of the economy are magnified. Workers no longer have discretionary income to spend. This was initially covered up by women entering the workforce producing two wage-earner incomes. Then when that ran its course, credit cards, second mortgages would keep the party going under false pretenses.

Today we are in a vicious cycle of decline.

What changed in the 1970s was a new idea about what metric should be used to measure the success of a business. Before this new idea was born, Peter Drucker’s measure was the rule. The purpose of a business, said Drucker, was to create a customer. But that went out with leisure suits, the new crop of business wizards would proclaim. What replaced it was something that even GE’s Jack Welch has called “the dumbest idea in the world.”

What was this dumb idea? Increasing shareholder value.

In an effort to offset declining profits and performance, a new operating modus operandi was conceived that the purpose of a corporation is to maximize shareholder value. To make sure the captains of industry got the message, boards of directors would change their compensation packages to cause these business leaders to focus on increasing the company’s stock price. What could possibly go wrong?

Everything!

The concept was embraced by both America’s business schools as well as industry. Unfortunately, the new policy not only didn’t solve the problem it was supposed to address but by unintended consequences created a myriad of new problems no one foresaw.

Tell me if any of these “unintended consequences” sound familiar to you: short-term decision making, relentless cost cutting, staff reductions (RIFs), less investment in the business, virtually no innovation, low workforce morale, no raises in pay, reduced benefits, non-stop mergers, increased debt, lost ability to compete, declining R.O.I., and economic stagnation. I’m sure you can add to this list based on your own experiences. For a more detailed look at this, you should read Steve Denning’s “Why ‘The System’ Is Rigged And The U.S. Electorate Is Angry,” the inspiration behind today’s blog post.

So twenty years ago, in 1996, President Bill Clinton signed into law the Telcom Act of 1996. This would bring “the dumbest idea in the world” to the radio industry. Wall Street jumped into the new shiny investment opportunity; radio. Everything that every other industry was experiencing from this new operational style was now rearing its ugly head in the broadcasting industry. All with the same negative impacts.

Not all organizations adopted this dumb idea of operating. They stuck with Drucker’s rule. And it’s the same with the radio industry. The smaller radio operations do operate differently. Their success has others sitting up and taking notice.

However, most organizations – and not just in broadcasting – are still in denial. The evaporating middle class is not good for an industry that lives off of advertising. Advertising is pitched to the masses who are the consumers that drive over seventy percent of the American economy. I wrote about the future of ad supported media last year after I read Thomas Piketty’s book “Capital in the 21st Century.” You can read that blog post here.

Based on the tumultuous presidential election season we’ve seen so far, it would appear that the American society has awakened and is now “as mad as hell and not going to take it anymore.” Cue Howard Beal here.

Steve Denning writes: “We are now at an ‘emperor has no clothes’ moment.” It’s now clear that this way is not working and is not only leading to systemic value destruction but an economy that no longer works for the middle class.

If we’ve ever needed real leadership in America, it’s now — and from all directions.

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