As advertisers tighten their belts amidst recession fears and record-high inflation, does radio have an opportunity to grow its market share? Industry leaders say radio is a good buy during a downturn because it offers one of the lower cost per points in media, has an army of sellers with digital and marketing savvy that can help steer clients through troubled waters and holds an ace up its sleeve in the form of highly sought-after promotions.
“The post-pandemic malaise has local ad buyers inching dangerously toward lockdown again, as they did in the early stages of the pandemic, and as they did during the Great Recession back in 2009-2010,” says Borrell Associates CEO Gordon Borrell. In the local media research firm’s quarterly business barometer, one-fifth of local advertisers surveyed said they planned to reduce ad spending for the remainder of the year. That is a reversal of a trend that began in February 2021, “where they felt more confident about the economy. So there's trouble ahead,” Borrell warns.
Most vulnerable are media perceived as pricey and difficult to buy, led by newspapers and broadcast TV.Digital, radio, and outdoor “all have the lowest CPMs and are relatively easy to buy, produce, and place,” said Borrell. A January 2022study by Solomon Partners showed radio with an average CPM of $6.75, versus $46.82 for newspaper and $20.00 for broadcast TV.
“Radio compares favorably for those who want to complement digital advertising with some sort of mass media, as many advertisers do,” says Borrell.
While the cost of doing business is on everyone’s mind, Erica Farber, CEO of the Radio Advertising Bureau, says radio provides advertisers with other important benefits. “Consumers want to be recognized and many even want to be provided reassurance that everything will be OK,” she says. “Radio is that local connection that offers comfort, companionship, and trust – the ideal environment for an advertiser’s message.”
Another reason why radio is well positioned during downturns: radio sellers have become expert marketers, according to a Borrell survey of advertisers, more so than for any other type of sales rep. And the perception of digital savvy of radio reps is now also the highest. That’s important during a downturn, when Borrell’s studies show ad buyers are looking for advice.
During economic turbulence, it all comes down to building trust and having solid relationships with clients, says Farber. “As we have learned from other Borrell studies, advertisers are looking to work with just a handful of marketing and sales executives versus working directly with the many sales executives representing a myriad of products and services,” she says. “Over the last several years radio sales representatives have jumped to top of the list as being one of the most respected media partners by advertisers. And that has happened because radio sellers are continuing to be better trained and have a better understanding of the importance of providing solutions to advertisers needs,” says Farber.
During inflationary times, advertisers beef up promotions, which is one of radio’s calling cards.
The Perils Of ‘Going Dark’
Apart from radio’s intrinsic benefits as a marketing channel, research shows marketers that pull back on advertising pay a heavy price down the road. According to the World Advertising Research Center (WARC)/Kantar, it can take up to five years for brands to recover from “going dark.” In fact brands whose share of voice exceed their share of market tend to grow while brands shrink when their share of voice is smaller than their share of market.
“An economic recession is handled differently depending on the consumer,” says Cumulus Media Chief Insights Officer Pierre Bouvard. “Some save. Some spend. Instead of a blanket decision to go dark, marketers must take the time to understand the different consumer segments.”
During a recession Bouvard says advertisers should shift more resources to creating future demand (brand building) versus converting existing demand (sales activation).
“Focus instead on developing a deeper relationship with consumers through branding campaigns that will take root and make a lasting impact, “ Bouvard advises. “The economy bounces back. When spending resumes, the results of strong branding campaigns can start to reveal themselves.”
Advertisers who've lived through difficult economic times have learned that cutting back on marketing leads to lost sales in the long term. “Instead of pulling back entirely during times of uncertainty, these marketers often look for more efficient means of engaging with their customer base,” iHeartMedia Chairman and CEO Bob Pittman said during a call with analysts in August. As one of the least expensive media with the largest reach, radio is well positioned.
Borrell sees a rough holiday season ahead. “The trick is to convince advertisers that downturns are the best time to grow market share, since their competitors may actually cut ad budgets to save money....which, as Henry Ford said, is like stopping your watch to save time.”