Nov 22, 2008

Business - India - Radio-More buck for the bang

Purvita Chatterjee

FM radio in India believes it is finally coming of age as an efficient and cost-effective medium of advertising. That belief manifested itself as a 15-20 per cent hike in ad rates in the last couple of months after a gap of more than a year. Also, th e launch of more radio stations during that period gave rise to much unsold inventory which had to be disposed of at throwaway prices and established radio stations had to compromise on their rates to take on the new competition.

The price hike is as much reward as rationalisation, all the more so as measurability, missing in most other media, is an advantage, say players in the Rs 750-crore industry. The slowdown of the economy has its advantages, too — the lower cost of radio advertising relative to other media can hopefully help sell more air time than ever.

B. Surendar, National Sales Head, Red FM, says, “A lot has changed in the markets in the past one year; the erstwhile perception-based market leaders have been toppled and there is greater accountability with the entry of RAM (Radio Audience Measurement).”

Red FM radio claims it has shown consistent performance in RAM both in terms of market share and cumulative listenership and that it is well-known for setting benchmarks when it comes to creative 360-degree solutions for clients as proved by consistently improving advertising shares, and boasts of a repertoire of award-winning campaigns, properties and the number one and most awarded radio jockeys in the country.

Radio City FM, which has also increased its airtime rates by 15-20 per cent, justifies it because of its ‘robust increase in listenership, reach and listener equity’ and that it is commensurate with the consistent, innovative delivery of quality of SEC AB audience to advertisers.

According to RAM data, Radio City has seen a consistent 10 per cent increase in reach in RAM markets alone at a time when the category witnessed a 2 per cent decline. The FM brand also enjoys sustained leadership across SECs in Mumbai with the highest ‘time spent listening’ (TSL) across audiences since February 2008.

Apurva Purohit, CEO, Radio City, said, “That radio delivers has been amply demonstrated by RAM. Be it having the lowest CPT (cost per thousand), having as high as a 15 per cent multiplier effect used in conjunction with a TV campaign or being three-fifth as effective as TV in raising awareness at one-seventh the cost, the power of radio is truly one to reckon with. As clients increasingly look at improving the delivery of their media rupee, there is no longer any doubt that radio is repeatedly proving its efficacy. Radio City’s increasing reach in the RAM markets and its robust TSL clearly makes it one of the best mass media vehicles for clients to invest in today.”

As for Radio Mirchi, this may not be the first time it has raised rates but is doing so after a long gap and claims that its pricing is in line with its deliveries.

As Prashant Panday, CEO, Radio Mirchi, says, “Price hikes happen usually once a year. This time, on account of the severe competition in the last couple of years, the price hike comes after nearly two years. It is to really take into account the much higher reach and TSL that we are delivering compared to two years ago when we were still trying to prove our effectiveness. Today, we have proven that we deliver. If you are to compare our deliveries with almost any TV channel or newspaper, we do far better. Our rate hike is only to align our pricing in line with what we deliver.”

With this, the share of radio in media is also expected to cross the threshold level of 4 per cent this year. As Panday says, “After growing at more than 50 per cent for the last two years, I see a growth of more than 100 per cent this year. This should take the share of radio in total media past the 6-per-cent-mark. In 2007, the share of radio is expected to have crossed 4 per cent.”

Others estimate an even higher share for media spends on radio. As Ashit Kukian, Executive Vice-President and National Head (Sales), Radio City, observes, “Radio might seem to be only a 4 per cent medium today but unlike television, it is primarily dominated by 3-4 top players and the size of these players garnering a large chunk of advertising is significant. Today, radio is making its presence felt and in two years, I see it touching the 7-8 per cent mark.”

Kukian points to a recent IMRB study on the radio industry, which says adding radio to an existing television campaign is expected to give the campaign a 15 per cent multiplier effect. Besides, if 10 per cent of a given TV budget is re-deployed to radio, the campaign’s efficiency is expected to increase by 15 per cent. Radio in isolation was measured to be three-fifth as effective as TV in raising awareness at one-seventh of the cost. The research has also shown that radio has the lowest ad avoidance compared to any other medium.

Radio’s share of the ad revenue pie is between 4 and 5 per cent today and it is expected to grow by 25-30 per cent this year.

While RAM has brought in measurability into the medium and is thus now attracting more advertisers, the economic downturn could also prove to be a boon for the medium. According to Panday, “The real challenge is to convince advertisers that in an economic downturn like we are witnessing now, the best medium to use is radio. This has been proven worldwide, but it will take a little time for advertisers in India to also realise the full potential of radio in adverse conditions. The fact is that radio is an extremely cost-effective medium. Today TV companies can claim higher reach than radio – but that’s only when they measure reach on a 1-minute minimum viewership basis. Ask any TV channel to provide reach on a minimum 5 minutes viewing basis and see how the numbers dwindle. In fact, our analysis shows that many popular TV channels may have reach as low as a few lakhs across the country!”

But can radio replace print as the immediate best option for advertisers? Yes, says Abraham Thomas, COO, Red FM. “Radio,” he continues, “is a high-tech, low cost option, which makes it so much more cost-efficient than print.” In spite of radio stations hiking ad rates, radio is inching closer to becoming the preferred medium. As Panday says, “Advertisers are responding favourably. Remember the overall media environment in the country. The biggest media business — print — has seen a price hike of between 25 and 50 per cent. This is unprecedented. With the ever-growing fragmentation in the TV space — now in the GEC space — the inflation in the TV business is extremely high. Outlays higher by 25 and 50 per cent are required today compared to a year ago.”

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