Effects of Radio as a Form of Advertising

Effects of receiving set as a Form of adRadio AdvertisingExecutive SummaryAdvertising in general expresses the positioning. Powerful publicize is the result of powerful planning. Great ideas and great ad campaigns dont rightful(pre nominative) pop out from no where, they be built on the key communication points that motivate sales.Radio is entirely a intermediate of sound, which evokes smells, sensations and visual images which brings the listeners imaginations into escape.Radio advert is one of the as well asls of advertisement which is effectively used for communication and positioning. It is one of the foundations for effective and successful advert. Radio can be used effectively for advertisement since it can target the colossal audience because of its high r individually. Radio is good at increasing awareness about the brand and railway system line and helping in building the brand image.But all this was only for pure academic purpose. With the advent of televisi on system piano tuner set receiver lost its popularity and thus its purpose with the merchandiseers. This led to lancinate declines in the proportion of advertisement spending on piano tuner as compared to separate(a) media.But then came the governments order on liberalization and privatization. This brought about scads of changes in the world of radio receiver political platform in India. Prominent and established companies entered the business of FM Broadcasting.FM broadcasting has breathed a juvenile spiritedness into the medium of Radio in the past few months. Could radio flat think this as a new phase of its support or a re-birth? Of course yes, people are today talking only Radio- Radio Mirchi, Radio City, RED, Go and WIN. One exit find people with radio sets of incompatible shapes and sizes listening to their favourite music on roads, in hotels, purge the bidi shops aired on any of the music channels. The radio channels are now vying against all(prenominal ) other to leave their best to the listenersHowever one can see that although radio is an excellent medium it has been used to its full potential and various efforts should be taken to improve it as with proper(a) direction radio can pass on heights as it is the cheapest and a very good medium.Objective by this project my objective has been to earn the followingTo find out about the current scenario of the radio diligence.The reasons for a stunted growth of the industryThe various travel in radio advertisementRealizing the needs and wants of consumers and fulfilling themWhat the various radio seats go through to offer the masses.enquiry MethodologyThrough this project I build do an effort to understand the advertisng tool called radio advertising which is creation increasingly recognized by food marketers as a powerful tool that helps in finding new customers and retaining the existing ones at a much lesser toll. firsthand ResearchThe aim of primary research was to under stand radio advertising as it is seen in the corporate world. To understand this I suffer taken dickens interview from different fields.Mr. Madhav Joshi who is currently working in Leo Burnett who helped me understand what all goes into the making of a radio advertisement.The mode of interview used was an informal one where he answered my questions on one to one basis.Also Mr. Sudarshan Sahe the ranking(prenominal) marketing humankindager of Radio City gave me an interview and helped me in trying to understand as to how the station works and looks after the needs of its consumersSecondary ResearchThe aim of secondary research was to understand as to why radio advertising has been able to grow at a considerable rate as compared to the other media. as well as the fall out of radio in the last decade .It was also undertaken to understand how radio advertising is done and what re the current receiveers in the market.Secondary data collection method desk researchSecondary data colle ction sources internet, book of accounts, newspaper nontextual mattericlesIntroductionOld media dont die They near bounce sanction in new avatars. Not so long ago radio had been written off as fuddy-duddy, down market and not so cool. idiot box and later new media were touted to being the media of the future. But thanks to technology radio is making a comeback. In fact, in its new avatar-fm-radio is all set too wrick the hippest, coolest and most with -it medium.FM radio is a new entity altogether and has to get along with new market dynamics. Media owners dealing with new markets will virtually have to draw up their strategies as they go along, create programming that is new, innovative and grab away eyeballs from TV sets and grass them tune into their radio sets. Its a complete new challenge and competition is never far away. Ad receiptss will also not be easy to come by, as advertisers will stick out media players to put their bills where their speakers are before the y commit large sums of money towards radio advertising. The other challenge for radio in attracting advertisers is the nature of the medium-radio has always considered being a reminder medium. The involvement of listeners to radio is low, Vis a Vis television or print media.However in spite of the various challenges the emergence of private FM post is certain to increase the quantum of radio advertising in the country , much same beam channels did to the quantum of television advertising in the country. That should wanton up a vast new market of consumers-100 million Indian house minces own an estimated 150 million radios, outnumbering television sets 31.The geographical area cover by radio in India in India is as high as 98 perpenny and the penetration level is approximately 97 per centime. But FM presently covers only 17 percent of the area and 21 % of the population of India through transmitters. Currently radio has just 2 percent of the 9000 crore Indian advertising market a ccording to an Arthur Andersons survey. Globally depending on each country, radio has a 5 % to 12 % of the advertising cake. On the higher side are countries resembling the United States with 13 %, Canada with 12.7% and Spain with 9.1%. FM station executives are not forthcoming on multi-platform strategies as yet. Given that radio has penetrated into 100 million homes and a FM set cost around Rs. 50/- FICCI estimates FMs deal out up from the present 1.5 percent to 5 % in five years. They have also forecasted that revenues from radio advertising in India will be Rs. Rs. 1200 crores by 2005 and Revenue of radio attend tos is pass judgment to rise to Rs 689 crore by 2008 at a CAGR of 30 per cent.While TV is a family medium, radio is personalized. Also advertising of certain product seems to work very well while some might not. For example, cellular phone service or auto related products would have a good impact when advertised on radio is primarily known as a stupefy epoch medium most people who turn in are doing so while commuting. Thus the potential if FM is better is bigger town, as the car population is much bigger. This would be the key when evaluating the medium. Also one must not forgot that radio continues to be a medium that has tremendous reach among the poor and marginalized sections of society.With the coming of much channels, and the emergence of lifestyle advertising, radio will become a push and pull medium. As said earlier, is not just making a comeback that is being reincarnated into a new avatar.Some Basic Technical KnowledgeAny radio setup has two parts* The transmitter* The receiverThe transmitter takes some sort of kernel (it could be the sound of someones voice, pictures for a TV set, data for a radio modem or whatever), encodes it onto a sine wave and transmits it with radio waves. The receiver receives the radio waves and decodes the message from the sine wave it receives. Both the transmitter and receiver use feelers to radiate and transport the radio signal.When you listen to a radio station and the announcer says, you are listening to 91.5 fm what the announcer means is that you are listening to a radio station broadcasting an fm radio signal at a frequency of 91.5 megahertz. Megahertz means millions of cycles per second, so 91.5 megahertz means that the transmitter at the radio station is operating at a frequency of 91, d,000 cycles per second. Your fm (frequency modulated) radio can tune in to that specific frequency and give you clear reception of that station. all in all fm radio stations transmit in a band of frequencies between 88 megahertz and 108 megahertz. This band of the radio spectrum is used for no other purpose but fm radio broadcasts.Common frequency band includes the following* AM radio 535 kilohertz to 1.7 megahertz* FM radio 88 megahertz to 108 megahertzAM radio has been around a bevy longer than FM radio. The first radio broadcasts occurred in 1906 or so, and frequency parceling for AM radio occurred during the 1920s. In the 1920s, radio and electronic capabilities were fairly limited, hence the relatively low frequencies for AM radio. FM radio was invented by a man named Edwin Armstrong in order to make high-fidelity (and static-free) music broadcasting possible. He built the first station in 1939, but FM did not become really popular until the 1960s.RoyaltiesFM is primarily a music channel, so the question of royalties is relevant. The Indian Protographic Record Society (IPRS) and Phonographic Performance (P) Ltd. (PPL) are supposed to hold all the rights of royalties. They are demanding Rs. 1,500 per hour (as against Rs. 100 per hour, at which they are supplying music to AIR), PPL is demanding a royalty of Rs. 250 per hour of needle time, the actual duration of a piece of music. The IPRS is demanding Rs. 100 per hour. The IPRS claims royalty for the original composers and authors of music.Cost AspectA Licencee pays Rs. 6000/- per hour.Add Rs. 1,500/- fo r the music.Add Rs. 3,000/- for the technology, salaries and other expenses. An hour long show thus costs Rs. 10,500.10 Minutes have been set aside for advertising. One minute is reserved out of 10 minutes for social awareness advertising.Thus, advertising time ready(prenominal) for sale is 9 minutes.In other words, 18 advertisements each of 30 seconds can be accommodate in an hour.This is the high target. Besides the tariff card should be modest, considering the limited range and listenership supposing a 30 seconder costs Rs. 500 at prime time for 18 such spots, the total revenue generated is Rs. 9000/- . Another estimate puts the ware cost of an hour long programme around Rs. 6,000/-. Add Rs. 6,000/- of the emancipatione fee to AIR.Studio hiring costs are between Rs. 500 Rs. 1000 an hour. The total expenses are thus Rs. 12,500 to Rs. 13,000 per hour.Advent of Format RadioThe arrival of Moving Pictures with sound and then Television were expected to be the demise knell fo r Radio. However Radio has not just survived repeated predictions of its demise but grown tremendously. It has benefited listeners and advertisers alike and earned the status of a Constant familiar What allowed Radio to accomplish this feat? Read on for the long journey the Radio industry has covered thus far.It was way back in 1895, that Guglielmo Marconi invented an antenna to send and receive radio signals. It took sooner a while before Reginald Fessenden developed the first radio receiver in 1913. However, experts give a lot of credit to David Sarnoff who actually conceived what is called as the radio music box. It was Sarnoff who suggested that radio should be mass-produced for public consumption. His persistence paid off in 1919 when such sets were available for general purchase. This saw the beginning of what was later looked on as the Golden Age of Radio.Early 1920s saw the launch of commercial radio. People in households would gather around the radio to listen to their fav orite programs much as they do today with TV. Radio became the first medium delivering cheer to the masses in their homes. The 1st paid announcement on radio was a 10-minute capsule from Howthorne Court a Queens based Real Estate union. This era was characterized with resolution programming wherein radio offered something to everyone. News, drama, sports live musical recordings would be presented in 30 or 60-minute programs. A network soap opera could be followed by a 15-minute newscast followed by one hour of a concert.Then in the 1950s TV began to catch the publics attention. references were charmed by the audiovisual experience of TV. A large number of popular shows chance ond from radio to TV. That was not all, as the radio industry was also losing a large number of talented staff to TV.At this point in time, radio experts discovered an opportunity that only radio could provide. They realized that radio was the only medium that could be used while doing other things, like g etting dressed for work, cooking a meal, traveling to office, studying and more.Radio turned local anesthetic and moved to what is known in the industry as Format programming. This era also spawned two of radios greatest strengths immediacy and local service. Format radio strategy was based on providing the same kind of entertainment to a selected audience, throughout the day, seven days a week.As the story goes, Storz and McClendon used to frequent a local malt shop, which had a jukebox. They observed that the customers would commonly come and play the same songs that they liked, over and over again. In fact, the staff serving these people would end up playing just the same songs even when the shop was closed.From this insight emerged the Top 40 format or the Contemporary Hit Radio (CHR) format were the most popular hits would be played on a higher rotation.This led to a change in the way radio time was being sold. Sales people shifted from selling programs to selling commercials. It also led to a shift in the way radio programs were scheduled. As radio was being used as a background knowledge medium of entertainment, it had to be relevant to the listener at every point of time in the day. The shows thitherfore had to be reflective of various day parts in the life of the listener.Irrespective of the form it came in, format radio definitely made radio not just survive the onslaught of TV but also made it grow tremendously. Being the only medium that could be carried and used wherever you are, it could update you about your world throughout the day while providing you with the entertainment you like all the time. Radio became The Constant Companion.The total number of radio sets at the time of independence in 1947 was a mere 275000.at that time a radio receiver used to be a status symbol in this country. But today its possession is taken for granted. According to estimates, there are radio sets in about 105 million households in the country.History of Indian RadioFor more than 4 decades, the Government of India did not permit private radio stations to broadcast in India. Then history changed its course. In 1993, the Government allowed private FM operators to buy blocks (chunks) on All India Radio, prepare programming content, book commercials from advertisers and broadcast the whole lot. Within 4 years, (1997-98), the FM Radio advertising and sponsorship business grew to Rs. 93 crores with Times of Indias Times FM Mid-Day Groups Radio Mid-Day becoming the of import players.Then, in June 1998 the Government, through its electronic media regulatory body Prasar Bharti, decided not to renew contracts of private FM operators.Not surprisingly, the advertising revenue fell by 50% within a yearThis time, the Government gave the green light to privatize radio in India. July 6, 1999 was the historic day when the Government announced that 150 new FM channels would be indorsed across 40 cities.And in 2000, the Government auctioned licenses for p rivate FM channels to bolster the revenue. And the focus on metros was unmistakable in the bidding. Expecting to collect Rs 800 million from auctioning 108 licenses, the government had to actually face mass withdrawal of bidders because of the huge license fee. A handful of serious bidders chose to remain.In solution to the Governments offer, many companies bid for the licenses to operate in key markets. But the going was not so easy. Many gave up, unable to shell out the high license fee. For instance, the bidding price for the Mumbai license was reportedly to the tune of Rs 9.75 crore. Others dropped out saying the business was not viable. So, in effect, the competition shrank, players consolidated and the Government extended its deadline. Today, there are roughly 10 players who will operate approximately in 37 cities across the country.The government collected close to Rs 4.6 one million million as license fee for the privately run FM radio channels in 40 cities. New Media Bro adcasting, a Zee Group company, which focused mainly on the smaller towns, won the largest number of bids.The first round of bidding for 76 channels in 26 cities, garnered close to Rs 3.5 billion. The government got the highest bids Rs 97.5 million from each of 10 broadcast companies for stations in Mumbai. Interestingly, the bids for Hyderabad and Nagpur came next, each for Rs 77.2 million and Rs 74 million, respectively, while the bids for Delhi were Rs 71.2 million eachRadio is expected to follow the growth of the Television industry, which grew speedily following the entry of private playersCurrently, FM coverage in India is restricted to just 17% of the country, compared to 89% of All India Radio (AIR).Players in Different CentersCompanyLocation of CentersNumber of CentersBid amount for first years license (Rs. crore)Entertainment Network IndiaDelhi, Mumbai, Calcutta, Chennai, Ahmedabad, Bhubaneshwar, Cuttack, Hyderabad, Indore, Jabalpur, Lucknow, Pune1243.87Hitz FMCalcutta 11.00India FMCalcutta11.00 backup MediaDelhi, Mumbai, Calcutta317.87Mid Day BroadcastingDelhi, Mumbai, Chennai320.17Millennium BroadcastingDelhi, Mumbai, Chennai320.17Music BroadcastingDelhi, Mumbai, Nagpur, Bangalore, Patna, Lucknow641.37Sumangali Publications Sun TVChennai, Coimbatore, Tirunalveli39.87 height BroadcastingCalcutta, Indore, Bhopal, Vishakapatnam42.90Udaya TV Sun TVVishakapatnam10.50Incidentally, Music Broadcasting became the first firm in India to commence private FM broadcast from Bangalore in July.Licence Fee and revenue sharing modelCurrently, FM players pay annual licence fees, which go up by 15 per cent every year. Private FM radio sector would shift to a revenue-sharing model from the existing licence fee regime. However, revenue-sharing also exists in the media sector. The objective is to make FM radio a success story. Its better to keep the revenue-sharing low than to have a failed project. There has been debate on whether to recommend a revenue-sharing st ructure or a fixed amount for a period of 10 years it is firm on revenue-sharing now. Revenue-sharing will follow payment of a one-time entry fee through a process of bidding. Revenue-sharing is quite low at around 4 %.While the private FM players had sought revenue-sharing in the band of 2-2.5 per cent, the panel has fixed it at 4 per cent.Setting up new radio stationsAfter the second round of privatization, the number of FM radio stations targeted is around 300 to 400. The panel also suggested that players wanting to enter the sector in the second round of licensing need to have a technical viability clearance by a financial institution on the financial viability of the project. It has also recommended to the government to release additional spectrum for the use of FM radio companies so that the number of companies operating in one centre can go up.Future of Radio IndustryFM Radio can play its part in building a stronger business future for India. Providing free-to-air local broad casts of music and entertainment, helpful information traffic advisories, community announcements and public service messages provide a real value-added service. But at current levels of advertising support, each radio station is reeling under the brutal financial impact of high costs. With more players in the fray the FM radio industry would grow and also enhance the governments yield from licensing radio naturally.The new India deserves an active private FM radio sector. It can provide a level playing field with benefits for listeners, for advertisers, employment career options. Spearhead the government objective of growing the FM radio business in India.With the government ready to reduce the license fees it will help in attractingnew palyers like reliance which had earlier backed out only due to the entry fees.also government allowing foreign players to enter he Indian market it will help the industry grow. Virgin group has already started exploring the Indian market for suit able partners. various radio stations are coming up with IPO for example Radio Mirchi thus helping them expand.The future looks bright as the reach of radio is expected to raise post the increase in the number and quality of players in the industry. It is on the basis of these key drivers of growth, it is being predicted that radios share in the total advertising pie will see an increase in the medium term. There are an estimated 150 million radio sets across the country. The Rs 1.6 billion industry is reported to be growing by 31 per cent every year and should touch the Rs 6.2 billion by 2007, with revenue rising at 23 per cent annually. Also, though radio has only a 2 per cent share in the Rs 6,000 crore Indian advertising market, advertising spending is expected to amount to Rs 500 crore this year.SWOT AnalysisStrengths* Recently, the government has agreed upon revenue-sharing model, which is 4 % for the growth of the radio stations. So that they can develop themselves well becau se this industry is hush in an introduction stage.* The success of private FM stations, and reveals that radio listenership habits have changed considerably not only are listeners tuning into it more often but also sticking to radio for longer hours everyday.* The advertisers, who would depend on word-of-mouth, pamphlets, brochures or ads in local supplements of newspapers, are welcoming the opportunity.* Radio is considered as a background medium, because people can listen to radio anytime and anywhere they want. It is also a free medium.* 90% of India has access to radio which is unmatched by any other media.* Radio also reaches to uneducated village folk who do not read print publications. At the places where the literacy rates are low where people hardly read newspapers and radio is the only medium that they can understand. They cant afford a TV set. Therefore radio is more popular.* Radio is the least cost medium and it helps to reach mass audience with various backgrounds. R adio offers its reach frequency and selectivity at one of the lowest costs per thousand and radio production is relatively inexpensive.* Radio is considered as a medium where the Proximity to purchase is very high.* Radio is a complement to another media. Therefore, other media or the advertisers or agency can use this medium for brand recall.Weakness* One of the major weaknesses of Radio is that there is very less differentiation in the programmes that are aired. Most of the stations plays much of the music that is played consist of Hindi Film songs, and therefore it is difficult to differentiate between the programmes of the different channels.* Fragmented Audience the large number of the audience in India is fragmented in various remote places. And therefore, the percentage of listener tuned to anyone station is likely very small.* No proper research available research is very important for any advertising segment. Research is the main base to attract client and get more revenu e. But, in India there is no proper research is available. Many stations are conducting their own research which can be biased.* Radio-only nature of radio communication is a tremendous creative compromise. An advertiser whose product depends on demonstration or visual impact is at a loss when it comes to radio. And like its radio message creates a fleeting impression that is often gone in an instant. Many advertisers think that without strong visual brand identification the medium can play little or no role in their advertising plans.* Increase in listenership numbers but no increase in ad revenue. This is the particular that every radio channel is facing.* Short commercialsOpportunities* Getting copyright licenses from the government for running mega events which are aired on the AIR radio station and have been restricted to be aired on other private stations.* Launching a radio station with 24-hour news channel* Tie-ups with BEST or railway authority for playing the FM in train and in bus.* The launch of Private Radio FM has managed to create a set of New Listeners for the medium* The new radio stations which will come in future they can have venture with the college or university campuses. And can play their station which will exclusively provide with the information relating to that university/college campus.* With the coming of the many more new players in the radio industry each channels can position themselves quite different from others, like, if some station is targeting the health conscious people then their programming strategy will vary accordingly. And then it is easier for the advertisers also to decide on which channel to advertise.* Allowing private FM players to start news and current affairs programmes.* One has to constantly innovate, and that is the challenge. Brand building is thus much more difficult. At the same time, we are very bullish, and gung-ho about this whole enterprise.* Leaves huge scope for innovation in local marketThreats* The biggest threat to private radio industry players is ALL INDIA RADIO. AIR is the biggest player in India because of its reach, low charges, government channel etc* Because of the new government policies there will be more number of stations and then competition will also increase. This is one of the biggest threats it faces. With no particular differentiation in the music. So, there is a fear of losing its brand loyalty.Advertising in IndiaIndia has been among the fastest growing economies in the world, with a nominal gross domestic product CAGR of 9.94% over the last 10 years (1995-2005). The nominal GDP for fiscal 2005 was Rs. 30,636 billion. According to CSO estimates nominal GDP growth for fiscal 2006 is estimated at 10.9%. There is a correlation between the economic growth rates of a country i.e. the nominal GDP growth rate, and growth rates of the advertising industryThe Indian advertising spends, as a percentage of GDP, is 0.34%, which lags behind other developed and deve loping countriesDuring fiscal 2005, the gross advertising spend in India is estimated at Rs 111 billion, and is expected to grow at 14.2% to reach Rs. 127 billion by fiscal 2006Segmentation in advertisingThe five key industry segments comprise print, television, radio, cinema, and outdoor. These different segments within the industry are at varying stages of growth and corporatizationMedia expires as % of Total Ad SpendYearPrintTVRadioCinemaOutdoorInternet200049.0%39.3%2.5%0.5%8.4%0.3%200148.4%40.6%2.7%0.4%7.5%0.4%200247.2%41.9%2.9%0.7%7.0%0.4%200346.6%43.0%2.9%0.7%6.5%0.4%200446.3%43.7%2.9%0.6%6.0%0.3%The Indian television industry has grown rapidly, especially since 1991, which saw the beginning of satellite broadcasting in India. This growth was also aided by the economic liberalization program of the Government. The growth of the satellite television audience saw proliferation of a number of satellite television channels offering more choices to media buyers and consumers of en tertainment. Thus, the television broadcasting business, which started off as a single government controlled television channel, now has over 300 channels covering the Indian footprint, resulting in growing ad spends on this medium. Reforms and proliferation of private players were the key reasons for this rapid growth of the share of television in the advertising industry.Radio AdvertisingRadio is still the king when it comes to getting your music. The best way for a new band to get comprehend by the public and record label executions is over the airwaves.Paradoxically, radio currently has only a 2.9 per cent share of the total advertising pie in India. Globally, depending on country, radio has a 5 per cent to 12 per cent share of the advertising cake. On the higher side are countries like the United States, with 13 per cent, Canada, with 12.7 per cent and Spain, with 9.1 per cent.Companies that advertise on FM channels today such as Hindustan Lever (HLL), Dr Morepen, Amul, Castro l, Santro, Britannia, Parle, DSP Merrill Lynch etc are dominating the advertising on each one of the FM channels, be it Radio Mirchi, Go 92.5 Red 93.5 or Radio City.Today, 70 per cent of the advertising comes from big-budget, national advertisers and the balance 30 per cent comes from retail. It is a known fact that retail advertising will grow because radio presents the perfect advertising medium for local businesses in a local environment. But national advertisers are also operational in the local market, implying that it is as important to them as it is to a retail advertiser, if not more.Nevertheless, it is undeniable that radio can be integral in exposing a new artist, new product or services to new fans and taking a local market to a national level. Accordingly, it is extremely difficult to obtain meaningful airplay. Putting it bluntly, successful radio promotion revolves around making and managing relationships.Radio promotion is an art that demands a certain style you may si mply neither have nor desire to cultivate. On top of that, it can take a great deal of time to make all the contacts and connections that are required for successful radio promotion.Advertising agencies that control the national picture will be slow to move on to radio for creative reasons. They have people who love to make television commercials, but dont have anybody who knows how radio works. Here, only about 2.9 per cent of the money spent by advertisers goes to radio, and up till now, all of that went to ALL INDIA RADIO.However, in revenue terms, money from advertising has gone up. Revenue from commercials on AIR, including on Vividh Bharti and Primary Channel (including FM) rose from Rs 393 million in 1990, to Rs 808.4 million in 2000, Rs. 600 crores in 2002, representing a growth of about 7.5 per cent per annum.