grantchester said:
Hey, big Dave, I'm a bit puzzled by the conventional wisdom.
We're told advertisers favor the younger demos, but we're also told those are the people who are turning away from radio. Formats that appeal to those over 50 are being abandoned, but that's the demo with the most money. And, since the children of people in that age group have grown and moved out, those should be the people with the most disposable income. Add to that the baby boom demographic bulge. There's more of them. Why aren't the 45-75 demos the most lucrative? Is it too hard to market to those folks? Do stations with older demos find the local, direct sale ad dollars?
Just wondering. Your thoughts please, sir.
Hey. I had to laugh at the title of this post, as our Director of Engineering in LA calls me Dr. Gleason, much to the confusion of the newer staff members!
Anyway...
The considerations on this topic are pretty complicated, but I can give you a Cliff's Notes version.
Advertisers that use ad agencies (local, regional or national) take their demgraphic goals from the client. The client will usually be very specific as to the demos they want to reach. Clients that manufacture have generally designed the product and even the packaging with one consumer model in mind, and that means demos, lifestyle, etc. Retail and service providers have data on who constitutes the most profitable segments of the population for whatever they offer.
The general feeling is that the main reason for not targeting 55+ in on radio is that the cost per sale is high. The simplest explanation is that it takes more ads over more time to get a change in buying patterns. This, in turn, means that the cost per sale increases, often to a point of no return on investment. In other words, you can get results, but the cost is high and you make no money on the sale.
The larger the market, the more agency business you get vs. direct sales. Remember that the top 10 radio markets represent nearly a third of all radio revenue in the country! So agency campaigns may only go a few dozen markets deep at times, yet they can get well over 60% of the US population by just buying the top 50 radio markets.
(This is why oldies and even standards are much more viable in smaller markets, where direct accounts are less demo and ratings driven and more results driven. Same goes for suburban stations in big markets).
Agencies are told who to buy in terms of demos. They establish a cost goal, called Cost Per Point (CPP) for each market based on how many people a ratings point represents in each one. Stations submit rates against the target demo, and get bought based on ratings and efficiency of delivery. The station can not sway the demo target, so having lots of out of demo listeners makes no difference... the buyer only looks at the target. So, radio has little if any control over the ages selected... because they are a client mandate and when an agency does a major naitonal or regional buy, they are looking at dozens and dozens of markets and hundreds of stations... and not taking pitches from out of demo "suppliers."
Obviously, there may be some consideration of format... an agency with no Spanish creative may not buy Spanish language stations. Or a personal care item for a specific ethnicity may only buy stations that target that group. Similarly, a high end product may look at high income composition, but still in the demo the staiton delivers. When you think about income, though, it is necessary to break some stereotypes; the biggest Lexus dealer in LA has a mostly Hispanic clientele. At the end of the process, it is all about the client demo specification, with subsets based on specific user groups.
Of course, 25-54 is a broad demo. Many buys are far more concentrated, like 25-34 women as an example. In LA, so far this year, we have not seen one 55+ buy come up. Unless you are in the 18-54 demos, you have a slim chance.
While there is some erosion in 18-24 and 18-34, the 25-54 is not off significantly. And the erosion, considering all the "new media" is not horrible, just unpleasant. Since radio is priced on what it delivers, rates are set by who is listening, not by who is not. And listening to major stations is big and saleable.
Hope this helps.
