Marketers Tune in to Direct Response Radio, Advertising Jumps 82 Percent in '97; Companies Report Bi
"In general, radio has been underutilized," said Stewart Yaguda, president of the new business division at Interep Radio, New York, which sells advertising time on 1,500 stations nationwide. "Radio advertising totals about $12 billion dollars a year, and only $2 billion of that comes from national advertisers. Most of the radio is from local advertisers -- the local car dealer or restaurant."
Yaguda thinks that many advertising agencies have pushed their national clients toward television advertising, which tends to be pricier and, therefore, more profitable for them. The clients themselves were eager for their products to appear on television, Yaguda said, in light of the public's appetite for visual stimulation.
Times are changing, however, with the success of companies like the Vermont Teddy Bear Co., Dial-A-Mattress, 1-800-Dentist and Beer Across America.
"Success breeds success," said Yaguda, whose division generated $73 million in new business for Interep last year. "When you show companies that a competitor or somebody in a similar market position is successful in direct response radio, they react to that very quickly."
The Vermont Teddy Bear Co., Shelburne, VT, began using direct response radio advertising heavily in 1991 and skyrocketed from a $500,000 company to a $20 million company in seven years.
"A lot of it has to do with the great work of personalities that we use across the country," said Gerry Howatt, a media buyer for Vermont Teddy Bear. "[DJs like] Howard Stern, Don Imus, and Scott and Todd just do a great job for us. Ninety-five percent of our spots are done live by the DJs, because it's an implied endorsement and it will stick in people's heads that much more."
Vermont Teddy Bear dabbled in television advertising in the past, but abandoned the medium because of hefty production costs.
"We are able to reach more people at less cost through radio," Howatt said.
Todd Holmes, co-owner of Beer Across America, Lake Bluff, IL, said Howatt's theory used to hold true, but the rising popularity of radio is spurring higher rates. His company, which relied heavily on direct response radio ads that aired during the holidays, is cutting back on the medium and allocating more advertising dollars to direct mail, print and television.
"When we first started doing radio, it was pretty easy to get a great cost per order. Now it's not so easy because there is so much clutter, especially during the holidays," Holmes said. "If you are doing it throughout the year, you can make money. If you have a narrow focus, it will be a hard road."
Yaguda agreed that radio advertising can be just as expensive as television advertising at times, but countered that no other medium offers the same flexibility. Advertisers have the opportunity to test different copy on different stations in a variety of markets and go forward with the program that generates the most response.
Barry Zoob, president of Cellular Linking, Chicago, said direct response radio advertisers also can capture an elusive and elite market -- drivers who use cellular phones. Cellular Linking, which has 20 clients -- including GMAC, Citibank and Chrysler -- allows cell-phone users responding to radio ads to dial a simple four-digit number and be re-routed directly to the advertiser, who foots the entire cost.
"Any of those people of this audience is demographically extremely attractive to advertisers. They even had to go through credit check before they got their cellular phone," Zoob said.
Zoob said the four-digit number makes it easier for drivers to respond to radio advertising, which is a crucial medium since 42 percent of people with a cellular phone don't read a newspaper between Monday and Friday.
"If you look at population," he said, "we have gone from a place-based society to a society on the move."