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How Radio Can Confront Change – An Interview with author and venture capitalist Pip Coburn

A No-Nonsense Marketing Smart Tip June 1, 2006

Pip Coburn studies change for a living. He’s the founder of Coburn Ventures, a trend-aware media investment company, and the author of the new book The Change Function: Why Some Technologies Take Off and Others Crash and Burn.

As the radio industry meets its future, it’s important to know how to make the right decisions the right way. The sad fact is that the vast majority of new technology products fail. But Coburn has found the alchemy that, correctly applied, can turn all our strategies to gold.

Below is a brief summary of my conversation with Pip, but I strongly recommend that you listen to the full interview here:

What is the “Change Function,” and what does it mean to the changes coming to radio?

Ninety percent-plus of new technology products fail, and I don’t think that’s necessary. There is an inherent belief – an assumption – that you create these massive technology-disruptive changes and then you wait for price to fall. Disruptive technology plus falling price – you put those two things together, the thinking goes, and magic will happen – the markets will take off.

But as a consumer, I want to know what I’m going to hand over a dollar for. Because if I don’t hand over a dollar, then you have a hobby, not a business. So a marketer really needs to ask why consumers will hand over money for something they aren’t doing today. Why will you, the consumer, change your habit?

Specifically, I’m interested in what your current “pain” is. On a spectrum from “indifference” at the bottom to full-out “crisis” at the top, what is your level of “pain”? Now, what is the “pain” associated with adopting the new technology solution being offered? If the pain of changing is greater than the pain you’re experiencing right now, you’re not going to buy that new gadget. But if your pain now is higher than the pain of switching, then you will make a change.

The important thing is to construct your marketing to help people understand that they really do want something, and then reduce the pain of adoption by helping consumers understand how easy it is to adopt the new technology product (assuming it is).

So for satellite radio, the consumer is balancing the “pain” of commercials and more limited choice on terrestrial radio, let’s say, against the “pain” of adoption, which includes the hassle of installation and the monthly fee?

Generally speaking, price is a small part of the whole “pain of adoption.” Most of the “pain” has to do with the process of buying the radio: Waiting in line, installation, the learning curve, the anticipated need for help. These are “pains” – literally.

And your local radio stations have services and functions that satellite can’t match

The question is this: What can local radio stations deliver in their advertised world that the user still receives from them uniquely?

You can drill down and realize what people are really using your service for. Then you start getting the marketing message clear on what that thing is. You figure out what the differentiator is that satellite radio can’t provide, and your marketing would gear towards that.

I have both satellite and traditional radio in my car, and one of the things you don’t get from satellite radio that you do get from local radio is that sense of community.

For example, local DJs can create a common bond with listeners whereas if my satellite radio is just playing song after song of country music, there’s no sense of community. The iPod is great, but it’s not the only answer for music fans – there is value in having someone guide you through that music. And this is what you lose when broadcasters try too hard to cut costs.

What do you think about the prospects for HD Radio?

HD Radio seems like a lot of effort for the user. They’re not picking up the HD radio when they buy a car, for starters. So, it’s an extra trip. The up-front price is about the same as satellite. And HD radio breaks up the band by layering additional stations along the same spot. With satellite radio it’s simple: 1 through 120. But for HD radio I have to understand a new world where there are multiple stations in the same spot where there used to be just one.

The other issue is this: Can the local radio stations in any given market work together so that my dial doesn’t become like a bag of melted caramels? Satellite radio is organized: The rock stations are next to each other. The decades are next to each other. You get all the baseball games in one area of the dial. Can HD radio do this? If not, I think it’s going to be very difficult for consumers. It feels like it’s going to be messy.

The HD radio message isn’t really clear and simple, and it isn’t perceived as being easy. Maybe it’s also a function of marketing dollars. In the satellite radio case you have two companies, and satellite radio is all they do for a living. They sent these satellites up into space. They have a lot of money to put towards marketing. They have time. They have some patience. And HD radio doesn’t seem to have any of these elements.

What is your distribution? What is your name recognition? What are people talking about? Which of those two products, satellite or HD, is closer to having some peer pressure associated with it? Satellite has a huge advantage. They already have 10 million units installed.

So how do you react when someone claims that when the price of HD radio receivers drops to $100.00 sales are going to take off?

It’s rarely, if ever, about the price, Mark. It’s not that price doesn’t matter at all, but if people aren’t interesting in buying the thing you’re selling, bringing the price down on a new technology will not solve your problem. Helping them see the value that they’re getting for the money is far more important, and so is reducing their perceived pain of adoption.

So what does HD radio need to do?

First, they need to differentiate the service from satellite: What makes HD radio different enough that you’re willing to tolerate a few commercials, you’re willing to do without the Comedy Channel and Howard Stern and Major League Sports? What’s the side-by-side comparison?

Second, they need to fundamentally understand why people use radio and what is it that we can provide that really the heart of what people want and isn’t redundant to satellite. What crises do potential radio consumers have? What are the ways to sell these people? What are the services they want, deep down? The sense of community is absolutely one. People do not like to be isolated, and radio has been bringing people together for 100 years now. Safety, family, health, there are a lot of issues that radio provides to people and that satellite radio isn’t doing a good job of right now.

Finally, they need to connect very, very quickly with the car companies so that when you go into the showroom you get your choice between two things competing side-by-side: Satellite vs. HD.

Here’s the reality about satellite radio: Pretty soon every car will feature the choice of satellite radio or not. And there are 17 million people a year walking into car showrooms. For them, satellite radio will become an impulse purchase, and the price becomes irrelevant – it becomes virtually free. It’s fantastic to be selling in that particular environment because it’s painless to the consumer. It’s not an extra trip.

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