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Is Cost-Per-Point the Enemy of Radio Innovation?

This is Part 2 of my conversation with Kaihaan Jamshidi, the Director of Strategy for Method, a brand experience, design, and innovation company and works with major companies like NordstromTime WarnerAOLTED, and many more.

Today we get deeper into the future of advertising on radio, and why the antiquated notion of media buying is an obstacle to innovation.

What follows is a highly edited version of our chat.  Click below for Part 2 of the complete (and fascinating) interview.

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How do we make advertisers more excited about innovation in and around the radio experience no matter how we define it?

I’m so glad that you asked me that. In any innovation process, the answer is that you need to get people on board very early. You need to get people involved in the conversation and you can never really design a good solution or a good product by sitting in a room all by yourself and thinking “Gosh, wouldn’t it be great if…” because then nobody has bought into it. That’s obviously very basic. Also you need partners, you need commercial partners, you need advertisers, you need to hook them into this world.

I think one of the big learnings about creating products and product design and services and bringing things to market is that there’s a really old school idea, an industrial idea of what you did with products where you would build a factory and spend huge money designing and turning out these products and they would go out into the market. People would buy buy these products until something new came along and then they’d hit the product’s creation button again and go through that same process, right?

What we’re seeing today, however, is that the life cycle for products is shortening massively, so new products are coming out so quickly they have to be obsessive in their ability to really connect to consumers. All because the technology is so much smarter, because it’s so much more interconnected, and because the speed of everything has ratcheted up a little bit. And so the way you create products has got to be much more fluid, it’s got to be much more continual and evolutionary. It’s got to include the whole range of people, including the customers, including the intermediaries, from the start. And it’s got to take them on a journey with you as you explore what’s possible.

I think one the big things is that you have to be willing to fail, willing to go out there to try something and just admit that you’re not going to be perfect the first time around, but you’ll make damn sure that you learn loads from that.

I think the radio players – all of the players involved in the radio world – they’ve got to go out there, they’ve got to get real stuff into market. They’ve got to be willing to accept that that real stuff is not going to be perfect the first time around, but they’ve got to make damn sure that they learn loads from it so the results are always heading in a useful and valuable direction.

Now, when I was setting up this conversation with you, one of your associates asked me this question. She said, “Well, you know, we’ve been doing a little work around radio, but what is radio? Is radio a distribution channel or is radio a content creator?” So my answer to that is yes. What’s yours?

From a design perspective, I would say radio is what people consume.

But you have to consider all the partners in the equation. There are the advertisers, what do they get out of it? One of the huge criticisms I would have of most media is that everybody has become completely hamstrung by media sales, by the process of buying media.

A big chunk of revenue comes directly out of media buyers. The media buying agencies negotiate that stuff on behalf of their clients. This is a huge disintermediation between the consumers and the advertisers with the media sitting in between. From a media perspective, the advertising industry has been consolidated around algorithms – around something that is convenient to media buyers but it’s not necessarily actually useful for the industry anymore.

What you’re saying is that the media buying process where most radio stations in the US get the vast majority of their revenue, that this element not only disintermediates, but it doesn’t have to do with what the consumers get out of the medium and it doesn’t have to do necessarily what the advertisers get out of the medium, right?

Absolutely. Some of things that are creating the most interest among advertisers basically sidestep the media agencies and start talking directly to the advertisers, saying “Look, here’s our customer base. Here are the people who are listening to us. Here’s what they love and here’s how it might fit with your brands and how it might fit with the things that you’re really interested in. Let’s not get stuck the 10-second spot or the 30-second spot or whatever it might be.”

Or the cost-per-point.

Yeah, exactly. “What could you, Mr. Brown, do for my audience as a radio station that’s going to really make them excited?” Whenever you start trying to create that opportunity, that also works for the creative agencies because instead of having to like churn out another spot against some sort of demographic targeting profile, they have been given a real opportunity to try and create something of real value and of real interest, and I think this whole area is one that people are beginning to ask us questions about.

They’re saying ‘we need to make our media space and our portfolio work harder for us either as a media owner, but what can we do about it? How can we create something where (A) it’s going to be of real interest and (B) we’re going to be able to get people on board with it?”

That’s an unfolding question that hasn’t really been cracked yet.

What you’re talking about is setting aside the whole cost-per-point method of one-to-many advertising and saying instead “What’s the idea that links the consumers on one end via the radio station or the radio set of assets with the advertiser on the other end and its needs whatever they are,” right?

Totally, what cost-per-point thinking has done is to standardize the whole question and taken out any real insight around the answer. It doesn’t matter what people actually want, either from the consumer side or the brand side. This is what you’re getting. It’s like whatever is question is, here’s the answer, which is convenient. It’s definitely convenient.

Basically, it’s really clear what happened. There were a bunch of people in the 1960’s and ‘70’s in advertising who saw dollar signs about how they could see where the big money was going, break that off and make a lot of money out of it, and that’s what happened. Along the way, the purpose of it has been completely lost.

In a traditional radio station, you have two sides, you have the content side or the programming side and you have the sales side. One side is selling the spots to interrupt the programming and the other side is creating the programming that creates the ratings that gets interrupted by the spots, and historically, they’ve been against each other.

It seems to me that this is the first time in history of broadcasting where they’re actually on the same side of the table, because if I’m creating content, I’m creating it across platforms and that content has to be popular enough such that the advertisers are interested in wrapping their identities around it. Meanwhile, the advertising has to be compelling enough to be part of the content mix rather than an interruption to it, so both people for the first time ever, sales and content, are on the side of creating compelling content that appeals both to advertisers and consumers and furthers the goals of each, true or false?

Absolutely, unequivocally, massively true and that’s ultimately one of the most exciting opportunities that anybody has got. That ought to be an opportunity for people to get the Hell out of the kind of the rat race predefined A-B-C not really adding any creativity, any real value and into the world we’re exploring.

Now, one of the big holdbacks I think is that people are scared of failing. They’re scared of messing up and alienating big revenue streams and things like that, but going back to what good product design looks like and good service design looks like, people have got to create some space to be able to experiment with these things.

We have to create spaces for innovation and experimentation and to make sure that you pull the advertisers into that, the consumers into that, the sales teams into that, the schedulers into that, the hosts, the DJs. I mean bring these people together and say, “Look, this isn’t about failure. This isn’t about right or wrong. This is about doing the right thing. This is about creating quality, this is about creating value, this is about making customers happy, this is about world pleasure, this is about enjoyment, this is about making what you do fun and valuable and exciting for everybody, so let’s play. Let’s experiment, let’s enjoy this.”

I think a great thing about radio is that the opportunity to do that quickly and to innovate quickly is probably greater than in many other media because production is that much easier. It’s certainly a massive disappointment that what ought to be a place for massive innovation really isn’t at the moment, but that’s an opportunity.

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