Exact and Formal Sciences

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STEP AnalysisThe STEP analysis of the Colorado Creative Music aims at analyzing macro-environmental factors of the music business the company is engaged into. These factors fall into political,Colorado Creative Music Case Study Part 2 Articles economical, social and technological groups (Pearce, Robinson, 2000). Political factors affecting music business in whole and CCM in particular: strong political stability in the United States; regulatory and legal issues concerning music business including copyright laws for copyright protection of both music writing and recording, copyright-related legislation touching upon the issue of virtual internet promotion and distribution, such as The Audio Home Recording Act (1992), No Electronic Theft (NET) Act (1997), “The Digital Performance Right in Sound Recordings Act (DPRSRA) 1995, The Digital Millennium Copyright Act, “Pending legislation: Music Online Competition Act and the Consumer Broadband and Digital Television Protection Act (CBDTPA)” and others. Environmental regulations and employment requirement do not affect business CCM is engaged into. As for the tax policy, in 2000, from total income of $216,614.05 the company had to pay $4,744,97 of taxes, which is not high rate and amounts to nearly 2 percent from the total income. In whole, it should be noticed that political factors are favorable for music recording industry and for CCM particularly. Economic factors include indexes in the macro economy that can affect music recording industry. Here also, macroeconomic factors, such as economic growth, interest rates and inflation rate are favorable for CCM. Thus, the U.S economy kept growing steadily since 1995. CPI falls down in 1997, 1998. Unemployment rate decreased gradually from 1995 to 2000. Social factors, covering demographical and cultural aspects of the environment external to music recording industry are rate of population growth, age distribution and carrier attitudes. The population growth in the United States is steady and age distribution also favors the music recording industry. It should be noted that for music industry in whole, teenagers and 20-years-olds are primary customer segment, but CCM aims at attracting people of 40-60 age range. Thus, the considerable share of American population fits this target market. Technological advancements in music recording, promotion and distribution have several effects on the recording industry. One aspect of the issue is that musicians are no longer dependent on major recording labels to create or distribute their products. (Viljoen & Dann, 2000) The MP3 software alternative to the CD becomes more popular since 1998. In the space traditional audio can fit 12 to 15 audio tracks; MP3 software can store approximately 150 music tracks. “The move towards MP3 as the new format to replace CD just as the CD replaced vinyl albums have been accelerated by the rush of new portable MP3 players on the market – some for less than conventional Sony Discmans.” (Viljoen & Dann 2000, p. 173). On the other hand, new digital technologies which appeared in late 20 century not only facilitate the process of music recording, but make it considerably cheaper, providing the possibility for multiple firms with limited resources to enter the market. Thus, if in 1980s, professional recording studio with all recording equipment, working on vinyl or tape carriers, cost several million dollars and therefore was a domain of 5 or 6 major recording companies, in 2000, assembling professional recording studio could be carried out at cost of only $5,000. All the equipment and hardware, due to the global advancements in technology, are much more affordable for an average artist or businessman. SWOT AnalysisStrengthso Cost advantages with new technology arising from the digital revolution. Not only assembly of studio with all necessary equipment and hardware is cheaper, but duplication of CDs, storage and shipping are less expensive as well. Low cost of production, duplication (duplication of 500 CDs ranges from $1.90 to $3.63, duplication of 2000 CDs costs about one dollar per CD), shipping and storage makes the final product less expensive and more affordable for the customers, thus widening the range and scope of the target market.o Positioning of CCM in a distinctive market niche. CCM is microlabel recording company which specializes on classic and traditional instrumental music.o Growing customer base and customer loyalty within target group. Customer base growth due to expansion of product lines (4 already, each year 2 new product lines emerge), and geographical coverage of listeners.o Good customer service shown through the direct contact between Darren and his fans.
Weaknesseso No clear strategic vision: CCM needs a long term vision which includes all areas of the business, from marketing and management to distribution and human resources. At the moment the company faces a dilemma of further strategic development, which will be focused on either enhancing or developing the recording company or more active promotion and distribution of the products through the possibilities of other companies (the company is currently regarded by its management as potential object of acquisition or investment)o Competitive disadvantages: CCM are not able to enter the retail market due to its current level of sales. Competitors such as major labels have advantage because they have major market power and influence. Such firms can specify when their music should be played on radio and negotiate large contracts with distributors and retail outlets, hence giving themselves broader appeal.o Limited channels of distribution: at present moment the company heavily relies on such distribution sources as direct sales, which include sales at the gig, shopping mall distribution and sales in the back end (800 number order, website order processing and mail orders). These channels are major sources of profit for the company. Nevertheless, to expand its consumer base, the company needs to acquire formal distribution channels, such as sales through traditional music distribution networks and others.o CCM is short in financial resources to pursue new opportunities. Profits are thin, meaning new opportunities may be unobtainable and long term improvements may not be afforded due to initial costs. To conclude a contract with major labels, which would provide the company with the access to traditional product distribution, the firm needs to sale at least 15,000 copies of its products per year. From the other hand, high sales numbers are impossible to obtain without good traditional distribution channels. o CCM is losing ground to larger firms because of limited exposure. CCM at present does not reach global or national audience like independents and major labels. CCM needs to broaden its reach and widen its customer base.

Opportunitieso Serving additional customer groups by expanding co-operation with other artists and enlarging the Acoustictherapy and other product lines with new marketing strategies.o Internet through expandi

Realistic information about radio advertising costs to help you budget your radio advertising campaign.

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Radio Advertising Costs : How Much Should I Spend?

“How much should I spend on radio advertising?” “How do I know I am getting the best radio advertising rates?” “What radio stations should I advertise on?” “What are good and bad radio advertising prices?” “How many spots should I air on a radio station?”

Every day at Radio Lounge,Radio Advertising Costs – What to Budget Articles we hear radio advertising questions such as these.

Honestly, there is so much confusion about radio advertising floating around – we can’t blame you for asking these questions. Why is advertising on the radio so mysterious? The answer is – radio advertising is not mysterious. It just helps to know how it works.

Effective radio advertising relies on two major components – the message (the radio commercial itself), and the media (that the radio spot airs on).

The Message

Let’s look first at the radio commercial itself. Before even thinking about which radio stations to air on, or how much to spend on radio advertising rates, you must think about what you are going to say in your radio ad. For this article, we are assuming that all call centers, fulfillments, websites, etc. lead generation, and sales closing processes have been put in place by you, the advertiser. Creating a radio commercial that helps drive traffic is extremely important to the advertising process.

The advertising industry is full of voice talents, radio personalities, DJ’s and others, all claiming to create radio commercials. Be careful here. When entering the arena of radio commercial production, look for a radio advertising agency that has experience and a track record of successful ad campaigns. Anyone can create a radio ad, but not everyone can create a radio ad that pulls traffic. Some radio stations provide free radio commercials if you advertise on their station. Most of these free commercials are never based on strategy and are just one of several dozen commercials that have to be created by an overworked radio production person in a five to fifteen minute window of time. Remember, you usually get what you pay for.

The most effective radio commercials are built on a solid, proven strategy. The copy is written using time tested formulas that maximize potential response. The talent is handpicked to best connect with the end user and the production is based upon clear, quality, and easy to absorb audio.

So…what does the radio commercial production process cost? The majority of radio commercials that work best usually fall into the $500 to $1000 price range. There are always exceptions to the rule (lots of revisions to copy or audio, additional voice talents, celebrity endorsements, etc.) but this figure generally covers development of a solid strategy, copy from experienced copywriters, performance by high caliber voice talents, and the highest quality production services.

The Media

For many with questions about radio advertising rates, and radio station prices, here is where the mystery begins. We will try to simplify the mystery of radio media buying as much as we can in this small amount of space.

A good radio advertising buy focuses on a few different things:

* Finding the best radio stations in a market that match your customer’s demographics (age, gender, income level, etc.) and psychographics (interests, beliefs, hobbies, personality traits, etc.).
* Finding the dayparts that best reach your target customer. Mornings? Middays? Afternoons?
* Selecting the top radio stations that most efficiently reach the highest potential customers, the right number of times (defined as frequency), for the least amount of money

Usually, when researching radio advertising costs, many potential radio advertisers have a pretty good idea of the first two points. However, when it comes down to finding the best station (or stations) at the best price, the radio advertising process becomes a little more challenging.

Here is how we tackle the process at Radio Lounge and determine how much to spend on radio advertising costs. Within the market you want to advertise in, we find the radio stations that have the best potential to reach your target customer. This is based on the formats of the radio stations. Urban Hip-hop stations will target different demographics than a News/Talk, or Soft Rock station. After we select a group of radio stations, we contact those stations to let them know we are thinking about advertising on their radio station. We ask for specific data from the radio stations called “rankers”. This is ratings data that most radio stations can provide based on specific requirements we have requested. From this point, we have a good idea which stations perform the best in our target demographics.

Once we have narrowed down the radio stations to just a few that will effectively reach our target customer, we then request a proposal based on certain criteria – dayparts, frequency goals, etc. From these proposals, we can see who reaches the target audience most efficiently – using tools like Cost Per Point (ratio of spot rate to ratings percentage), Cost Per Thousand (ratio of spot rate to audience category totals), etc. If a radio station is not competitive, we will often ask the station to resubmit a more competitive proposal. But, how will we know if all of the station’s radio advertising rates are too high. Radio Lounge has access to data that allows us to compare proposals against historical figures to determine if radio station prices are in line with market averages. We negotiate, and help execute the purchase.

Great…but what does this cost? It depends on the size of the market you wish to advertise in as determined by Arbitron (the radio ratings services). Radio advertising rates can be as high as $800 per 60 spots in a top market like New York City, or as low as $3 per 60 spots in Kerrville, TX. How will you know what to spend?

Here’s a valuable system we have used from our history of working with radio advertising rates. The system is based on a solid branding schedule that may run one spot per day in the morning drive, one per day at midday, and one per day in the afternoon drive – Monday through to Friday, and two spots on Saturday and Sunday. That’s nineteen spots a week at sticker price. This type of schedule is good for achieving a desired frequency level of three (meaning the average listener to a station will hear the radio commercial at least three times). Under these broad assumptions, you can use the following chart as a rough guide to budgeting your radio advertising campaign.*

*Note, these are gross rates and do not include production costs or agency discounts. These are market averages for the standard radio schedule mentioned above, actual costs may vary. Different combinations of dayparts on different stations may cost much less.

* Markets 1 -5 (ex: New York City, Los Angeles, Chicago, etc.)
Expect to pay from $4000 to $8000 per week/per station for a top performing station.

* Markets 6 – 20 (ex: Dallas/Ft.Worth, Houston, Phoenix, San Diego, etc.)
Expect to pay from $2000 to $5000 per week/per station for a top performing station.

* Markets 21 – 50 (ex: Denver, Cleveland, Kansas City, etc.)
Expect to pay from $1000 to $3000 per week/per station for a top performing station.

* Markets 51- 150 (ex: Akron, Syracuse, Baton Rouge, etc.)
Expect to pay from $800 to $2000 per week/per station for a top performing station.

* Markets 150+ (ex: Myrtle Beach SC, Green Bay, Topeka, etc.)
Expect to pay from $500 to $1500 per week/per station for a top performing station.

You may be saying, “Wow! That can be expensive”. Relax, these are standards and radio advertising schedules come in all shapes and sizes. Sometimes, schedules are smaller depending on advertising goals and objectives. However, we do recommend that you are able to commit to the range of minimums.

Leftovers?

Notice we have not mentioned remnant radio advertising here at all. Remnant advertising is the practice of buying unused inventory at deep discounts. Remnant advertising success exists more in theory than in practice. However, this is not to say that there are not advertisers who are having success with remnant advertising. If, and when, remnant advertising falls into your lap, we suggest you look into it. However, basing your entire radio ad campaign on remnant advertising may be shooting yourself in the foot. With the exception of a few times a year, most top performing radio stations do not have that much unsold inventory. Often, the largest advertisers have contracts that guarantee so many low cost/no cost spots that have to run. The reality is that if large advertisers (with the big dollar schedule) need their spots to run, or if another advertiser pays just one penny more than you did for your remnant spots – bump! You just got bumped off the air that day. You may pay for twenty spots and only get two that air. The stations will make it up to you, but what if you were counting on that advertising to drive sales. Or better yet, in the age of consolidated radio groups your remnant advertising might run on the third to the last rated station in the market. The result is NO RESULT and you have just wasted money for nothing. We really do believe that when it comes to radio advertising YOU TRULY DO GET WHAT YOU PAY FOR.

Now that radio advertising rates have been explained, you may ask the question, how long should I advertise? The type of radio advertising helps define the length of a campaign. Advertising for an event? We recommend shorter, more compact schedules to create buzz leading up to the event or launch. Branding a product? Often, long term schedules with a bit of breathing room work best. Maybe even flighting could work (on two weeks, off two weeks). Most of the time, the two things that will determine how long to run a radio advertising campaign will be advertiser goals (traffic numbers), and external factors such as sales cycles. Oh yeah, and usually budget affects the length of the campaign. It is not desired, but that’s reality.

The Total Cost

You may be thinking, “So if I want to run a spot on three top Houston radio stations, I should expect to pay $1000 for a commercial, plus $3000 per week per station…that’s $10,000 for one week’s worth of advertising!” That’s true, and may be just what it takes to reach over half a million potential well targeted customers. The real question is, “How much money can you make off half a million potential targeted customers?” Is it more than $10,000 a week? $40,000 a month? These are questions to ask yourself, because in the world of advertising, that is pretty good traffic.