How The Internet Of Things Could Cut Into Radio's Revenue
January 19, 2016
Seventeen years ago, marketing guru Seth Godin published his classic book, Permission Marketing. In it, he contrasted Interruption Marketing and Permission Marketing. With Interruption Marketing, advertisers interrupt something you want -- a television show you want to watch, a magazine you want to read, a highway you want to drive on, etc. -- with an advertisement -- such as a TV commercial, a print ad, or a billboard. Radio relies on an interruption marketing model to generate revenue ("Got the new Adele track coming up right after these commercials...").
With Permission Marketing, consumers give brands permission to market to them. The key is to catch those consumers at the right moment. For example, if my kitchen sink backs up, I will go to the phone book or Google or Angie's List and seek out information about plumbers. I'm essentially saying, "Please, tell me more about your plumbing services."
The key to Permission Marketing is to get to the consumer at the right moment. I don't care about plumbers when I'm driving home from work or watching Seinfeld reruns on the weekend, so interrupting me with an ad at these times isn't very effective. But if a company can catch me at the moment when I need a particular product, its chances of closing a sale increase dramatically.
The Internet of Things and Permission Marketing
The "Internet of Things" is the idea that soon many of our devices -- from our cars to our thermostats to our pressure cookers -- will soon communicate with each other over the internet. So when you get in your car to drive home from work, it will tell the thermostat to heat up your home and the pressure cooker to start cooking dinner.
Last spring, Amazon introduced Dash Buttons (by invitation to Amazon Prime members only). They partnered with over 60 brands, such as Tide and Maxwell House. Just place the button by your washing machine or coffee maker and connect it to wi-fi. And when you find yourself running low on detergent or coffee, press the button and a new shipment will be mailed out to you.
Dash Buttons take advantage of a Permission Marketing strategy by connecting with consumers at precisely the right moment. It's not hard to see why giving consumers Dash Buttons is far more likely to increase toilet paper sales than running ads on the radio. Surprisingly, consumers have to pay for the buttons ($5 each)!
As the Internet of Things allows more and more brands to engage with consumers at precisely the right moment, the ability of companies to execute effective Permission Marketing strategies will grow, and these companies will steer their marketing dollars away from Interruption Marketing. This poses a threat to radio. After all, why should Maxwell House pay to run a spot schedule when consumers will pay to put an ad and an order button directly onto their coffee makers?
Using Geo-Targeted Ads to Get Back in the Game
So what is radio to do? To compete, radio will need to be present at those crucial decision-making moments. More than that, it will need to know that it is present at those moments and deliver advertising messages that are appropriate in the context. One way to do this is through the use of geo-targeted ads.
For example, if your radio station knows that you like to drink Starbucks coffee on your way to work, it can play an ad that says, "Would you like some coffee this morning? There's a Starbucks just a few blocks away."
Of course, in order to do this, your radio station will need much more than just an analog signal beamed to a tuner. Your station will need to gather data about your listeners so you can deliver them the appropriate ads. Not only will the station need to know where listeners are, but also have information about their preferences and behavior patterns. By doing this, your station can compete with the oncoming Internet of Things.