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Everyone knows Miller Kaplan provides the data for RAB's monthly Radio revenue releases. But did you know that they do a lot more that can help your sellers increase their business? Find out what in this sales meeting.

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Miller, Kaplan, Arase & Co. LLP

Business Survey

Instant Backgrounds

Building Sales Through Advertiser Media Spending Analysis
by George Nadel Rivin, CPA
Partner in Charge of Broadcast Services, Miller Kaplan

When Radio Executives are asked to describe what service Miller Kaplan, Arase & Co., performs for the Radio industry they often say, "Arbitron measures audience and Miller Kaplan measures revenues." Brian Reed, Vice President of Sales for Entravision says, "Miller Kaplan provides some of the most actionable data around. Nowhere else can I get precise revenue expenditures by advertiser for all the advertisers in our markets."

Since the early 1980s, Miller Kaplan has served as the industry's source for precise revenue measurement. The monthly Market Revenue Reports issued in over 150 U.S. markets serve as the source for RAB's monthly revenue updates for industry revenue growth. Initially, the Los Angeles based CPA firm collected only top-line revenue data. It was not until 1989 that Miller, Kaplan, Arase & Co., LLP began providing account by account expenditure data when they introduced their X-Ray Reports for the Los Angeles market. Today, 35 U.S. markets, including 24 of the top 25 markets, participate in Media Market X-Ray.

With advertiser media mixes being subject to rapid change, awareness of advertiser spending patterns is vital. There has been much discussion recently of Automotive Manufacturers shifting some of their advertising dollars away from the traditional media buys that they have made for decades and moving more money into Interactive Advertising. Coupled with continued consolidation in the Communications sector, this creates uncertainty for traditional expectation. While the extent to which this will affect you remains uncertain, it is best to be informed.

"Past Performance Does Not Guarantee Future Results," however it does help you prepare and forecast for the future. Did you know that across the nation for every advertiser using Radio, there are on average eight others that are advertising on television and/or newspaper, but not on Radio? It is your job to stay current. Leveraging the information that is available to you is vital in today's rapidly changing advertiser environment.

There are a number of national trends that Miller, Kaplan, Arase & Co., LLP feels are significant. Throughout this article, we will focus on ways for you to best capture opportunities that may have gone unnoticed. The first is the national trend by product code.

The five major product codes for 2005 Radio expenditure growth:

• Appliances & Electronics - Up 33.3%
• Jewelers and Watches - Up 15.7%
• Financial Services - Up 13.9%
• Transportation - Up 13.5%
• Health Care - Up 13.4%

The five major declining product codes which cut back 2005 Radio expenditures most:

• Communications and Public Utilities - Down 20%
• Computers and Office Equipment - Down 19.8%
• Drug Stores and Products - Down 7.7%
• Charitable, Religious and Non-Profit - Down 6.1%
• Beverages - Down 2.5%

While not among the major product codes, political advertising was down 57.5% year-over-year nationwide.

In addition to looking at the growth in overall Radio spending, it is important to look at the changes to each category's media mix.

The five product codes increasing their Radio spending as a percentage of Total Media spending are:

• Transportation - Up 26%
• Appliances & Electronics - Up 25.7%
• Foods - Up 13.2%
• Lodging, Resorts, Tours and Camps - Up 10.5%
• Concerts, Theatres and Movies - Up 9.5%

The five product codes cutting back on Radio spending as a percentage of Total Media spending are:

• Computers and Office Equipment - Down 25%
• Internet/E-Commerce - Down 14.3%
• Education - Down 12.3%
• Drug Stores and Products - Down 8.2%
• Insurance (Non-Medical and Dental) - Down 8%

Understanding nationwide trends is important when trying to determine the future of the Radio industry. With last year's release of "Radio's Leading Advertisers," for the first time, information has become readily available for not only specific advertiser's media spending patterns, but also the distribution of their Radio buy among formats. Did you know that Anheuser Busch spent 30% more of their Radio advertising budget in May and June than they did in the prior four months combined? Did you realize that Cingular Wireless spent 33% less in 2005 than in 2004 on Radio, but actually increased their Newspaper spending by over 35% in 2005. While Verizon outspent the next highest Radio advertiser by over 50% nationwide, American Equity Mortgage should be on News/Talk format radar screens. American Equity Mortgage, while 24th in overall spending in 2005, outspent Verizon by nearly 40% in News/Talk formatted stations.

Listed below are just a few of the hot and cold advertisers that increased their local spot spending by greater than 50% in 2005 or decreased their spending by over 30% over the prior year that can be profiled in Radio's Leading Advertisers:

HOT - Up greater than 50%

• American Express
• E-Entertainment Television
• Ikea
• Shane Company Jewelers
• Universal Pictures

Cold - Down greater than 30%

• Allstate Insurance
• Cingular Wireless
• Chevrolet Dealer Association
• Proctor and Gamble
• Warner Brothers Television

Advertising expenditures for the top 100 local spot Radio advertisers are updated quarterly at www.Radiosleadingadvertisers.com. Access to this data is available for only $175.00 per year.

Information in Radio's Leading Advertisers comes from the aggregation of individual Media Market X-Ray's. Each month, Radio stations in 35 major U.S. Markets (including 24 of the top 25) E-Mail billing files direct from their traffic systems to Miller, Kaplan, Arase & Co., LLP. As a CPA firm, all individual station information is held strictly confidential. Account by account expenditure data is available to Radio stations operating in X-Ray markets. They see how much each advertiser spent on their own station/cluster, their precise share of the advertiser's Radio spending and their rank on the buy.

Stations can readily see those advertisers in which they are underperforming. Addressing the issue may be as simple as saying "I'm a 7 share Radio station, you're spending $420,000/year in my market on Radio and I'm only getting $15,000/year. Your two most direct competitors spend close to 10% of their ad budget with us and are always sharing their success stories." Jeff Federman, Senior Vice President/Market Manager, CBS Radio, Los Angeles sums it up best when he says "Media Market X-Ray is a vital data mining and analysis tool that we use extensively to forecast and prospect from. The additional revenue that we have collected from the research that we have conducted from this data has made X-Ray an invaluable resource."

While there is a tremendous breadth of information that is available to participants in the X-Ray system, benefits fall within three distinct categories: Prospecting, Strategic Planning, and Performance Appraisal.

While some stations' greatest benefit from X-Ray is picking up additional dollars from existing advertisers where they had previously felt they were getting their fair share, others benefit most from prospecting.

X-Ray users prospect:

• By Product Category
• By Agency
• For Advertisers not currently buying Radio
• By looking at new advertisers that have recently entered the Radio Market
• By searching for the fastest growing advertisers who have increased their year-over-year spending in Radio
• By identifying advertisers that are underutilizing Radio by reference to their product category competitors usage

X-Ray users plan:

• By looking at a given month or quarter well in advance to see those advertisers that provided the foundation of station and market revenues in the same period during the prior year
• By looking at product categories in which they both outperformed and underperformed against overall station market revenue share

X-Ray users evaluate performance:

• By accessing overall queries regarding station share and growth to measure sales managements performance
• By accessing individual advertiser expenditure data allow you to accurately measure each Account Executives share and growth of their lists
  • Remember that an AE growing their portfolio by 10% year-over-year mean less if the advertisers on their list collectively spent 30% more than the prior year on Radio. An AE growing their list by 5% means more if the advertisers that they represented spent 15% less on Radio than in the prior year.

Providing leads to your Account Executives that include reference to the agency, media mix, and advertiser expenditure levels allows Account Executives to create solid proposals and be more confident that they are asking for the right amount instead of leaving dollars on the table. Too often, Account Executives under propose and even so, feel that they maybe asking for too much.

In response to X-Ray users requests, Miller, Kaplan, Arase & Co., has added a consultative service to its product offering during 2004. X-Ray ADvantage is customized for each station and utilizes the macro databases that Miller Kaplan manages. Drawing from over 20 years of experience, Miller Kaplan looks at stations running like formats in other markets in a stations region to identify the low hanging fruit. From there, Miller Kaplan applies power ratios by product code to identify a starting point dollar amount for a proposal for the top 25 identified targets potentially bringing in tens of thousands of new dollars each and every quarter. This program, which is available only to X-Ray subscribers, is a low-cost way to find new potential business. Over 100 stations already receive quarterly "Money Pages" and realize an average of $50,000 in quarterly incremental revenue.

In every industry, you need to look back to have a decent shot at predicting the future. Stock market analysts do it. Disneyland does it so that they can estimate the number of anticipated visitors on a given day to cross through their turnstiles. If you haven't been doing so already, you may wish to utilize the revenue trend data provided by Miller, Kaplan, Arase & Co., to assist in forecasting your future!

Coming Next Week: 2006 Radio Marketing Guide & Fact Book