EMERGING PARADIGMS IN MARKETING-A STUDY ON THE FM RADIO MARKET IN CHENNAI CITY
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1 EMERGING PARADIGMS IN MARKETING-A STUDY ON THE FM RADIO MARKET IN CHENNAI CITY N. Ananthi 1 Abstract: FM radio has gained popularity in India, especially with the entry of private players. Radio stations generated revenue of INR 8 bn in 2008; expected to reach INR 18 bn by Share of Radio advertising was 3.3 % in 2008; expected to reach 4 % in Privatization of Radio discusses phase I and phase II rounds of FM licensing in India. The study was intended to access the current preference and suggestions about the respondent s favorite FM, as it plays a very important role in developing a strong market base, as Fm is such a service where Brand is not what is given preference, its only the content that matters. The study is aimed to assess the standing of Radio Market as a whole in Chennai. INTRODUCTION India has an estimated 180 million radio sets, reaching over 99 percent of its one billion inhabitants - a clear indication of the vast commercial potential in India for this medium. Today FM radio market has emerged and has made enormous growth. The commercial aspect of radio is enormous as is the number of people it reaches to. Right from the roadside petty shop to corporate banker all are hooked to the radio. The radio industry revenues for fiscal year 2005 were at Rs 3.22 billion, and there was a growth of 14.3 per cent in 2006 and it is expected to be a Rs 1000 crore industry by Chennai Market While measuring the growth of the Radio market, two aspects are considered one is the growth from the listenership point of view, and the other is from revenue point of view. As far as listenership is considered, Chennai is the fastest growing market among the metros. Today in Chennai, radio penetration has reached a level of 75 per cent and growing. From the advertisers side, the way the clients were looking at radio last year, compared to how they are using the medium now has completely changed. Last year the clients had to be educated to what radio is all about. Advertisers have already tasted success of their radio campaigns and are slowly increasing their spends on radio. 1 Asst.Prof, Department of Business Administration, Dr.Ambedkar Government Arts College Chennai, India. ananthi.ethirajcollege@gmail.com 1
2 Chennai where there exist exit 9 stations, it becomes very necessary to find out the preferences of people regarding the fm stations. Radio mirchi being one of the most preferred FM stations among people, has strong competitors like Big FM, Suryan FM, Radio city, Rainbow etc. Hence this project throws light on the FM radio market in Chennai, with regard to the FM listening habits of the people. Radio listening on medium wave was confined to urban limits of cities. As against a mere 2,75,000 receiving sets at the time of Independence, now there are about 111 million estimated radio sets in about 105 million household in the country. Presently the broadcast scenario has drastically changed with 198 broadcasting centers, including 74 local Radio Stations, covering nearly cent-per-cent country's population. It reaches 97.1 per cent of the population, which includes substantial population in rural area, and covers 89.7 percent of the geographical area of the country. An Overview of the Radio Industry in India History In India radio broadcasting began in 1935 by AIR. In 1999, the privatization of FM through the Phase I policy was undertaken. However, the phase I policy failed due to a high license fee structure. Of the 108 licenses issued, only 22 operated and one was closed down. Phase II policy The Phase II Policy enabled the industry to enter a high growth trajectory. Before the Phase II policy, there were 22 stations and by the end of 2007, 266 stations are expected to go on air. This was possible due to a more favorable fee structure. In the phase II policy, annual license fees are 4% of gross revenues or 10% of reserve OTEF (One time Entry Fee) whichever is higher. Key players The key players operating the FM radio stations in India are Adlabs, South Asia, ENIL, Radio city and Dainik Bhaskar. Share of radio in the total ad spends 2
3 The share of radio in the overall advertising pie at approximately 3% is much lower than various developed and developing countries worldwide. Globally, the share of radio in the advertising pie is around 5% in countries where the medium is still in a growth phase and around 10-12% of the advertising pie when the medium reaches a mature phase. Source: ENIL IPO prospectus Characteristics of the Radio industry Low advertisement rates Radio is a cost effective medium for the advertisers. Radio advertising rates are low on cost-perthousand basis as compared to other media. Low content costs Radio does not require any commissioned original content unlike other media such as print and television. Royalty fees have to be paid for the music content to Phonographic Performance Limited (PPL) and Indian Performing Rights Society (IPRS) and certain music companies. Prime time differs from television The prime time for radio listenership differs from prime time television viewing. Radio listenership peaks in the morning, afternoon and late nighttime slots, while for television the prime time is the night slot. Reaches the required audience 3
4 Listenership of radio as indicated by the Indian Listenership Track (ILT) survey is the highest among the younger audiences (15-29) and the SEC A audiences. The research indicates that almost 70% of SEC A (higher socio economic class) audiences listens to radio everyday. This is the audience most sought by advertisers. Audio medium Radio is not a visual medium like television and thus people prefer television to radio. Besides this, the only source of revenue for the FM radio operators is advertisement revenues and they do not receive any subscription revenues from the listeners. Thus, radio has its advantages as well as disadvantages. In the next article, we shall outline the growth drivers for the radio industry. RADIO INDUSTRY-GROWTH DRIVERS Fastest growing segment of the media and entertainment industry The radio industry recorded a growth of nearly 58% in The share of radio in the total advertising industry increased from 2.4% to 3.1% during the same year. This is further expected to increase to 5.5% by 2011 as per the FICCI-PwC report on the Indian entertainment and media industry. The size of the radio industry is projected to increase at a CAGR of 28% from Rs 5 bn in 2006 to Rs 17 bn by Robust growth of the Indian economy The Indian economy has grown at a robust rate of 9% and 9.2% in FY06 and FY07 respectively. The advertisement industry is a proxy to India s high economic growth. As per a study conducted by Zenith Optimedia, the media planning and buying arm of advertising group Public is, the advertising spend is expected to increase to Rs 367 bn by 2010 from Rs 227 bn in
5 Beneficiary of the Buoyant Growth of Major Advertisers The major advertisers on radio are the entertainment channels, real estate firms and retailers. All these industries are expected to witness robust growth in the years to come. More than 90 channels across various languages and genres are being launched this year. The real estate industry is projected to grow at a CAGR of 25% in the next five years. Organized retail industry is projected to grow at a CAGR of 40% in the next five years. Radio industry should be a major beneficiary of the high growth in these sectors. Biggest radio advertisers (Jan-Nov 2007) Category % share (time based) TV channel promotions 11.8 Real estate 6.2 Cellular phone service 5.5 Independent retailers 3.8 Publications/books 3.1 Source: ENIL prospectus Demographics The target listeners for the radio industry are the youth. 55% of the India population is below 25 years leading to an increase in the audience of the radio industry. The content on radio primarily comprises of film music. The Indian film industry is getting more organized and receiving more institutional funding. The quality of music produced is improving which augurs well for the growth of the radio industry. Reduction in license fees The Phase I policy for the privatization of FM radio had a very high fixed license fee structure with an annual escalation of 15%. In the phase II policy, a revenue sharing formula was introduced whereby radio companies had to pay a fixed annual license fee of 4% of gross revenues or 10% of the reserve OTEF (One Time Entry Fee) whichever is higher. The reserve OTEF was 25% of the highest valid bid for that city. 5
6 Availability of listenership data Leading TV viewership research company, TAM, has recently ventured into radio audience measurement through a study called RAM (Radio Audience Measurement). The study is currently restricted to the cities of Delhi, Mumbai and Bangalore. Research may cover larger number of cities in the years to come. Availability of listenership reports is bound to support and attract larger spends from marketers. Marketers generally wait for adequate research data to emerge before committing large spends to any medium. Local advertising Globally, the local retail segment constitutes a large part of radio's advertising income. As per the CII-KPMG report, while local advertising contributes 70% of radio revenues in the United States of America, in India, the share of local advertising is only about 8% of radio revenues. Ideally, a localized medium like radio can be effectively used for local-level promotions apart from being bundled as part of cross-media promotion strategies. Thus there is huge potential for the radio industry to benefit from an expected increase in the share of local advertisements. Theoretical Background In 2001, the first private FM radio station went on air. Today there are more than 250 of them beaming across almost 70 cities in India. Thanks to FM becoming mobile phone compatible, radio has indeed become the constant companion of people 24 hours a day, seven days a week. It s something that newspapers and TV will never achieve. It is estimated that 25% of mobile subscribers in India have radio enabled mobile phones; this simply means that more 60 million people have access to radio-on-the-move. Industry revenues, too, are showing an upward spiral. For 2006, billings are estimated at Rs.500 crore (US$125 million) growing at 28%cumulatively. By2011 they are projected to reach Rs crore (US$ 425 million). (Source: The Indian Entertainment and Media Industry: A Growth Story Unfolds, FICCI PWC Report, March Local Mantra 6
7 The sales and marketing efforts of the major FM radio stations have focused on the large advertising clients. This may be partly attributed to the FMCG-marketing background of some of the managers and partly due to the sales strategy of the multi-media groups that own most radio stations. However, radio is a unique medium and the focus on large advertisers seems to be at the cost of its largest potential benefactor - the local retailer. The retail segment globally constitutes a large part of radio's clients and sales, but currently in India accounts for a small portion of the radio revenue pie. For example, in USA, 70 percent of all radio revenues come from local retailers, and only 30 percent comes from either national or international advertisers or from the network of advertisers. In contrast, in India, retail comprises only 8 percent of radio advertising. Radio, by its very nature, is a localized medium, due to it s ability to transmit a particular message over a small geographical area. The retailer, with city/ locality specific target groups, can be a major beneficiary of radio advertising. Clearly, there is a need to unlock the advertising potential in the retail segment. Radio stations offer high frequency opportunity to hear for the advertiser. International research indicates that radio has 60 percent of television s effectiveness at increasing campaign awareness amongst an audience of year old radio listeners. However, advertising on radio costs just 15 percent that of television. While the price relativity for other audiences will vary, the achievement of 60 percent of the result at 15 percent of the cost makes radio significantly more cost effective than television. Ad Spending in the Radio Segment 7
8 Radio is emerging as a most sought after medium today and the recent AdEx statistics corroborate that premise. AdEx India (a division of TAM Media Research in technical collaboration with Air Check USA) has done a comparative study of the changing spending patterns on radio by advertisers from the first quarter of 2005 to the first quarter of 2006 across the four metros of Delhi, Mumbai, Chennai and Kolkata. According to the AdEx data, there has been a growth of 33 per cent in advertising spends on radio between January and March 2006, as compared to the corresponding period in The reason, according to leading media planners, is the gradually increasing credibility of the medium. FM stations have been around for about four-five years now. Earlier, there were a lot of misgivings about the medium and whether it would deliver. But now, it is finding its place, says JyotiBansal,-vice-president,MPG. The AdEx report also brought to light the fact that the Mumbai radio stations have got the maximum share of advertising spends 39 per cent of the overall revenue pie. The second largest spends have been on the radio channels in Delhi (37 per cent), followed by Kolkata (14 percent) and Chennai,(10percent). Objective of the Study To understand the FM listening habits of people in Chennai City. To determine the number of days in a week the respondent listens to Radio FM To determine the time and place preferred by the respondents to listen to Radio FM. To find out the most liked Fm station among listeners. To determine the preferred kind of songs, by the respondents. To identify the attributes considered by the respondents for choosing a particular FM Station. 8
9 To know if the respondents listen to advertisements on Radio. Methodology The scope of the project is to understand the FM listening habits of the respondents and the study was carried out in Chennai city only. The research design adopted by the researcher is descriptive in nature. Both primary and secondary data were collected, primary data was collected based on the objective for analysis purpose and secondary data collected for the theoretical review that also aided in framing a structured schedule and knowing the profile of the customers. The sampling technique adopted was non-probability, judgment sampling. The sample includes 250 FM radio listeners in Chennai and all class of people from various areas, age group, income and different background. Table No. 1 Frequency of Listening to Radio FM No. of Days Number of respondents Percentage 1-3 days days All 7 days Total
10 Interpretation: Out of the total samples, 50% of the respondents listen to radio fm on all the 7 days, 38% listen 4-6 days and 12% of the respondents listen to FM only 1-3 days in a week. Chart no. 1. Table no. 2: Preferred Place for Listening to Radio FM Place No of respondents Percentage Home Office Friends house 21 8 Commuting Other 10 4 Total
11 Interpretation: 43% of the respondents listen to radio FM the most at Home, 34% listen while commuting, 11% listen in their office and 8% listen when they are at their friend s place. Others category which comprises of 4% includes public places, relative s house etc. Table no. 3: Most Preferred FM station Among Respondents FM stations Number of respondents Percentage Radio mirchi Big fm Suryan fm Aaha 7 3 Radio one 15 6 Rainbow 15 6 Radio city 8 3 Hello 8 3 Chennai live 5 2 Total Interpretation: among the 250 respondents interviewed, it is inferred that Radio mirchi is preferred by 28 % of respondents, Suryan FM by 26%, then comes Big FM at 23%, and Rainbow & Radio one are preferred by 6% each, whereas Aaha, Radio city & Hello fm are liked by 3% each and Chennai live being the least preferred by on 2% of the respondents 11
12 Chart no. 2 Table no. 4: Favorite Programme Programs Number of respondents Percentage Imsai arasi Kadhala kadhala Ragasiya snegithi
13 Dr. love 20 8 Kittu mama kittu mami 17 7 None Others 12 5 Total Interpretation: Out of the total sample, it is seen that 27% of the respondents like ragasiya snegithi the most, after which imsai arasi and kadhala kadhala were preferred with 15% & 14% each. 8% of the respondents like Dr. Love and 7% of them like kittu mama kittu mami. Whereas 5% of the respondents liked other programs and 24% of them did not like any show/program on the radio FM. Table no. 5 : Kind of Programs Preferred. Options Number of respondents Percentage Request based Informative Theme/issue based Road show 22 9 General Interaction Celebrity shows Others 12 5 Total Interpretation: 21% of the respondents like shows which are Informative in nature and 19% like shows which are Theme based, Celebrity shows are liked by 16%, Request based and 13
14 General interaction shows are preferred by 15% each and Road shows are least preferred at 9% only. 5% of the respondents like other kind of shows which included, contest shows, only music shows etc. Chart no. 3 Weighted Average Method: Objective: The main aim is to find which is the most preferred FM station. Table no.6: Rating of Various FM Stations in the Order of Preference. Factors weight rank Radio mirchi I Big fm III Suryan fm II Radio one IV Rainbow VII Radio city V Hello VIII 14
15 Ahaa VII Chennai live IX Weight = X i W i Rank = X i W i N= 250 N Note: Rank Weight Calculation: Radio Mirchi = (68X9) + (75X8) + (51X7) + (46X6) + (10X5) = Interpretation: Radio Mirchi is the most preferred FM station by majority of the respondents, followed by Suryan fm, Big fm, radio one, radio city, rainbow, aaha, hello fm and the least preferred was Chennai live. Weighted Average Method Objective: The main aim is to find which attribute has been rated first by the overall respondents with regard to the choice of a particular FM station. Rating of Necessary Attributes in the Choice of a Particular FM Station: Table no: 7 Factors Total Weight Rank Songs II RJs III Programmes IV Contests V 15
16 Information given I Weight = X i W i Rank = X i W i N Note: Rank Weight Calculation: Information given = (152X5) + (50X4) + (20X3) + (18X2) + (10X1) = Interpretation: Thus it is inferred that most of the respondents select a particular FM station based on the information given, which is being rated first. It is followed by the selection of songs played, the RJs, the programmes, and lastly the contests & events conducted by the FM stations. Chi-Square Objective: To determine the relationship between the occupation and the number of days respondents listen to the radio FM H0: there is no significant difference between the occupation and the no. of days respondents listen to radio FM H1: there is a significant difference between the occupation and the no. of days respondents listen to radio FM Days/ Age Student Employed Unemployed Housewife Others Total 1-3 days days
17 All 7 days Total Table no. 8 O E O-E (O-E) 2 (O-E) 2 /E ` Where, O = observed frequency; E = expected frequency E = RT X CT N Where, RT = row total; CT = column total; N = no. of respondents Calculated value of χ 2 = Degree of freedom = (r-1) X (c-1) = (3-1) X (5-1) = 8 17
18 Level of significance = 5% Table Value = 15.5 Interpretation: Since the calculated value of χ 2 is greater than the table value, H 0 is rejected at 5% level of significance and the alternative hypothesis is accepted. Hence, There is significant difference between the occupation and the number of days respondents listen to radio FM. i.e. it depends on the individual s occupational status, the no. of days he/she listens to radio FM. One Way Anova Objective: To identify whether there is any significant difference between the respondents of different age and the time they listen to radio FM H 0 : There is no significant difference between different age groups with respect to the time they listen to radio FM H 1 : There is significant difference between different age groups with respect to the time they listen to radio FM. Table no..9 Time/ Age >45 TOTAL Early morning Late morning Afternoon Early evening Late evening Night Total Correction Factor (CF) = T 2 /n Where T = Total Number of Respondents, 250; n = Number of elements, 24 Correction Factor (CF) = (250) 2 18
19 CF = 62500/ 24 = Total SS (TSS) = X 2 ij (T) 2 n = TSS = SS between = (T j ) 2 (T) 2 (or) (T j ) 2 CF n j n n j = = SS within = X ij 2 (T j ) 2 = = n j Source Variation of Sum of Squares (SS) Degree Freedom of Mean Square (MS) F Ratio MSB MSW Between Sample k-1 = 4-1 = 3 Within Sample n-k = 24-4 = 20 TOTAL n-1 = 24-1 = 23 SSB = = (k-1) 3 SSW = = (n-k) = 2.20 From the F-Table, F (3, 20) = 3.10 at 5% F-limit. Calculated Value = 2.20 Table Value = 3.10 Since the table value is greater than the calculated value at 5% level of significance, the null hypothesis is accepted. 19
20 Interpretation: There is no significant difference between different age group with respect to the time when the respondents listen to radio FM Findings Most of the respondents listen to radio FM on all the 7 days. Most of the respondents who listen to radio FM are the youth, under the age group of years. Majority of the respondents prefer listening to FM at night. Majority of the respondents prefer melodious songs to be their all time favourite. Programs which are informative in nature are liked by maximum number of respondents. The most important attribute considered for choosing/liking a particular FM station is found to be the information given by the FM station. Most of the respondents feel stress relief and happy after listening to the radio Majority of the respondents do not listen to the advertisements on radio FM. Radio Mirchi is the most preferred FM station by majority of the respondents, followed by Suryan fm, Big fm, radio one, radio city, rainbow, aaha, hello fm and the least preferred was Chennai live. Suggestions Since most of the respondents who listen to radio FM are the youth, programs and content could be altered/ developed according to their interests. The RJ talk could be made more interesting and appealing to increase the listener s involvement. More events and contests could be sponsored and endorsed to make the station visual to potential advertisers. More of particular theme based programs could be aired. 20
21 Conclusion As the competition is growing with more FM stations coming in, it is becoming more important for the existing FM stations to have product differentiation and create a brand image to sustain listenership, and attract more advertisements which is their main source of revenue. Hence it is only through the various programs, RJ talks, events, contests, etc that the FM stations can get familiarity and preference. The suggestions given could be considered and worked on for further improvisation. Bibliography Naresh. K.Malhotra,, Marketing Research, An applied orientation, Pearson Prentice Hall, Fifth Edition, Pg: Beri, G.C, Marketing Research, TATA McGRAW HILL, Fourth Edition,pg:15-35 Kothari, C.R, Research Methodology, New Age International Publishers, Second Edition, pg Gupta, S.P., Statistical Methods, Sultan Chand & Co., Fifth Edition,pg: Agudelo, C. G. (2007). Daring to think is beginning to fight: The history of magazine "alternative," Colombia, Dissertation Abstracts International Section A: Humanities and Social Sciences. H. Suzuki, A statistical model for urban radio propagation, IEEE Transactions on Communications, vol. 25, no. 7, pp Mishra, Sita and Muralie, Sushma (2007) Thinking Beyond Mass Media: Changing Trends in Marketing Communication, Journal of Marketing and Communication, Sep- Dec.,2007, Vol.3, issue 2 Bill rose &Joe Lenski, The Infinite Dial 2008: Radio s Digital Platforms, Arbitron Radio Listening Report: pg 1-25 Reports: FICCI PricewaterhouseCoopers Annual Report on Indian Entertainment and Media Industry ENIL -ENTERTAINMENT NETWORK (INDIA) LIMITED 21
22 India in Business published by ITP Division, Ministry of External Affairs, Government of India. WEBSITES:
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