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July 05, 2006

Clear Channel's "Less is More" Exposed as Bad for Radio Advertisers

Marketing professor Dr. David Allen decided to put Clear Channel’s "Less is More" hypothesis to the test with research using scientific methodology. As reported in the Philadelphia Inquirer, Dr. Allen found 30-second ads to be only 75% as good as 60-second ads at promoting brands and less than 50% as effective at conveying details of topics such as sales event information (and, we’d guess, toll free phone numbers).

That Clear Channel made such an important strategic decision without first commissioning such independent research is a mystery. Instead they sponsored their own “research”, which clearly was done to justify management’s decision to others – most notably the paying customers (advertisers) who would be asked to pay more than half the price of 60-second radio ad and receive less than half the value.

How has Clear Channel management become so confused about what business they are in? Are they in the “Please Wall Street” business, or are they in the business of delivering such good content to discernable audiences that listenership grows and advertisers beat a path to their door with blank checks? Perhaps the difference between pleasing Wall Street and pleasing customers is a nuance, easily confusing to many, but that’s why senior management gets the big bucks. True, B-schools teach that management’s #1 job is to maximize shareholder value, but how that gets done is where many of the mistakes get made.

Clear Channel is on the way to becoming an HBS Case Study on how groupthink leads to strategic mistakes. We can tell you how this story ends. “Less is More” proves to be a mistake, which everyone but Clear Channel already knew. The Clear Channel board fires some of the top management who championed the cause, as if that fixes the problem. And everyone expects the shareholders to have a short memory. They probably will. Regardless, as advertisers, we look forward to the day when Clear Channel returns to sanity.

We applaud Dr. Allen’s initiative and thank him for his contribution to the radio industry. Hopefully someone at Clear Channel is listening.

Posted by Jeff Small & Brett Astor at 10:07 AM | Permalink