Yesterday, we talked about some of the differences between The Radio Show and the PRPD Convention. Late last week, as commercial and public radio broadcasters made their way back home from these conferences, there is one thing they likely had in common. In both Portland and Indianapolis respectively, there were a lot of high-end, delicious meals consumed in both towns.
Not too many of these radio execs on either the public or commercial side of the spectrum dined in fast food restaurants while attending their respective conferences.
But there’s interesting news out of the fast food industry, and it involves the big dog – McDonald’s. That venerable brand is feeling the pressure of core erosion. It turns out that since 2011, 19-21 year-olds have cut back on their Filet-O-Fish and Big Mac purchases, instead moving to restaurant choices like Five Guys and Chipotle.
For McDonald’s, this is a deep concern. While Technomic reports that those in the core Millennial group – 22-37 year-olds – are steady, it’s these Gen Z late teens/early 20s consumers who are off by around 13%.
But a “flattish” Gen Y report does not bode well because as they know in the fast food industry, if you’ve not going up, you’re lagging behind.
So if this sounds a bit like where radio now sits, you and I are tracking right along. McDonald’s has a problem with Gen Z consumers, while radio continues to see TSL drop-offs with this group, too. And the flat results that McDonald’s is experiencing with its prime target are reminiscent of radio’s listening and revenue totals during essentially this same time period.
It’s tough out there for heritage brands – especially among these late teens and twentysomethings who put a greater priority on customization. (Remember the old Burger King slogan “Have it your way?”) And as the Chicago Tribune notes, “This is a generation that doesn’t listen passively to albums; it makes playlists of preferred songs.”
So the similarities are eerily familiar. And of course, McDonald’s fortunes are also important to radio because it continues to be a leading advertiser:
One of McDonald’s problems is in the perceptual department. Ad Age reports that an internal company memo noted the chain isn’t even in the top 10 of favorite restaurants among Millennials. Of course, a survey of their audio and music choices would likely produce a similar outcome for broadcast radio among these same consumers, moving to Spotify, Pandora, and music collections during this same time frame.
If that sounds a lot like Jeff Smulyan at recent conventions lamenting that “radio needs to be cool again,” then you have a sense for how both radio and McDonald’s have work to do if they hope to not lose an entire generation of consumers to cooler, hipper brands.
McDonald’s has 14,000 restaurants in America, so scale works both for and against them. FM radio is in a very different boat because despite consolidation, it is comprised by hundreds and hundreds of companies, any of which could come up with innovations that might appeal to the Gen Z and Gen Y mindsets.
That is, if they recognize the problem. While sessions at both radio conferences addressed digital content strategies and even touched on those wild and crazy Millennials, addressing this generation head on has never been much of a priority.
NextRadio could be a way for radio to launch its “cool comeback,” but broader content strategies aimed at this elusive generation are rarely discussed.
The fast food industry knows a problem when it sees one. And as the Tribune notes, McDonald’s has innovated itself out of trouble in the past – with cheap but tasty coffee drinks, as well as free Wi-Fi. But both of those offerings are becoming ubiquitous in the food business, so it may be back to the innovation drawing board for Mickey D’s.
Other brands that are wrestling with a youth dilemma are taking steps. In Facebook’s case, they bought Instagram. And for KNDD in Seattle, they’ve amped up music discovery while eliminating half their commercial load.
The solution paths may be arduous and even elusive, but they won’t happen without recognition that a problem exists.
Perhaps the difference between radio and McDonald’s is that they’re on it. Late last month, they canned their head of operations. And an exec from the company noted that when it comes to Gen Y, “They’re promiscuous in their brand loyalty.”
And the first move was announced yesterday: starting today, all McDonald’s customers get free coffee during breakfast time for two weeks. Think of it as a commercial-free stunt. It may not be lasting, but it will bring people to the Golden Arches.
McDonald’s is moving, instituting a change in focus, energy, attitude, and even stunts..
Radio would do well to watch McDonald’s’ efforts with great interest.
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Interesting that both of these ‘mature businesses,’ radio and McD, seem to be suffering from ‘image’ problems with younger consumers. Think about the multitude of others that are in much the same boat; KMart & Sears, Radio Shack, even the once uber-hip Abercrombie & Fitch. But is it about image or is about other things the consumers care about? Personal choice, convenience, what’s in it for me, why should I care about you, etc. McDonald’s folks are pretty darn smart marketers, and as you say, they’re already attacking the issues. Radio must do the same – no amount of PR will help the next time a 10 spot break comes on and drives a listener to another audio device…
Mark, thanks. It’s probably a combination of both – perception but also the reality that the product isn’t quite in-sync with changing lifestyles and priorities. Not all legacy brands suffer with Millennials, but for those that do, new strategies and tactics need to be considered. Thanks for the comment.
Great read Fred….and I can’t think of another business in America that has tried harder to “reinvent” their look and product line more than Mickey D’s. They saw the consumer was getting more health conscious AND getting far less tolerant of eating “in a dump” and redesigned every restaurant early, early on.
And they’re still struggling.
The consumer is in charge. PERIOD.
Right you are, Dave, and it’s incumbent on legacy brands – even with some “issues” – to keep working it hard. In a sea of change, we have to adapt. We’ll all be watching McDonald’s carefully. Thanks for taking the time.
Just ran 10 miles this morning and now I want a Big Mac ,Large Fries, Oh!….and a diet coke. ( gotta keep fit ya know)
Nice to see that all the food groups are represented, Scott!
I was totally with you until you suggested NextRadio as the solution to the cool factor. If radio is having trouble with youth, its not because their phones don’t have radio (streaming works just fine for this group) its because of the other factors you mentioned – active customization vs. passive listening along with other factors that you’ve noted in this blog before. McDonalds won’t solve their problem with youth be putting the same products in a new package and niether will radio.
If the lack of coolness is an issue, radio has to get cool in the context of whatever group its targetting. Grandparents probably shouldn’t have much to say about how that plays out…and the answer is probably not fully (and maybe not at all) found in a transmitter, but rather in some way to leverage radio’s strengths into a streaming product that’s better/different than the ones that dominate now with a royalty rate that allows for profits.
IMO, if radio doesn’t develop and beta test differnt products that could be perceived as cool soon, it will see the opportunity window closing much sooner than its PR engines suggest.
I’m not suggesting that NextRadio is “the answer” any more than free coffee is. It’s a stab, it’s an attempt, it’s an experiment.
And as I said in my comments to Tony, the radio industry missed the Millennial boat years ago, and now is forced to play catch up. Thanks, Bob, for adding to the conversation.
I can hear it now: “Free latte with every song we play!”
McDonald’s owns Chipolte. Sort of like an owner buying an FM to hedge against the inevitable erosion of his legacy AM.
Correction: it did own it but sold out in 2006.
And maybe that tells us a little something, Dave. Thanks for the comments.
The tag “I’m lovin it” is a prime illustration of how badly their advertising has gone awry (and they’re not singular in this distinction — copywriting is a swiftly dying art). One does not write commercial copy of that sort in the first person. Who cares what “I” love? It is what “YOU” love (or more specifically, what I, as the seller, am trying to convince you to love) that is important.
“YOU will love McDonald’s!” is the message. Like “YOU deserve a break today” — one of the most successful tag lines in history, not only for its snappy, memorable creative, but for the bottom line sales success.
As Val Geller reminds us, Tom, the most important word in the English language is “you.” Thanks for taking the time to chime in.
Fred, Good thought starter for the radio industry but I think it goes a little deeper and you touched on it with Jeff Smulyan’s “radio needs to be cool again.” We need to see why radio stopped being cool with this gang of Millennials. Bottom line is we put out a bad product, satisfying debt concerns instead of picking hit records and it made radio just like any other business. Why did the generations before this fall in love with radio, it was the magic and that’s why they still use the product, albeit not as much as they did in their youth. These Millennials aren’t dummies but you know what, neither were we back in the day and we knew a good thing when we heard it and that’s why we listened.
Radio lulled itself into thinking that consolidation cemented its “we’re the only game in town” status. Call it hubris, arrogance, or just plain being out of touch with what young people are thinking and doing. I suspect the other piece is the industry’s 25-54 obsession made it even more convenient to turn its collective back on teens – the people who grew up to become Millennials. Those twentysomething chickens have come home to roost. Thanks for the comment and the thoughts, Tony.
Just a slight disagreement, or perhaps merely clarification. I don’t quite accept that the [radio] “industry” has a 25-54 obsession. Rather, it’s the ad agency community.
Perhaps we could compromise, and say it was an “obsession” that was fed to them, to which they didn’t put up much resistance.
Before the agencies peddled this alleged demographic “science,” radio stations, by and large, programmed for a general audience reach. Whoever tuned in, well, that’s who tuned in. And they sold — locally as well as nationally — the raw numbers. In Philadelphia or Detroit or St. Louis, you bought a 60-second spot to reach 45,000 persons. None of the drilling down to “persons 18-34, male, with brown hair, near-sighted, with a preference for green flannel shirts, who own two dogs, and whose favorite food is meatloaf, and who buy it at a nearby restaurant every Tuesday.” (And if you think I’m exaggerating that agencies think they can actually laser-focus on a demo to this degree, I’ll show you some minutes of my past meetings with some of these dolts.)
It was roughly the mid 1970s when this malpractice really took hold; when agencies began dictating not only which target demo they wanted, but how much they intended to pay.
This era also heralded the steady demise of radio — when the stations started to play along with this sham, and programmers started claiming they could work some sort of witchery to determine from the Pop Charts a playlist that would deliver the exactly wished-for, precise demo segments.
As a result of decades of programming and selling* this way [see footnote below], stations have completely lost the art of how to write and produce local ad copy, and how to sell locally. They tooled themselves up to become “Agency Convenience Machines,” thinking they could pay the mortgage with national spots.
That worked — for many of them — until we turned the demographic corner with the Baby Boom retirement. Now the population numbers are no longer in an upward trend (which they mistakenly thought would last forever). Instead the numbers are in a temporary flattening effect, even a bit of a decline here and there, for at least a decade, probably more like two decades.
And most stations are NOT going to be able to ride it out for anywhere near that length of time.
[footnote: I used the term “selling” very generously. Putting together an agency buy, utilizing a calculator to spew out paperwork with shares and cost per points, making the station’s spot price conform to the arithmetic, and GIVING the agency the budgeted dollar amount they are willing to pay, ain’t exactly my idea of “selling.”]
Thanks for the clarification, Tom. You’re right that 25-54 was handed down by the agencies – and then radio dutifully played right along. You have to “follow the money,” but when the majority of stations in the market are targeting 25-54s, that doesn’t leave a whole lot of wiggle room for format diversity. And as we know, that means certain demographics – teens and AARP members are going to be left in the dust.
In radio, as in any business, you reap what you sow. Appreciate you taking the time.
Radio could and should have pushed back on this. Pleny of media did/do really well appealing to younger demos and agencies have no problem placing money on them for their younger targetted clients. For some reason, agencies decided that radio was most appropriate for 25-54 and radio, rather than make the case for 18-34 focused products, went along and focused mostly on 25-54. Too bad. The 15 year olds radio igonored in the early 90s are 35+ now.
I cannot agree more. In the process, we’ve lost some formats and a whole lot of money. When I first got into radio, part of the allure to advertisers is that we had formats that were perfect for every audience (unlike TV where cable and highly focused channels were still bubbling under). Today, we complain about “compression” in the ratings, as everyone vies for the largest chunk of the 25-54 “sweet spot.” Hmmm….
Trying to skew radio toward younger demos has always been the problem. It’s even MORE of a problem now.
The older demo is where the money is. Fifty percent of the income in this country is earned by pesons 50+, and they hold 80% of the financial assets.
The youngsters are head-over-heels in debt.
While that’s all true, radio has virtually walked away from Boomers, too, Tom. That 25-54 myopia has implications on both sides of the spectrum. Thanks for adding to the conversation.
Fred: Right you are, and thank you for clarifying. I should have phrased that better. The “25-54” bracketing is ad agency handiwork that has not been re-examined in at least 40 years. The mindset that 50- and even 60- and 70-plus individuals are not viable consumers is hopelessly outdated and incorrect. People are living longer, and living better. Today’s 65-year-olds aren’t buying Poli-Dent and Geritol,they’re buying vacation cottages and motor boats. And these folks are the most natural fit for radio, because it’s an old friend to them. They’re familiar with it and they like it. Or I should say, they like it when it’s done well.
Tom, thanks for the follow-up and keeping the conversation about demographic omissions going.
Tom, thanks for the follow-up and keeping the conversation about demographic omissions going.
Tony, your comments should be like a slap on the side of the head to programmers.
It’s so obvious, isn’t it? Making revenue more important than the on-air sound is like telling the listeners that we really aren’t there for them, but for our clients. Ironic, since clients come for our listeners.
Truth is, radio still can offer plenty that no other media can replicate- it’s local, it’s immediate and (ideally)can offer a sense of loyalty for and comfort to listeners.
It seems so easy! Let your listeners feel like they matter and you will matter to them.
Does anybody else remember how amazing FM radio was in its infancy? If you don’t, believe me- it was insanely amazing and cool. And it ran spots that were sometimes also cool, go figure.
It’s not rocket science. It’s radio. And it deserves a little more respect at the hands of those in control.
These are great points, Cindy. Some of the radio basics are missing & while things will never be what they were, they could be a helluva lot better. Especially in the face of new competitors. Thanks for taking the time to comment.