The new advertising rates for metros announced by many of the FM radio stations have come into effect recently.

While the FM players as well as media planners believe that the hike has been a fallout of the now year old RAM service, whose data is being increasingly relied upon for listenership statistics, industry observers aver that the hike may just be another way of rationalising effective ad rates. In an evolving industry where rate cards are not always adhered to and discounts rule the roost, the hike may just be the industry's way of announcing its growing acceptability as a medium.

Says Radio city EVP and national sales head Ashit Kukian, The ad hike explains the efficiency of the medium and advertisers are taking note of it. The transparency of RAM data also substantiates the reach of the medium; there is a strain on our inventory in many key markets and people are ready to pay. Even though the RAM data fluctuates every week, it is accepted as a benchmark to gauge listenership....

Listenership data would be in principle the guiding factor for advertisers,... agrees Radio Mango director programmes Ravi Nair. RAM has been providing some sort of largely accepted listenership data and this would have encouraged the radio stations to demand more from the advertisers. With RAM being accepted generally, the radio stations have hard data to bargain for better rates....

Red FM national marketing head Anuj Singh puts it lucidly as a �rate correction' and not �rate hike'. It was high time that radio as an advertising medium be taken seriously, looking at our cost per thousand reach and effectiveness....

Agreeing with Singh, Starcom South East & South Asia CEO Ravi Kiran adds, The radio industry had always believed that radio as a medium had always been under priced and haven't been paid the kind of money they should be paid for their investment, energy and talent. The prices for advertising are between the media buyers, advertising agencies and sellers and need not be made public for industry to react....

Citing other reasons for ad hike, Ravi Nair says, A second reason could be that the market has expanded and radio stations are increasingly catering to bigger audiences. Another reason could also be that the increased costs of operations are prompting the hike....

Effect on ad volumes

Media planners believe the price rise will not affect the advertising volumes in any way. Elaborates Ravi Kiran, Price does play a role in deciding advertising investments but hike in radio advertising won't necessarily result in advertising being diverted to print or radio. Each medium has its own place, target audience and no other medium can encroach on that....

Analyzing the increase in the advertising of Radio Mirchi, Lodestar COO Nandini Dias says, If a radio station increases its price in isolation, it doesn't mean anything as media buying mainly depends on the position the radio station holds in the market. It sounds feasible if the hike in the rate is a result of change in any parameter, otherwise this might not be easily accepted. If there are stations which are cost effective and deliver in a better way, it might prompt the advertisers to divert their investments in other brands. Also, deals are not finalized sticking to the rate card and media buying is relative to what other radio channels do....

The radio industry is too small to be affecting the other mediums; the only fear remains the media sellers getting too greedy to kill the market with this price rise,... says Ravi Kiran.

Agrees radio professional Rajesh Tahil, "It won't result in decrease in ad volumes as it is a still cost effective medium that reaches out to a large audience base. Huge amounts of advertising dollar is spent on television, comparatively this small hike should not rationally effect the media buyers/advertisers desire to invest in the medium. This is a positive move which proves the radio industry is not afraid to demand the increase in the advertising rates as they are proving their efficiency."

RK Swamy/BBDO group senior media advisor PRP Nair feels that, With the festive season coming, the radio stations are trying to attract the seasonal advertisers who put in money during the festival season apart from the regular FMCG. Radio as a relatively new medium has experienced tremendous growth and is marketing itself aggressively to gain maximum ads. The fact that radio stations are announcing their hike from the past few days gives an impression that it is a collective move by the radio fraternity. Increasing ad rates empowers the radio players to negotiate in a better way as there is always room for negotiations....

Radio a cost effective medium

The radio industry seems to be cashing on the festive season where a lot of local advertisers including the jewellery stores, sweet shops, local retail outlets invest in advertising. It is the time when the local retailers gear up to promote their products. Although radio hikes its advertising prices, it is still the most cost effective medium reaching out the same target audience compared to print or TV and will enjoy heavy bookings now,... states PRP Nair.

Hill Road Media director Rajesh Tahil stresses that it is not about cost but cost effectiveness of the medium. Most of the radio stations have experienced healthy growth with increased listeners, so its time to capitalize the medium now. The rates have been low for this long because of competitive pressure and not because of non-effectiveness of the medium. Radio is the only medium which offers attractive packages to local retailers....

If we look at the advertising breakdown, about 70 per cent of the advertising comes from national players and even after the ad hike, radio still remains cost effective for local retailers compared to other advertising mediums. It will not certainly discourage advertisers from pumping in money because it is just a marginal raise and the media buyers are ready to pay that price realizing the efficiency and reach of the medium. It would lead to a 10-12 per cent increase in the revenue of the radio station and if the ad volumes are to be affected, it would only include three to four per cent dip in the ad volumes,... says Kukian.

No hike in Kerala

Radio stations in Kerala are not in a hurry to increase their advertising rates as players believe it is too premature to do so. Club FM COO George Sebastian says, Kerala had the last roll out in all the radio frequencies and is a relatively new market to increase advertising rates. The advertising rates fixed at time of induction were introductory price as we were testing markets and we haven't increased the fares yet. We are at an advantage as coming from a print parent company, we offer combined deals on print and radio for our customers....

Adds Nair, We are yet to complete one year of operations and as such it is premature to consider rate hikes. Also, in Kerala we don't have RAM yet so there is no proper listenership tracker in place....

Among the big players, Reliance ADAG's Big FM hasn't yet hiked its price but plans to do it soon. Nirupan Soni says, We are planning to increase the advertising rates but haven't decided the slab yet. As far as banking on national advertisers is concerned, a large portion of radio advertising comprises national advertising and small number of local ads. But we would have different hike slabs for different segments of radio stations....

Singh articulates, Advertising rates differs according to different time bands across the day and not many people know how to plan radio. The advertising cost also differs according to the cities, the advertisers association with the company and many other factors and we will not do anything that would hurt the local advertisers. If the radio industry gains at the same rate, I believe the industry would comprise 5 per cent of the advertising pie in two years....

Talking about the future of radio advertising, Kukian says, Radio might seem to be only a 4 per cent medium today but it is primarily dominated by 3-4 top players and the size of these players garnering large chunk of advertising is huge. Today radio is making its presence felt and in two years it will be perceived as a serious medium touching the 7 to 8 per cent benchmark....