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56 unique executions, i.e., bus wraps and station dominations, sort of pressure to demonstrate, through data, the effective- as attractive parts of launch efforts due to their "break ness and efficiency of their media choices. Having a credible through" effect. These advertisers, however, referred to tran- measurement system would make it easier for the advertisers sit as a one-off: something they would use in a single set of cir- to sell their programs. cumstances as an accent element, but not a recurring part of the media plan. Limitations of Transit Media Other advertisers see transit media as offering a unique opportunity to be part of the consumer's daily life in an up- A few respondents mentioned limitations of transit media close fashion. These respondents talked about wanting to that are worth noting. One local hospital advertiser felt that "surround the customer with our message" and "catching cus- transit, and perhaps other out-of-home media, did not afford tomers in their daily routine." They were enthusiastic about enough space to get across a robust product-selling message. full bus wraps and station dominations. These advertisers are In her mind, there are messages that simply are not appropri- perhaps more likely to include transit as a regular part of the ate for this medium. media plan than those discussed in the previous paragraph. Another advertiser felt that transit offers only limited reach. This was a national consumer product advertiser. Though this was not a criticism identified in the media Perceived Image of Transit Media planner study, there might be some substance here. Two Transit advertising was perceived by several of the adver- other advertisers commented that the attractiveness of tisers as being "not cheap." In particular, the production costs transit varies by location: in cities where transit "is part of of transit advertising were cited as being high, and a reason to daily life," it is much more attractive to advertisers than forgo the medium if the budget were to tighten. There were where it is not. Compared to television, which can reach comments, as well, about transit not being efficient. It was every household with a set, no matter how remote the loca- seen from several perspectives as not being a precisely tar- tion, transit media's reach is indeed limited. It is also a geted medium. A couple of respondents complained about complication of transit that the audience reached varies not being able to buy specific bus routes, and therefore wast- from city to city. ing money reaching people they have no interest in reaching. Additionally, some advertisers said they thought transit Advertisers' Suggestions for Improving advertising was downscale and cluttered due to the number Transit Media's Attractiveness of messages that appear together (e.g., inside a bus or railcar). An advertiser who focuses mostly on New York City has an The top suggestions of the advertisers interviewed are to image of transit as upscale and very amenable to targeting make transit media measurable, make it fresh and exciting, consumers at the neighborhood level. One advertiser thought make it more flexible (packaging) and faster to respond (cre- of transit as a dated medium, saying it was "very '50s and ative), and make it less expensive to produce. '60s," and therefore not for sophisticated brands. Other advertisers were not at all negative about transit, Advertising Sales Contractor acknowledging that "transit has its place." Some recognized Interviews its ability to be exciting, big and new, as exemplified by bus wraps and station dominations. Some also offered that tran- Whereas our media planner survey explored the pur- sit has the ultimate ability to get their ads close, as in "directly chaser's view of transit advertising, interviews with advertis- in the faces of" their customers, which they saw as extremely ing sales contractors provided the view from the seller's per- valuable. One even saw transit as the medium best positioned spective. Many transit agencies have media sales capabilities to make advertising experiential for consumers. in-house. However, the purposes in this study were better met by speaking with the external contractors who sell the bulk of transit advertising. Importance of Audience Measurement The one-on-one telephone interviews of 12 media com- Most respondents, when asked, agreed that having mea- pany executives were focused on getting their perspectives on surements of the audience targeted and reached would the major obstacles to greater transit advertising sales growth. increase their interest in using transit media. One respondent, Most of these interviews occurred between April and June of a regional retailer, said that her company was so focused on 2007. Interviewees included representatives of the largest tracking sales back to advertising initiatives, that transit advertising sales contractors--Clear Channel, CBS Outdoor, media stood very little chance there, except perhaps for a spe- Titan Worldwide, Lamar Advertising and Gateway Out- cial event. Most advertisers spoke about experiencing some door--as well as a handful of smaller ones.

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57 How the Advertising Sales Contractors Sell Sales Force Organization By way of background, it's important to understand that The advertising sales contractors we spoke with agreed that advertising sales contractors sell to three different customer transit needs a dedicated sales force in order to avoid a conflict types: national media planners (working largely with national of interest with other media. Where the sales force is not ded- clients), local media planners (working with local clients), icated to transit, and the same sales force sells other media as and advertisers, themselves. One major advertising sales con- well, then transit sales will almost certainly be sub-optimized. tractor estimated that his company did 35% of its transit Media companies are able to make a higher margin on sales media sales direct to advertisers, 40% to local media planners of media that they own than they are on transit media. Tran- and 25% to media planners working on a national scale. sit advertising sales contracts typically require the contractor Another advertising sales contractor estimated that his com- to pay the transit agency 60% ( 5%) of monthly sales revenue pany did only 10% direct sales, 35% to local media agencies achieved or a guaranteed minimum payment, whichever is and 55% to national media agencies. higher. After the sales company pays its sales force and over- Much of the sales effort of advertising sales contractors-- head, the margins left for the sales companies are 15% to 20% in fact of sales representatives of all media types--is focused at best, whereas margins on billboard sales can be up to 40%. on getting media planners acquainted with and excited about Therefore, when an advertising sales contractor owns bill- the media they represent. There is still a lot of direct selling to boards and other out-of-home media, but also represents tran- advertisers, but the majority of media sales go through media sit agencies, because of the margin differential, the sales rep- agencies. If the sales representatives are successful in their resentatives will make more money, and therefore be more presentations to media planners, then the representative's highly motivated, to sell billboards. media will be "top of mind" for those media planners as they The main implication is that transit agencies should make go back to their jobs of developing media plans for their sure, when hiring a sales contractor, that the sale contractor clients. Beyond presentations, however, those sales represen- does not also sell billboard space in the same location. This sets tatives who are able to cultivate excellent relationships with up the potential conflict of interest. If the contractor does media agencies are ultimately the most successful. have competing media in the area, transit agencies should When the media planner decides to recommend transit as make sure that the sales efforts are kept separate. part of the media plan, the media planner contacts the repre- sentative to get whatever specific information (e.g., pricing, availability) he or she needs. Some media planning agencies Pursuing New Technology and simply ask media companies to give them a plan for out-of- Other New Media Options home. Others develop a formal Request for Proposal that The media company executives who were interviewed they send to multiple media sellers, specifying their media seemed to fully appreciate the need for exciting new options objectives and their budget. Often, a worksheet is attached to offer to clients. Several spoke enthusiastically of the inno- specifying the types of media they desire. Then, the media vations they are working on--for example, "Glow Skin," sellers develop their best proposals that the media planner the poster material that remains illuminated in the dark via can then choose among. "electroluminescent technology." Because each advertising sales contractor represents only a However, they also cited many perceived obstacles to limited selection of transit agencies, any media planner look- bringing new technologies and other new media options to ing to buy, for example, transit media in the top 10 U.S. cities transit. One perceived issue is lack of interest and/or commit- has to deal with multiple advertising sales contractors. Infor- ment to follow-through on the part of transit agencies. As the mation on the proper contact for the advertising sales advertising sales contractors see it, advertising sales is far contractor representing each city's transit media is readily from the top of the agenda for public transit agencies. Tran- available in a well-known resource book called the "SRDS sit agencies are in the business of providing affordable, safe Out-of-Home Advertising Source." Sometimes, media agen- and efficient transportation to their publics, not the business cies prefer the media sales company to arrange the purchase of selling media space for profit. Besides, revenue generated of all desired cities, even those cities the media sales company by advertising sales is generally a lot less than 5% of the entire does not represent. In these cases, the media sales company operating budget of the transit agency. Consequently, only will contact its fellow media sales companies to arrange the modest internal resources are allocated to advertising sales. It entire purchase on behalf of the media planning agency. The is often made the responsibility of the chief marketer for the advertising sales contractors have what they call a cross order agency, who has many other priorities as well. Under these arrangement to give the business to a colleague and collect a conditions, as the advertising sales contractors see it, it is dif- commission in return. ficult for them to get the agency access and resources they

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58 would need to gain approval for and implement a significant advertising sales contractors to develop or purchase their own initiative like a new product. media innovations. This appears to be the direction at least One suggestion for addressing the focus/commitment issue one advertising sales contractor is heading in for in-car tele- was the appointment of a dedicated high-level manager of tran- vision screens. A second option is for the advertising sales sit advertising sales, and perhaps other revenue-generating contractors to subcontract the new media sellers so that the opportunities. This person's focus would be on generating new media, in effect, become part of the advertising sales con- more revenue for the agency's operating budget. Such a person tractor's inventory. A subcontract alleviates the competitive would be more of the business world than of the public trans- threat, but either increases the cost of the new media or portation world, and would provide the collaboration and part- lessens the new media seller's margin. nership that the advertising sales contractors are looking for. A A third option is for the transit agency to give the lead sales handful of transit agencies, including the Metropolitan Atlanta contractor a Right of First Offer provision in the contract, Rapid Transit Authority in Georgia, have such a position. which gives the sales contractor the option to provide the new Another obstacle to new product and technology develop- media themselves or decline and allow a new vendor to come ment is the cost of such a program. There is almost always into the market. The Bay Area Rapid Transit District has used capital required for new programs. Advertising sales contrac- this approach in its contract with Titan Outdoor with appar- tors are understandably hesitant to make a capital outlay to ent success. improve a transit agency's advertising space inventory when A final idea is laissez-faire. Many new media companies their sales contract is short in duration. If the contract were claim that the new media attract new advertisers to transit taken over by a different contractor at the end of the period, advertising. They should be asked to formally document this not only would the first contractor have been unable to as being the case. If they can document it, then the competi- amortize its outlay, it wouldn't be able to make any money tive stakes are reduced, and the advertising sales contractor on the sale of the assets, because, very often, the transit and the new media vendor can co-exist. agency declares ownership. The research team's understanding is that the above con- The New Product Pipeline cerns are being addressed today by longer term contracts and the inclusion in contracts of provisions that allow for the In addition to the electroluminescent panels ("Glow Skin") recovery of amortized capital investments by the contractor mentioned previously, an advertising sales contractor men- that made them. tioned video screens installed in rail cars and buses; although There is another obstacle to bringing innovative new prod- such screens are available now, this advertising sales contrac- ucts to transit, and it is possibly the most significant one. tor was developing its own in-house system. Some advertis- Transit agencies get pitched all the time by entrepreneurial ing sales contractors mentioned being in the early stages of companies with innovative new products to sell. Transit TV investigating digital signage, e.g., as bus sides. There was also and Tunnel Vision are two such examples, and there are mention of a clear plastic, overhead hand grip with space for many, many more. However, adding transit advertising an ad above the opening. inventory by a party other than the advertising sales contrac- tor is very tricky. Sales Contractors' Understanding Some contracts award the rights to all advertising revenue of What Customers Want generated in and on buses, trains, stations and platforms to the advertising sales contractor, and so preclude any discus- According to advertising sales contractors, clients want sions of bringing in new media from an outside source. Alter- advertising opportunities that are new and different. They natively, some contracts do allow the transit agency to bring want opportunities that are big and bold and that break in new media. However, this can be seen as a threat by the through the advertising clutter. They want hard numbers advertising sales contractor because now his company would proving the effectiveness and efficiency of the medium. They face competition for customers. The first customers targeted want evidence that the out-of-home campaign ran as planned. by the new media sales people are often existing transit adver- They also often want consistent programs from city to city tising clients. In any case, multiple advertising sellers in one (e.g., bus benches in the top 20 cities). market can create confusion among advertisers, which is not helpful to maximizing the transit agency's realized revenue. Advantages of Transit Advertising There seems to be a stalemate situation here that is very important to resolve for the sake of transit advertising A key objective of the advertising sales contractor inter- growth. It is beyond the scope of this study to do so. However, views was to understand how the sellers of transit advertising there seem to be a few options available. One option is for the are "pitching the product" to customers. When asked about

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59 the leading attributes of transit, its key selling points, they to "effectively show that [their ads] are out there, the desired spoke mostly about the tremendous reach and frequency of audience is seeing them, and that what the advertiser is get- transit advertising. As one advertising sales contractor exec- ting is substantial." Another advertising sales contractor, rec- utive paraphrased the sales message, "I can put you in front ognizing that the large media agencies want to see numbers, of four million people a day." devised his own methodology to calculate reach and fre- The most frequently mentioned unique aspect of transit is quency numbers from transit advertising. its ability to reach audiences that cannot be reached by other Advertising sales contractors talked about the difficulty of out-of-home media. Several advertising sales contractors selling transit in cities outside of the top 10 to 20 cities. Quite talked about transit's ability to go to residential neighbor- often, transit media from one or several of these cities is bun- hoods and suburban areas, where billboards are frequently dled with the purchase of the larger cities. According to the zoned out. Others saw the same uniqueness, but spoke of advertising sales contractor, the smaller cities would other- reaching audiences in urban centers, from which billboards wise remain unsold. The consequence, however, is that the are also often excluded. The point may be that if a consumer smaller cities are sold at a significant discount. is not commuting in a car, then, for the most part, they are Stories were also shared of transit being used as a sales not viewing billboards. Transit is in the urban centers, on the "kicker" to sweeten a billboard deal. Many of the advertis- highways and in the suburbs. As one advertising sales con- ing sales contractors own multiple types of media in a city, tractor put it, "Buses go where people go: they cover more based on the strategy of wanting to offer one-stop shopping area, they get into the heart of the community, they achieve to media planners. To entice a media planner to purchase more." its billboards that are, for example, less well located than a Another advantage of transit mentioned was its intrusive- competitor's billboards, the media company will include ness: whether the audience wants to see the ad or not, it's transit ads as a free bonus with the purchase of their bill- there. It can't be skipped, shut off, or thrown out. Also men- boards. This type of tactic gets the transit ads sold, but it tioned was the speed with which ads can get put up and their certainly lessens transit advertising's value in the eyes of cost advantage relative to billboards. customers. Challenges of Selling Transit Suggestions for Increasing Transit Advertising Sales Most advertising sales contractor executives interviewed commented on transit being a tough medium to sell. They In addition to the right sales force organization and finan- pointed to the fact that transit has to be presented to media cial motivation, as discussed previously, the following are planners and advertisers because they rarely ask for it them- additional advertising sales contractor suggestions for increas- selves. As one advertising sales contractor executive said, ing transit advertising sales: "You have to work at selling transit." According to advertis- ing sales contractors, possible explanations for the difficulty Refresh the medium with exciting new products. of selling transit include the following: Develop a third-party validated audience measurement system. Transit is not considered a mainstream medium. Publish research testifying to the effectiveness of transit Advertisers want new and exciting, and transit is neither. media. Transit is perceived as being seen only by the least desirable Reduce restrictions on categories of advertisers allowed populations from a demographic standpoint. by transit agencies (e.g., alcohol is often an excluded Some transit authorities simply do not do a good job with category). cleaning and maintenance, and their advertising spaces are Make more large format opportunities, like bus wraps, harder to sell. available. Route-specific advertising is not allowed, essentially forc- Develop a system for demonstrating the product in the ing the advertiser to buy unwanted ad space. field to media planners (much like the computer technol- ogy allowing billboard sales people to show the creative In the absence of an established audience measurement that is up on any billboard at any time). system, many sales representatives are improvising. Often, Make full-system route maps accessible electronically. they develop visuals using full-system route maps, updated Develop visuals that show the extent of geographic cover- with locations of shops, restaurants and other destinations age offered by transit. along the routes where targeted consumers are likely to be Make better quality demographic data, at least on riders, found. The point, as one advertising sales contractor put it, is available.