TCRP Project B-33: Practical Measures to Increase Transit Industry Advertising Revenues

1. TCRP Project B-33: Practical Measures to Increase Transit Industry Advertising Revenues Findings, Conclusions and Recommendations September 2008

2. Agenda

3. U.S. Advertising: Current Situation US advertising in a “severe slump” Down 1% in 2007 to $230B Down another 3% in 2008 Important developments in media industry Decoupling of advertising and media services Advertisers no longer look to one agency to both develop media plan and develop advertising Recognition that there are many more media choices than TV, print, radio Advent of specialization Internet Out-of-home Direct marketing

4. U.S. Advertising: Current Situation Advertiser trends Intense pressure to show results of marketing spending is driving demand for media that: Can deliver sales and prove it Are highly targeted for maximum efficiency and effectiveness Can accommodate multiple ads (tailored by audience) Can break through the clutter Can “get in the face” of the consumer Promote consumer loyalty Are easy to change quickly

5. Transit advertising revenue down 2% in 2007 2007 Out-of-Home Media Spending = $7.2B = 3% of Total U.S. Media Spending in 2007 ($230B) Source: Outdoor Advertising Association of America

6. Agenda

7. Conclusions Transit advertising has serious image and product deficiencies, particularly among media generalists serving local and regional advertisers Transit advertising’s positioning is neither highly motivating nor differentiated from billboards The level of product innovation is insufficient Aside from sales activities, there is no promotion of the product to its target audiences The challenges of growing ad sales is greater among transit agencies not in top 20 media markets Transit advertising sales materials are not as effective as they could be at “making the case” The overall level of satisfaction with transit media sales reps is low

8. Media Planner Survey: 153 Respondents Director-level and above Employed by advertising agencies, general media agencies and out-of-home media agencies, but not advertisers Balance of major media agencies (annual billings >$50 million) and smaller agencies National distribution 20-30 minutes, $100 incentive to participate

9. Out-of-home specialists have greatest familiarity and recommend most frequently There is an opportunity among all segments to increase familiarity, which drives recommendations FAMILIARITY WITH TRANSIT MEDIA* FREQUENCY OF RECOMMENDING TRANSIT MEDIA** BB: 86% BB: 67% Percent of Media Planners *“Which of the following best describes your familiarity with transit media, e.g., its products, benefits, product requirements, purchasing, etc.?” **“How often is transit media included in your recommended plan?”

10. Experience with transit media positive EXPERIENCE WITH TRANSIT ADVERTISING Agreement with statement, “I’ve had a good experience with transit advertising”

11. Transit’s greatest perceived strength: Reaching captive audiences Other strengths: saturating a market, extending reach and frequency Not a strength: building brand awareness or building a brand’s image % OF “BEST AT” VOTES AWARDED TO TRANSIT* Percent of Media Planners *“Among transit, place-based, billboards, electronic billboards, television and the internet, which medium does the best job at…”

12. With the exception of “captive audience,” billboards perceived to do everything transit does, but better % OF “BEST AT” VOTES AWARDED TO TRANSIT, BILLBOARD AND PLACE-BASED Percent of Media Planners *“Among transit, place-based, billboards, electronic billboards, television and the internet, which medium does the best job at…”

13. Transit seen as supplemental, second tier media Over three-quarters of media planners view transit as supplemental Over half agree that transit is rarely requested for inclusion in a media plan ATTITUDES and HABITS concerning TRANSIT MEDIA

14. Image of transit media needs updating and greater credibility Fundamental attributes of a medium: need to be higher HOW WELL EACH OF THE FOLLOWING ADJECTIVES DESCRIBES TRANSIT MEDIA Only 1 in 4 find transit media to be innovative Almost 2/3rds of respondents think transit is expensive Not perceived as hip, sexy or intrusive… A positive finding: “Downscale” not as prominent an issue as expected Perceptions of “clean” are very weak A positive finding: being complicated is not a barrier

15. Media generalists with local-regional clients have poorest image of transit advertising HOW WELL EACH OF THE FOLLOWING ADJECTIVES DESCRIBES TRANSIT MEDIA Percent saying the adjective “describes extremely well” or “describes very well”

16. Most important media attributes: reliability, value, targeting, measurement IMPORTANCE OF MEDIA ATTRIBUTES % of media planners who rated attribute as “extremely desirable” or “highly desirable” MUST HAVE REALLY SHOULD HAVE SHOULD HAVE NICE TO HAVE

17. Transit media’s strongest attributes not aligned with media planners’ most important attributes GREEN: 0 RED: 5

18. Billboard’s performance on important attributes better than transit’s GREEN: 3 RED: 3

19. Preferences for new media point to digital MOTIVATING POWER OF NEW MEDIA % of respondents saying the new medium would significantly increase the likelihood of their recommending more transit advertising to their clients

20. Though comfortable selling transit, two-thirds of media planners don’t disagree that it’s difficult to sell Only 46% of media planners agree that clients’ perceptions of transit media are positive ATTITUDES and HABITS concerning TRANSIT MEDIA

21. Satisfaction with sales reps shows weakness More dissatisfaction with multi-media sales reps Only 42% of planners with multi-media reps could agree that rep spends as much time on transit as on other media SATISFACTION WITH TRANSIT MEDIA SALES REPS SATISFACTION WITH TRANSIT-ONLY SALES REPS SATISFACTION WITH MULTI-MEDIA SALES REPS

22. Summary of the Obstacles to Transit Advertising Growth Transit advertising’s positioning – the benefits its target audience perceives it to offer – is neither highly motivating nor differentiated from billboards; Transit advertising has serious image and product deficiencies; The level of product innovation is insufficient to generate interest and enthusiasm among media planners and advertisers; Aside from sales activities, there is no promotion of the product to its target audiences; Transit agencies not in top 20 media markets face greater obstacles to growth than those in the top twenty; Transit advertising sales materials are not as effective as they could be at “making the case”; The overall level of satisfaction with transit media sales reps is low.

23. Agenda

24. Transit is very well positioned to grow Media dollars are shifting out of traditional media and into alternative forms Internet is the fastest growing medium, but out-of-home is the second fastest Public transit ridership is increasing as fuel becomes cost prohibitive Advertisers’ demand for new and different formats is what’s driving out-of-home’s growth…something transit could deliver Advertisers also looking to connect in a more personal, one-on-one way with consumers…something transit does deliver However, transit advertising has many issues to address

25. Transit’s positioning is neither highly motivating nor differentiated from billboards Today, transit advertising sits in the shadow of the out-of-home advertising 800-pound gorilla, billboards Transit is seen to have the same uses as BB, but performs less well across the board Consequently, 77% of the sample agreed that “Transit’s best use is as a supplement to other media” All 3 media planner segments view “Reach a captive audience” as transit advertising’s greatest strength, as well as its unique strength Our judgment and knowledge of media tells us that this is not a highly sought after media objective Advertiser trends indicate demand for highly targeted media, and for media that can break through clutter, connect one-on-one with consumers, trigger consumer action Transit is lacking relevance and distinctiveness in today’s advertising market

26. Give transit a compelling positioning in its own right Transit has something different from billboardsto offer…and just as compelling Permission to believe: Transit advertising is at eye level…in stations, outside stations, on the street, in the cars Transit advertising can encompass a consumer…whether they are in a station domination or an interior-wrapped bus or railcar Transit media lend themselves to innovative creative (e.g., bus wraps) Transit media travel…customers can confront your transit ad multiple times during a day, not just at rush hour Transit is affordable – you can be in your audience’s faces with one campaign after another Test positioning among target audiences before launching Recommendation #1. Reposition transit to differentiate it from billboards, elevate its importance and update its image Transit media are the mass media that get “up close and personal” with your consumers so that they don’t just see, they experience your brand message.

27. Aside from direct selling activities, there is no promotion of the product to its target audiences Many media have industry associations that focused heavily (if not exclusively) on promotion of the medium to the advertising world Promotional tactics include Websites for providing news and information Events showcasing the medium’s best uses to media planners and advertisers, often in collaboration with associations of national advertisers Advertising campaigns expressing the unique value proposition of the medium We found no evidence of wide-scale promotion of the medium to media planners or advertisers In the highly active and highly competitive media market, transit’s diminished presence is a liability

28. Recommendation #2. Promote transit media among both advertisers and media planners Commence national advertising, e.g., in professional trade journals and on websites Develop tools to make media planners’ jobs easier Create a searchable directory of transit agencies with demographic data and advertising sales contact information Identify transit agencies in the directory by audiences reached, e.g., college students, the elderly, Latinos, etc.

29. Recommendation #3. Create a transit media trade group Mission: to promote sales of transit media Activities, e.g.: Organize industry events / showcases Forge alliances with national advertisers Advocate for legal and regulatory changes to permit new product development Ease access for media planners Develop national marketing and communications strategies Organize and promote multi-transit agency offerings, e.g., transit agencies that serve college populations or senior populations

30. Transit has serious image and product deficiencies Most fundamental attributes perceived weakly Efficient – only 38% said this describes transit advertising Effective – only 58% said this describes transit advertising Reliable – only 50% said this describes transit advertising A good value for the money – only 37% said this describes transit advertising Image perceptions especially weak among media generalists with local-regional advertisers as clients Having audience measurement, demographic data, the ability to demonstrate that what was bought was actually delivered – are all “must haves” for media planners Transit perceived to not deliver on any

31. Recommendation #4. Develop a credible audience measurement system Develop an audience measurement system to address weak perceptions of efficiency, effectiveness, value, reliability In the short term, conduct a series of market research studies to explore/prove transit’s effectiveness Multi city Multi media (buses vs trains vs stations, etc)

32. The level of product innovation is insufficient Advertisers demand venues that are new, exciting, fresh – so that they can make a statement with their choice of medium Perceptions of transit advertising as innovative, fresh, exciting are low The product innovation ideas in the ASCs’ pipelines are not among media planners’ most highly rated ideas. Transit agencies indicate willingness to try new media However, advertising sales contractors perceive many transit agencies to not be fully aligned with this objective “We want to come in and show transit authorities additional revenue opportunities, but they’re not so interested – it’s the difference between an entrepreneurial/creative business and a government bureaucracy.”

33. Recommendation #5. Introduce digital and interactive (experiential) technologies to transit advertising • Get ASCs to collaborate on expediting the introduction of new media to transit • Address alignment issues within transit agencies • Appoint a directorof new business development within the transit agency whose entire responsibility is driving higher advertising sales • Alert general managers that their attention will be needed in a timely manner • Explore incentives, e.g., rewarding the department driving business development with bonuses or extra spending if goals are reached • Address obstacles/disincentives to new product development in the ASC-TA contract structure • Forge a collaborative effort between ASC’s and TA’s to bring about legislative/regulatory changes needed to permit digital’s use on transit

34. Transit has serious image and product deficiencies - more Less than 1 in 10 respondents describe transit advertising as “clean” Only 1 in 5 respondents perceive production costs to be reasonable Less than half think that transit media offers flexible flighting Slightly more than half think that it’s easy to do a multi-city buy in transit advertising More than half think that advertisers’ perceptions of transit advertising are negative

35. Recommendation #6. Address transit’s other product and image deficiencies Re-position and promote transit advertising’s benefits Disseminate examples of best-in-class creative (ads) used in transit Further explore extent of negative advertisers’ perceptions to better inform media planners Further explore perception of high production costs so that it can be addressed In communications By introduction of cost-lowering technologies Put additional focus on keeping transit ads and their environs clean and well maintained

36. The challenges of growing ad sales is greater among transit agencies not in top 20 media markets General estimates are that 40% of transit media is purchased by national advertisers and 60% is purchased by local and regional advertisers National advertisers generally want only top 20 media markets It is more or less up to the media planners working with local and regional advertisers to drive ad sales growth for transit agencies outside of top 20 markets This study shows that media planners whose clients are local and regional advertisers have the least favorable image of transit advertising This group is the least enthusiastic and most skeptical. Most of all, because they are working with the smallest budgets, they need to be convinced of transit advertising’s value for the money.

37. Recommendation #7. Develop specific strategies to promote ad sales of transit agencies outside top 20 markets Arrange individual meetings with media planners serving local and regional clients Advertising sales contractor and transit agency do meeting together Tailor marketing pitch using each segment’s specific beliefs and attitudes about transit advertising, as outlined in this study Use new positioning and market studies to change media planner’s image of transit advertising’s effectiveness Promote groups of transit agencies that reach audiences in high demand E.g., all transit agencies that serve college towns E.g., all transit agencies that serve Latino markets E.g., all transit agencies that serve senior markets Make this information searchable in the transit agency database

38. Transit advertising sales materials are not as effective as they could be at “making the case.” Media Planners see deficiencies in the sell-in tools and materials the receive on transit Media Planners not getting the measurement data they “must have” Many media planners agree that “it’s difficult to sell transit media to advertisers” (21% agree and 45% are on the fence) We found no evidence of a selling message other than “extends reach and frequency,” which is of value, but not distinct

39. Recommendation #8: Arm sales force with information, research, case studies (and ultimately, measurement) Re-position transit to give it a more compelling benefit and to differentiate it from billboards Produce high quality sales materials targeted to media planners A brochure expressing the benefits and best uses of transit, as well as success stories Evidence of transit’s effectiveness and efficiency via a credible research study of in-market usage Information on exactly what they’re selling – routes, times, locations for every market Information on competing out of home media – locations, cost, availability, etc. In collaboration with media planners, produce high quality sales materials targeted to advertisers To use in direct to advertiser sales opportunities For use by media planners in theirpitches to advertisers Provide media planners with the necessary information to prepare post-buy analyses to communicate exactly what was bought

40. The overall level of satisfaction with transit media sales reps is low • Media planners with multi-media reps are less satisfied than are planners with transit advertising dedicated sales reps • 58% either disagree or are on the fence re: “My media rep spends as much time selling me on transit as on other media.” • Our research confirmed that the practice of offering less commission for transit ad sales than for the sale of company-owned media exists; it is unknown how widespread this practice is

41. Recommendation #7: Address the dissatisfaction with sales reps among media planners Establish sales performance measures and hold ASCs accountable to them To the extent that they exist, remove financial disincentives of selling transit for multi-media reps Conduct further research to gain more detailed insights on drivers of dissatisfaction

42. Recommendations for the Proposed Media Trade Organization Develop the national transit media advertising campaign (Recommendation #2). Provide guidance (e.g., selling messages about the benefits of transit advertising) for the development of sales tools and materials to help sales reps be more responsive to media planners and advertisers (Recommendation #8). Commission market research documenting the effectiveness of transit advertising (Recommendation #8). Lead the effort to establish a more effective way to portray demographic information depicting transit advertising’s audiences (Recommendation # 8). Organize conferences that showcase transit media to media planners and advertisers and include a competition showcasing best-in-class transit advertising (Recommendation #2). More…

43. Recommendations for the Proposed Media Trade Organization Lead the effort to develop an audience measurement system (Recommendation #4). Develop tools and information for media planners to make it easier for them to use transit media (Recommendation #2). Advocate for legal and regulatory changes necessary to permit new product development (Recommendation #5). Develop “package” offerings comprising the advertising space of multiple transit systems (Recommendation #7). Charter a work group to develop strategies to expedite the introduction of new technologies (Recommendation #5).

44. Recommendations for Transit Agencies Commit to supporting the internal effort required to drive advertising sales growth Management needs to make themselves available for timely decision-making on such topics as introducing new advertising platforms (e.g., digital) and pursuing lucrative, but possibly new, opportunities with important advertisers. Appoint an entrepreneurial advertising director within the transit agency whose charge is to drive sales as high as possible, within reasonable limits. Decide that the agency can tolerate the degrees of risk that typically accompany new business development efforts. Locally assess the performance of the sales force and address underperformance as warranted Set performance targets and hold sales organization accountable to them Find a mutually acceptable approach to pursuing the introduction of new products and technologies with sales contractors Require sales contractors to deliver periodic new product development progress reports along with business reviews

45. Recommendations for Advertising Sales Contractors Find a mutually acceptable approach to pursuing the introduction of new products and technologies with transit agencies Provide better sales training and materials and assess sales incentive structures Survey clients – both advertisers and media planners – on how their needs can be better met Apply the information in this study to tailor the sales pitch by type of media planner Out-of-home specialists are transit advertising’s biggest fans. They just need to be given more reasons to use transit as frequently as they use billboards Media generalists with national advertiser clients are also big fans of transit. Most critically, this audience needs to be convinced of transit’s effectiveness Media generalists with local/regional clients, as we have seen, are the least enthusiastic and most skeptical. Most of all, they need to be convinced of transit advertising’s value for the money

46. Prioritizing Next Moves

47. End of Presentation TCRP Project B-33: Practical Measures to Increase Transit Industry Advertising Revenues Principal Investigator: Jane Alpers, Executive Vice President Denneen & Company, Boston, MA jalpers@denneen.com Draft 3 02 04 09