Radio gives advertisers a new roadmap

Kenya has more than 90 radio stations, the majority of which broadcast in vernacular, forcing media buyers to spend on each platform to reach their distinct audiences.

“Vernacular stations have broken the market into specific segments that media planners must budget for to cover the entire landscape,” said Joe Otin, the head of media monitoring at Synovate.

Mr Otin said cost has also become a big driver of growth in radio advertising, which is much cheaper compared to the cost of running print adverts and producing TV commercials.

“Radio commercials cost the least to produce and air – an important consideration for the many small media buyers looking for avenues of marketing their products to the rural folk on small budgets, especially at this time when the economy is down,” he said.

Stiff competition
George Lutta, the managing director of Media Initiative East Africa, a media buying firm, reckons that such fragmentation demands that media buyers find new ways to effectively reach their target audiences at the least cost possible, pointing to the high cost of producing commercials.

“Radio advertisers have to plan different campaigns for different geographical regions because of the differences in language,” he said, predicting that mobile marketing (through avenues such as SMS) will become the new frontier of growth because they are more targeted and cost less than mainstream media.

Synovate found that stiff competition for customers in a market where consumer demand is declining with slow economic growth forced Kenyan companies to increase their advertising spends by wide margins in the first quarter of the year.

Advertising spend grew by 35 per cent from Sh3.6 billion during a similar period last year buoyed by robust growth in the telecoms sector where competition has intensified with the entry of new players.

The survey found that a big shift is under way in the advertising market with the radio emerging as the media of choice for top spenders.

The medium took Sh2.7 billion of the Sh4.8 billion total advertising spends in the first quarter of the year.

In the first quarter of the year, when the economy is estimated to have expanded by a modest margin of 1.8 per cent, top media buyers increased their spend by up to 70 per cent, underlining the intensity of competition in the marketplace.

Telecoms companies, including Safaricom, Telkom Kenya, Zain Group, Nokia and Yu were among the top 10 advertisers.

Safaricom’s advertising spend increased by over 70 per cent compared to the same period last year while Telkom Kenya’s spend rose by an even higher margin.

“These companies are fighting to keep their customers in a highly competitive market that is mainly driven by innovation,” said George Lutta, the managing director of Media Initiative East Africa, a media buying firm.

“Nothing can replace advertising in a business where competitiveness lies in introduction of new products and value added services as it is in the telecoms market,” he said.

Even though the plummeting economic growth has resulted in ad spend cutbacks, a bruising consumer market war has persisted in the telecoms sector where Zain, Telkom Kenya and Yu are fighting for a bigger share of a market that is dominated by Safaricom.

Safaricom chief executive Michael Joseph said the company intends to continue supporting its products and services through the downturn signalling that there are no plans to cut advertising spend.

“We hope to optimise this with the assistance of research to ensure we retain effective media exposure in our target market,” he said.

The communications industry increased its share of the total Sh4.8 billion spend on advertising from 17 per cent in January-March last year to 23 per cent during the same period this year.

Financial services sector, including insurance, also grew its share of the total spend to 12 per cent up from 7 per cent in the first quarter of last year as mobile banking joined the raging battle for the unbanked and more commercial banks entered the retail market.

Products such as M-Pesa and Zap have taken the country by storm chalking up more than six million subscribers in a very short time compared to bank account holders that have stagnated at around three million.

“There is still a large chunk of unbanked people at the lower end of the market and financial institutions are really interested in this segment. We are seeing a huge push in the consumer and retail market with micro finance and forex being the main areas for growth,” says Mr Lutta.

Synovate said data used in the survey was based on gross rate card costs and does not include discounts or concessions that media houses offered their clients.

TV share of the advertising market dropped slightly to take 31 per cent down from 34 per cent in the first quarter of last year while print media took in 13 per cent of the total spend down from 20 per cent last year.

Statistics indicate that penetration rates for telecoms services are still relatively low in Kenya compared to the global average and that the new wave of value added services roll-outs will require continuous advertising.

Growth is also expected in the beverage sector as players looking to exploit new niches embark on aggressive customer recruitment.

Mr Lutta gives the example of the malt-based non-alcoholic drinks market where East African Breweries is tussling with the Coca-Cola Company for control.

EABL was the first to enter the market with the launch of Alvaro in April last year before Coca-Cola unveiled Novida in November.

Media buyers expect weak economy to hurt growth in advertising spend for personal care products and foods.

“When life becomes harder people trade down and the kadogo economy (smaller packs) grows. This is still very much high volume, low margins business that quickly responds to changes in the economy,” Mr Lutta said.

Data from Synovate show that media inflation (the overall increase or decrease in costs of media without a corresponding increase or decrease in value received) has been rising steadily over the last four years.

Big role
Media inflation went up from eight per cent in 2004 to 35 per cent last year. Increases by Royal Media stations rate cards contributed most to the high level of media Inflation in 2008.

Television and print volumes dropped in 2009 and growth in advertising was mainly due to increased costs and placing of advertising in high value segments.
Generally, year on year media inflation trends follow overall money inflation trends, states the Synovate report on media inflation.

“In Kenya above the line advertising still plays a big role but as cost of media increases and audiences fragment there is a realisation that the most important media is people based (word of mouth).”