XM and Sirius root that success in a series of smart marketing steps. Both companies initially bet that salespeople, truckers, and other people who spent a lot of time driving would be some of their first to sign on to the service. In fact, half of XM’s subscribers sign up as part of a new-car purchase. “The automobile market has been a critical part of our business from day one,” says David Butler, director of corporate affairs for XM.
Butler says XM is available on more than 100 vehicle models, including as a factory-installed option on 40 General Motors models and as a standard feature on several by Honda and Acura. Sirius reports that its service comes factory-installed in 40 models and as a dealer option in another 40. Just last week it added BMW to its roster of factory customers.
Boston University marketing professor Frederic Brunel points to such transparency as typical of the seamless integration necessary for the successful launch of a new technology. The installation option eliminates the effort by consumers to acquire the technology–the research, the shopping, the reading of the installation manual. When satellite radio is offered as a new-car option, Brunel says, consumers “don’t even know it is satellite radio. They turn on the car, and they have a satellite subscription.”
But understatement isn’t for everyone. Another breed of satellite radio listeners wants to be perceived as hip technophiles. When the New York firm Smart Design had plans for a satellite radio receiver on its drawing boards, it took careful aim at this type of customer. “The no-commercials aspect of satellite radio was a big pull, but there really needed to be a design element that says ‘this is a new lifestyle,’” says Clay Burns, vice president of Smart Design, which designed the Delphi XM SkyFi radio receiver.
In addition to making the radio eye-catching, SmartDesign grappled with the challenge of creating an interface that let drivers easily navigate among more than 100 stations and that presented textual information, such as song title and artist. To help users tame this flood of information and choices, SmartDesign developed a scrollwheel that’s akin to traditional radio’s tuner controls, but that offers much quicker channel access. The company also added special function keys that perform handy tasks like memorizing the screen display and thus preserving the name of a song and artist for later reference.
It’s unclear whether XM and Sirius’ latest high-stakes marketing bets will pay off for the money-losing businesses. Sirius’ production costs for the Howard Stern show start at $500 million for the shock jock’s five-year contract; XM will pay $650 million for its Major League Baseball deal. Professional sports coverage is labor-intensive programming, cautions Tom Barnes, president of MediaThink, an Atlanta firm that consults on radio marketing strategies. “For a lot of stations, major league sports aren’t that profitable,” he says. “It’s generally viewed as very expensive and a lot of hard work. That’s not to say Howard is going to be a walk in the park.”
Despite the noisy promotion and counter-promotion, it’s the smaller successes that confirm satellite radio’s place for subscribers. Mike Gannon, a 33-year-old Boston resident, was cheering on the Washington Redskins at FedEx Field this fall when he saw a promotional spot for XM on the stadium screen. The Redskins season-ticket holder signed up instead with Sirius, which airs all NFL games. Now, when he’s not attending the ballgames, Gannon, media-relations manager for AIR Worldwide, a risk-modeling company in Boston, watches them on TV with the sound turned down, listening instead to the play-by-play provided by a local D.C. radio station. The pairing, he says, “is the best thing that’s ever happened.”
Gannon says he and his wife appreciate the freedom from commercial radio’s incessant nattering but realized the true value of their subscription one recent evening when, during a drive home, their 15-month-old grew loudly cranky. Gannon says he turned to the Sirius children’s channel, and his son, he says, “immediately relaxed.” As did Gannon.