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HomeMy WebLinkAbout04/21/1998, 7 - A REPORT ON THE EFFECTS OF TV ADVERTISING AND THE RENEWAL OF THE EXTERIOR BUS ADVERTISING AGREEMENT council 4-,1 -R8 j ac,Enaa izEpoat 'b=`� C I T Y OF SAN LUIS OBISPO FROM: Michael McCluskey,Public Work Direc VIA: Al Cablay,Public Works Manage �'�"C Prepared By: Harry Watson,Transit Manager SUBJECT: A report on the effects of TV advertising and the Renewal of the Exterior Bus Advertising Agreement CAO RECOMMENDATION 1. Receive a report on the effects of TV advertising on bus ridership, 2. Approve an Exterior Bus Advertising Agreement with KCOY, CBS-12 for 1998199. 3. Authorize the CAO to sign the agreement. DISCUSSION Background: On February 12, 1997, the City entered into an agreement with CBS-12 for an in-lieu advertising program. In that program, the City was to receive $36,000 in TV advertising for its transit system, and CBS-12 received exterior bus advertising for its station. As a measure of the advertising effectiveness at that meeting,the Council asked staff to monitor the effectiveness of TV advertising on ridership and prepare a report prior to approving the renewal of the new TV Bus Advertising Contract. That report has been prepared and indicates that ridership has declined during the past year despite the use of TV advertising. Three p1gor factors have contributed to this decline. 1. The City raised the fares on S.L.O. Transit for both monthly passes and cash fares. Passes were raised $8.00 (33%) for a monthly pass, $5.00 (200%) for a monthly senior/disabled pass and$0.25 (50%)for a one way cash fare. Fares had not been raised in sixteen years. 2. The University initiated a major campus wide utility project called the Utilidor. This project closed all major streets on campus and, resulted in serious and substantial re-routing of S.L.O. Transit buses throughout the project's term. 3. The announcement that there would no longer be free bus fare for students faculty and staff was premature and resulted in a "spreading the word" too early for retraction by the University and S.L.O.Transit. IV Council Agenda Report-.,us Advertising Page 2 Ridership Loss Cal Poly Customers Cal Poly ridership leads the decline with 27% fewer students using transit July through December when compared to that same period the previous year. The numbers are 186,803 the fust six months compared to 254,738 the previous year. Free Fare: Staff has confirmed through presentations given at the University, that many students are still unaware that the free faze program is available to them. Continued efforts in advertising by the City in the University's Mustang Daily are being used to inform the students of the free fare program. On campus construction: The Utilidor project caused one of the system's largest ridden routes, Route 4 to be detoured and stopped as it entered the campus adjacent to the stadium. Riders were then required to walk up to 'h mile uphill to their classes. The amount of time between arrival on campus to the beginning of class did not allow them sufficient time to get to class on time. The second highest ridden route, Route 5 encountered grid lock on Grand Ave. as it was approaching campus. Riders left the bus mid block and walked up to one mile onto campus and still beat the bus they were just on. When departing campus, that same bus was staged at the stadium and caused riders to miss the bus because they could not get to it before it departed. This resulted in students waiting '/s hour to as much as an hour for the next bus to arrive. Lastly, the third heaviest ridden route, Route 1 encountered both grid lock and a rerouting as it entered campus from Highland Ave. The result was the same as Routes 4 and 5 approaching from Grand and Foothill, again students were late to class and when departing campus also missed connections. In summary, it is apparent that the value to Cal Poly riders .of these routes was obviously diminished as a result of the detours and the perception that the free fare was no longer available. It is staffs determination that these factors are reflected in the declining Cal Poly ridership. This academic year(September-December 97) the monthly average is 41,000 Cal Poly riders compared to last academic year (September - December 96) when the average was 70,000 Cal Poly riders. The ridership drop is more apparent when looking just at the academic year compared to the fiscal year stated earlier in this report. Cash or General Fare Customers: With the recent fare increase,two things occurred: 1. Cash fare ridership declined 2. Monthly pass sales increased City staff fully expected that both would drop initially, with a gradual rebounding over the following 1 '/z years. Council Agenda Report-Dns Advertising Page 3 Cash fares were increased from $0.50 to $0.75 for a one way fare (50%). Fare income has increased 30% while cash ridership has declined 16% for the fust six months of this current fiscal year. As stated, it was anticipated that monthly pass sales would decline but, in reality they have increased by a modest 11% in both regular and discounted(or senior/disabled)pass sales. This situation has led staff to ascertain that although pass cost was increased, they apparently now offer a better buy when compared to paying the one way fare for frequent riders. It could also be concluded that some of the loss of cash fare customers can be linked to the increase in pass sales. Effects of TV advertising In helping understand the effects of this past year's TV advertising has had on ridership, staff relied on four(4) sources. First was our own data collected(via Laidlaw), second is information gathered by Tom Fulks of Regional Rideshare with whom San Luis Obispo Transit has partnered on many of S.L.O. Transit's advertising campaigns. Third are the results of a recent on onboard survey and Fourth is data from KCOY on the effectiveness of TV advertising. 1. For two months after the ads first appeared on the buses and TV, comments from the riders concerning the advertising were collected by Laidlaw staff through the 541-BUSS telephone service as well as comments received from riders by the bus drivers Staff wanted to measure public response to both our TV ads as well as the ads on the buses. Overall the response was positive as only one complaint was received about the ads on the buses. Two riders wanted to know if advertising on the buses would result in lower fares charged to the riders. 2. Mr. Fulks of Regional rideshare believes that downtown businesses might have experienced decreased business as a result of lost customer access due to construction and a concurrent price increase of 50%. His conclusion is that TV advertising has played a major role in mitigating the City's ridership losses. He makes that comparison in the attached narrative. 3. Staff also conducted a two day survey that asked S.L.O. Transit riders the question: "How did you first hear about the bus"? Multiple choice answers included: Newspaper, Radio,TV and Other. Together with the category of`other",the following subheadings were included: a friend, at school, WOW week and Senior Center. The results were: • Other @ 78% • TV @ 11% • Newspaper @ 7%, • Radio @ 2% Of the"Other": • Friend @ 38% • Observation @ 31% • School @ 24% • WOW week @ 4% 7-5 Council Agenda Report-..as Advertising Page 4 Staff also contacted our neighboring transit operators (Lompoc, Santa Maria, Santa Barbara, Monterey and Merced)to ascertain whether they use TV as part of their advertising mix. All except Merced responded that due to the expense, no TV advertising is done. Merced reported that they have used the local cable channel, but received no "discount" on the cost of the ads. They relate that little feedback was received on the ads. They consider TV as just one component of their marketing program. Finally, KCOY reports that TV advertising is the most effective form of advertising because of these demographic facts: • Advertisers,using their ad dollars as ballots voted TV the top advertising medium. • TV is watched in the typical home an average of 7 hours 11 minutes per day. • Men and women average 4 hours per day watching TV • A long-term steady ad campaign works best at getting the "point across" and is evidenced by the use of TV advertising with KCOY by restaurants, drive-ins, auto dealers,appliance stores.... Regional Rideshare completed a county wide survey of employers and the general public by Meta Information Services. In the words of the actual survey, "The primary purpose of the study was to determine what, if any, changes had occurred in San Luis Obispo County employers' and residents' behavior and awareness of transportation-related issues since a previous base line survey". Among other conclusions,the study pointed out"Newspapers and television were still being credited as the most effective in providing rideshming messages". The benefits of the entire marketing effort, in staff's opinion has helped to mitigate the ridership loss. TV advertising reached the greatest number of people when compared to the radio and print campaigns. It is also staffs belief that without TV advertising, the triple impacts effect (i.e. fare increase, Cal Poly's Utilidor project and the student's perceived loss of free fare) could have resulted in a much larger loss of customers. Proposed renewal of Exterior Bus Advertising Agreement with KCOY As stated earlier, on February 19, 1997, the City entered into an agreement with CBS-12 which allowed for advertising on S.L.O. Transit buses by CBS-12 in trade for running S.L.O. Transit commercials. This arrangement has been mutually beneficial and CBS-12 desires to continue the arrangement. As a comparison, SLORTA has an in-lieu agreement with KSBY for advertising on CCAT buses. That agreement is for$12,000 and SLORTA must match that with $12,000 cash. Both KCOY and KSBY are charging the same ad rate of$50.00 per ad to both S.L.O. Transit and SLORTA on their in-lieu agreements. As a part of last year's negotiation with KCOY, staff contacted KSBY to discuss the option of entering into a contract with them instead of KCOY. They indicated that they were in the midst of renewing their agreement with Regional Transit (SLORTA) to advertise on the exterior of CCAT 7--4�4 Council Agenda Report-bus Advertising Page 5 buses. Staff contacted KSBY again this year and they indicated that they would only be interested should KCOY decide not to renew the advertising agreement with the City in the future. A copy of the Resolution No. 8635 authorizing advertising on the buses is attached. Also attached is the agreement to cover this next year. FISCAL EAPACT The current and proposed agreement provides for$36,000 worth of TV advertising spots for S.L.O. Transit on CBS-12 TV. There is no fiscal impact on transit for this agreement that represents an in- lieu arrangement. ALTERNATIVES 1. Sell the bus ads for cash. A report from "New England Transit Advertising" lists nation-wide results of bus ad sales. According to that source, equivalent size bus ads to those KCOY has on the City buses would generate from $200 to $250 per month in major metropolitan markets. It is expected that S.L.O. Transit would receive 1/2 of that amount in our market, $100 per ad, or$200 per bus IF all bus ads were sold all the time. It is staff's belief that the selling of ads, installation of ads and collection of accounts is labor intensive and has the potential to.consume all of the cash proceeds. If an agent were used,the commission would also diminish the generated income. If those proceeds were used to purchase TV advertising, the ad rate per spot could more than double. The agreement's $50 per spot rate is much less than that charged for spots purchased by other advertisers given the fact that the agreement's spots appear in "prime time" as well as "non prime time". As an example,the program 60 Minutes costs $800 per 30 second ad. This alternative is not recommended by staff because the amount of cash the ads could be sold for would not generate sufficient funds to match the in-lieu agreement. 2. Do nothing. The termination of the agreement would end a major component of S.L.O. Transit's marketing and advertising program. This agreement represents three times the total budgeted advertising program for the system. With overall ridership down, it is prudent for the City to continue all efforts to promote transit use and decreasing TV advertising is not consistent with that objective. This alternative is not recommended by staff. Attachments 1. Resolution No. 8635 2. 1998/99 Agreement 3. Rideshare Coordinator's narrative I Drive/Cnsl Agenda Repts/rraavt bus advertising agreement renewal KCOY 398/2 7--s— 8635 RESOLUTION NO. (1997 Series) WHEREAS,the City of San Luis Obispo desires to increase its revenues so as to offset operating losses;and WHEREAS, advertising on City buses is one method of increasing revenues. NOW, THEREFORE, BE IT RESOLVED, that the City hereby approves a policy allowing advertising on City buses,but not the City trolley, subject to City approved standards and conditions. Upon motion of fro seconded by Williams and on the following roll call vote: AYES: Oc)uncil 1k nbers IRme o, Williams, Roalm m, Smith and Yzyor Settle NOES: none ABSENT: Alone The foregoing resolution was adopted this 18th day of �"�rY 1997. ATTEST: Bo a Gawt City G k Mayor Allen K. Settle PROVED: ^Wgeyl Plorney AGREEMENT This in-lieu agreement between the City of San Luis Obispo and CBS-12 is for one year, beginning March 1, 1998 and ending February 28, 1999. The agreement allows for advertising on S.L.O.Transit buses by CBS-12 in trade for advertising S.L.O. Transit on CBS-12 TV. The terms of the agreement'are as follows: 1. The City will determine the size and placement of all ads which will be the rear two side windows and the rear window (on those buses that have rear windows). 2. Only perforated vinyl signs will be used so as to allow riders to see out of the windows (Scotch Micro-Perf). 3. The content of all bus ads will be approved by the Transit Manager. 4. CBS-12 will provide$3000 per month in advertising on it's television station in trade for the bus advertising on San Luis Obispo Transit. 5. CBS-12 is responsible for the cost of production and installation of the signs. 6. The base rate for advertising will be a) $50.00 per 30 second commercial on a broad rotation basis between 6am and 12 midnight, seven days per week, b) in a specific program with the spot rate determined by the time, day and"going cash rate"paid by other advertisers in that specific program, c) a combination of options (a and b) totaling$3000 per month. 7. The$3000 per month advertising trade may accrue for up to three months if S.L.O. Transit determines it needs more or less advertising in any one month period. 8. S.L.O. transit will use all of it's allocated trade air time by the end of each three month period. 9. All trade advertising may be preempted by cash advertising. This agreement is entered into this_day of 1998 Charlie Hogetvedt John Dunn General Manager CAO CBS-12 TV City of San Luis Obispo Tmnsportation/Advertising/Bus ad 98 CAO Rpt.Agreement 7�7 To: Harry Watson, SLO TRANSIT fax: 781-7198 From: Tom Fulks, SLO Rideshare 781-4462 Date: March 19, 1998 There is no scientific method of determining the effects of television advertising on SLO Transit ridership during the past year short of a full scale market research project. Traditionally, such studies cost more than the amount of money that has been spent on advertising, or, in this case, the value of the amount of advertising we've benefited from as a result of this partnership. Given this shortcoming, we suggest that the SLO Transit system has benefited handsomely from this arrangement, in that our ridership decreases have not been more significant during the past year as a result of the aforementioned fare increases and construction at Cal Poly. This opinion is shared by our transit staff and our advertising partners at the SLO Regional Rideshare Program, who helped us negotiate the initial partnership agreement with KCOY CBS-12. If we were to compare these circumstances SLO Transit faced this past year with a hypothetical downtown retail businesses which depended heavily on foot traffic for its revenue stream, SLO Transit fared well. If, for example,the fictitious Ajax Widget retail store's customers were to lose access to the store as the result of road construction in front of the store, the store would have to advertise heavily to convince its customers that it was worth the effort to navigate a detour in order to benefit from its products. If, at the same time its access was blocked, Ajax Widget increased its prices by 50 percent, the store would either have to spend more money on advertising in order to explain the price increase, plus the lack of access, or face the prospect of closing its doors. SLO Transit lost its access at Cal Poly and increased its prices by 50 percent, yet experienced only a modest decrease in ridership from both cash customers (-16 percent) and Cal Poly pass customers (-27 percent). A Study of Fare Increases in Small California Cities (August 1987, San Joaquin Council of Governments) showed that small transit system ridership will decrease 33 percent for every 100 percent increase in fares. Given this statistic, our ridership decrease has been modest when considering both the fare increase and the access problems at Cal Poly. 7—O Though we lack scientific evidence to prove it,we believe this lack of sever ridership hemorrhaging is due to our advertising partnership with KCOY-TV CBS=12. =9