8-8-2012
Over the last two days our inbox and comments section has been brimming with your feedback on our two stories featuring Cumulus Co-COO John Dickey's call to raise rates. Everyone has an opinion on why radio is stuck in the 7% quicksand. This letter somes from a Radio Ink subscriber who says part of the challenge on the street is when radio is battling for share of the radio buy and not focusing on increasing the entire revenue pie.
Dear Ed:
I?ve been selling radio advertising for 20 years (17 in sales management) and I?ve hated negotiating the entire time. I would love to eliminate agency CPP battles, promotion requests and required freebies with every buy!
Problem part one is that media advertising organizations have trained their buyers. We?ve taught them that we are indeed negotiable! This is true for TV, Cable, Newspaper, Billboards and, out of category, the auto industry. Unfortunately, like the auto industry, without a top-down, industry-wide initiative, it might be difficult to get that cat back in the bag.
It?s all well and good to pontificate on high, but there is a serious issue where the rubber meets the road at the market level. When Group A drops rate or bundles in (for free) under-performing stations to grab share it?s definitely tougher for Group B to compete for the business without doing something similar. I've let multiple deals go due to this mentality of our cross-town competitors. I just couldn?t compete.
Part two is company leaders demanding that markets ?price for share.? I?ve heard this from our competitors and from our own company leadership! ?Listen up sales managers! Price for share! Don?t lose that buy, but keep your damn rates up!? WTH? This mixed message is infuriating and shows a disconnect at the top of an organization.
Part three is the supply and demand issue. Yes, I know...if sales people would get off their butts and sell, there would only be demand and little supply. The reality is that radio is more perishable than bananas and I personally have ?cut/signed last minute deals? to fill unsold inventory. I?ve grimaced and taken a low-rate deal in the last week of the month to hit budget. BUT, I?ve also (recently) raised rates mid-month and walked from everything that wasn?t at an inflated rate when avails allowed it. So, maybe I?m part of the problem. Please understand that I would rather be part of a global solution.
Part four is commissioned sales people. Someone replied that commissions are to blame. NOT SO! Almost every sales team in every industry has some form of commission structure. It?s a wonderful way to compensate and motivate salespeople...and managers. Every seller on my team understands that XX% of $100 is more than XX% of $80. BUT they also understand that XX% of $80 is better than XX% of $0. This puts the sales people in a position to do more selling to their managers than to the accounts! Managers also understand that a creatively structured buy is better than a non-negotiated loss. As long as our competitors are pricing for share, and our buyers know we?ll negotiate, the gloves must come off when necessary.
This is an industry (all media) problem that will not be fixed by one Big-C Radio Group alone. I?m not talking about price fixing, I?m talking about fixing price.
(8/9/2012 7:40:21 PM)
If you are a value illustrator and really know motivation beyond the CCP of local consumers and have taken the time and effort to establish a client bond rather than just taking a 25 year old agency buyer's order for your rated station. You will get higher rates. Unfortunately, for all too long, we in radio, have been lazy and taken the easy way. Make it cheap and throw in free stuff
(8/9/2012 1:42:05 PM)
If John Dickey is serious about addressing this out-of-control problem, I give him lots of credit. Radio really cannot ever attain it's revenue potential while salespeople are empowered to price it's only product. Only ownership can determine pricing since only ownership has all the factors involved in determining the company's profit picture. John, do this:
Have a rate card for each Cumulus station. Issue a directive to all managers that deviation from each card is no longer allowed as of Monday. Have all managers schedule a Saturday morning meeting with their sales staff to explain the policy. Order each manager to fire the first person to violate this written corporate policy. Fire the first person and allow the remaining staff to be aware of the dismissal. It's goos for survivors to see a corpse, occasionally. John, one further thought: A lot of Cumulus stockholders read this publication and are counting on you.
(8/9/2012 10:30:43 AM)
Unfortunately, radio changed forever when the business of radio became a commodity. When LMGs came into being the game was over. Stations lost sight of the fact that a radio station's best asset was it's position in a market driven by its personalities and format.
Stations became over the top cost conscious and began looking for ways to make radio a commodity. GRPs were all that mattered and the industry became a quantity rather than quality product.
(8/9/2012 9:47:50 AM)
No one has mentioned program content. People will gladly purchase worthwhile program content.
(8/9/2012 8:41:15 AM)
Not much to add here. In a supply and demand game, when supply out-strips demand, it's a buyer's market. Most of the time, most stations operate in a buyer's market. From my earliest days in the business, it's been clear that the share is the metric that makes the corporate suits foam at the mouth. If I had a dollar for every group conference call or management team meeting I've sat in where the BIG GUY said, "we've gotta get our share up". I'd be retired in Costa Rica by now.
I won't name names, but I actually sat in a manager's meeting in Charlotte where a very respected group head told us that rate integrity was bull&$%@ and that we needed to price for share. When you put that kind of message out there at the local manager level, what other result can we expect?
The horses are out of the corral. While it's definitely possible to drive rate and share together (been there and done that) in isolated situations, at this stage of the media game, all the talk about driving rate as an industry is wishful thinking. With rare exception, ratings, supply, demand and pricing are permanently married to each other. Your secret sauce--the perceived value you bring to a buying scenario is the only differentiator that can get you some breathing room on those buying parameters we all loathe.
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