7-10-2013
Just because you work in a small market doesn?t mean you have to think small.
Small market broadcasters have a significant advantage over their cousins at the large and medium stations. This is because a business? gross margin of profit remains about the same whether it?s operating in a small, medium, or large market. For example, grocery stores try to operate on about an 18 percent gross margin whether they?re located in Los Angeles, CA, Austin, TX, or Mitchell, SD. And, average sales for groceries don?t fluctuate much between large, medium, and small markets.
Funeral homes operate on a 55 percent gross margin (after the cost of labor), regardless of whether they are operating in Atlanta, GA, Cleveland, OH, or Bartlesville, OK. And, the average cost for a funeral ($6,000) is about the same regardless of market size.
Furniture stores in all sizes of markets operate on a 44 percent gross margin. The average sale at a furniture store, regardless of market size, is around $800.
I just spoke with a plastic surgeon who lives and works in a small Iowa market. His gross margin is 50 percent. His average sale for liposuction is $3500 per zone sucked (there are eight zones). His average sale and gross margin would be the same if he worked in Dallas or Pittsburg.
So, if gross margins of profit and average sales are similar regardless of market size, what?s the small market advantage? Media costs. Compared to the rates in bigger towns and cities, small market rates are obviously very low. That means a small-market business owner can afford to own significant media inventory, a schedule he?d probably never be able to afford if he were working in a bigger market.
Bigger schedules usually get better results. Unfortunately, the only thing keeping clients from running bigger schedules is us. We?re not asking for bigger orders. We?re used to asking for $500 per month, instead of $500 per week.
?Why run a commercial every hour on these stations?? I say to the client. ?Because they let you, Mrs. Independent Businessperson. In this town you can afford to own your category on these stations,? I continue. ?So, why wouldn?t you take advantage of that? Here, you could afford to run as much or more than your biggest national competitor. With that kind of schedule and a good creative idea, when people think about your category, they?ll only think about you.?
The plastic surgeon fully understood what I was saying. ?Your average sale is $3500 and your gross margin is 50 percent. So, how many $1750s have to come through your clinic per thousand a week spent on advertising? It looks like a good calculated risk to me,? I said. He agreed. With that kind of money, he could afford to run a massive schedule to educate people on the benefits of liposuction and, at the same time, teach people to trust him and to like him. Instead of going to a larger market for the procedure, they can have it done by a big-city doctor right here in town.
The furniture store owner absolutely gets the concept. By spending $500 per week on his small-town station, he now owns his category. He has plenty of minute-long opportunities to teach people about his bistro tables, tilting armchairs, and indoor/outdoor furniture. He is now aware that to break even on his campaign, he only needs to catch one new fish per week.
Previously never a big advertiser, the funeral home director now sees the benefit of running a very competitive marketing campaign. Per thousand dollars per week spent, he only needs one or two new customers a month and he?s more than paid back for his advertising investment. Unscripted, he talks about the kinds of services that people request. He gives people ideas they can use when planning their own funerals. He lets the people know that he is a real human being with real emotions. This is important, if he is to survive his battle with a price-cutting corporate competitor.
The grocer now has a better way to deal with his biggest competitor, Wal-Mart. He can use vignettes of unscripted conversation to remind listeners that, unlike his competitor, all of his meat is cut fresh each day right there at his store. Unlike his competitor, he buys almost all of his produce locally. Unlike his corporate competitor, he participates in virtually every single local charitable event.
Even in small markets, big ideas deserve bigger budgets. Do the client?s marketing and advertising thinking for them. Then, ask them for real money. If you ask for more budget and back it up with calculated risk based on gross margins and average sales, you?ll find far less rate resistance than you think.
Paul Weyland helps broadcast stations bring in more long-term local direct business. Read his book Successful Local Broadcast Sales. Contact Paul at www.paulweyland.com or call him at 512 236 1222.
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