(SALES) How to Bring Rates Back Up

9-25-2013

From the movie Back to the Future (in 1955, TAB and Pepsi Free aren?t invented yet):

Server -- You gonna order something?
Marty McFly -- Ah?yeah, give me a TAB.
Server --  I can?t give you a tab unless you order something.
Marty McFly -- Then give me a Pepsi Free.
Server -- If you want a Pepsi PAL, you?re gonna pay for it!

Cheap rate packages are keeping broadcast stations from reaching their short- and long-term revenue potentials. In markets all across the country, rate structures are cratering, with prices dropping in some cases back to early-1980s levels.

?It?s all about supply and demand in a saturated media environment and a recessive economy,? is the convenient but short-sighted reason for pants-dropping. Because, as we all know, spoiling local clients (and their little blood-sucking advertising agencies) for the short-term also spoils them for the long-term. In other words, selling cheap packages for ?just this one time? is how we create rate-contentious clients for life.

Smart broadcast sellers advise their clients against spending 95 percent of their advertising dollars on sales events, going after the worst, most disloyal three percent of bottom-feeders who will only buy the merchant with the lowest price. Yet, here we are doing precisely the same thing with our ?special packages.?

So, how do we get rates back up? We go ?back to the future.?

We go back to the ?good old days? of professional broadcasting, back when we had to bring good creative ideas to the table because the clients were not capable of coming up with the same quality of creative on their own (they?re still unqualified in the creative area to this day). We show clients how to identify and solve consumer problems in the consumer?s own language, to drive business to the client without having to sacrifice the client?s price. We show the client why it?s in their best interest to get away from ?clown car? clich?-infested, Crapmaster commercials and get back to deep-sell marketing strategies that solve actual consumer problems.

We do detailed return-on-investment calculations with clients, using their gross margins of profit and their average sales against our total CUME numbers, not fragments of numbers, not with CPP, just like we used to do in the Golden Age of Broadcasting, for the following reasons:

-- So that clients know without a shadow of a doubt that doing business with us is a good, calculated risk rather than a gamble. ?Based on your average sale of $___ and your gross margin of ___ percent, we?d have to bring you ___ new customers per week in order for you to break even. Based on our weekly audience of ______ thousand people that means we could fill up ______Arena ______times, and out of all of those people we would only have to sell ____. If we sold ____ people, that would be a 50 percent return on advertising investment. Looks like a good, calculated risk to me.?

-- So that we can manage their expectations about results. If you don?t do the ROI analysis, you and the client are not on the same page about how many new customers the client needs to break even. That?s when you get the surprise phone call, ?Cancel my advertising. It?s not working.? Based on what? That?s anybody?s guess.

-- So that we can double or triple what they feel comfortable spending on your station. Once clients understand return on investment and how few new customers they really have to sell to break even, they may opt to spend much more money with you. We should be establishing the cost, not them. Would you make your decision on what attorney, accountant, or surgeon to hire based solely on who had the cheapest price? I hope not. If your doctor told you that you needed open-heart surgery, would he ever say, ?By the way, what?s your budget for this?? No, of course not. ?Um?could you do me for about $400?? ?Why, yes, we could. Of course the surgery will seem like an Aztec sacrifice to you, with no anesthesia and all, but we could do it!?

-- Just like back in the Olden Days, we steer conversation away from our price and back to the value that we bring to them as professional advertising consultants. When sold correctly, value always supersedes price.

-- We think bigger, not smaller, even in a recession. The broadcasting industry has been through recessions (and depressions) before. There is no question, even in our current economic situation, that bigger proposals get more client attention and consideration than the little dinky ones. Of all of the vendor proposals pitched to clients, ours are usually among the smallest, hence worth the least amount of the client?s valuable time and consideration. No more small-ball.

-- We invest in training our salespeople in the art of creative thinking so that they can use intelligent headlines to get appointments with key decision-makers, pitch million-dollar ideas, handle objections like professional people, and close long-term agreements for more money at higher rates (Hellooooooo!).

-- We stop sales turnover by paying our sellers a living wage so they can concentrate their time and energy on our business, instead spending their time looking for another job just so they can pay their bills.

When clients bring up other station?s cheap rates and packages, remind them that there is a lot more at stake than just the rate. ?Remember at family get-togethers like Thanksgiving, when you had the Big Table and the little table? Well, Mr. Client, they?re trying to seat you at the little table. Their prices and lack of a solid creative campaign reflect that. A business like yours has a lot of potential and I think you?ll get there a lot faster and feel more comfortable seated here with us at the Big Table. Now, let?s move on and talk about long- and short-term marketing strategies.?

We must sell smarter, we must sell bigger. We convince clients that our plan for their success is better than theirs, not that we have the cheapest rate in the market. Can we? Yes, even in a recession. Turning our backs to cheap rates now is the only way to a brighter future. And, if we don?t go back to higher rates, the future doesn?t look very bright at all. Here?s to back-to-a-brighter-future for all of us.

Principal Strickland -- You don?t have a chance. You?re just like your old man. A McFly never amounted to anything in the history of Hill Valley.
Marty McFly -- Yeah?Well, history is gonna change!

Paul Weyland is a broadcast sales trainer, author, and speaker. You can reach him at paul@paulweyland.com  or by phone at (512) 236 1222. Find Paul?s books, CDs and software at www.paulweyland.com or on www.amazon.com.

(9/25/2013 6:38:14 PM)
Does no one acknowledge the brontosaurus in the room - the fact that our commercial production is so lacking in influential and appealing/listenable messages that audiences dislocate knuckles in their hysterical stabs at changing frequencies?

Spot efficacy just might be a factor in advertisers' ROI. Besides, most advertisers have nothing even close to that "one big thing" to which consumers would flock.

(9/25/2013 1:11:48 PM)
I agree with both Larry and Matts feedback. I would add that the spot loads across the industry have to be cut by at least 40%. The industry is at risk by continuing to run spot loads of 12-14 minutes per hour. They are too high, the industry knows it, the listeners are fatigued by it and the advertisers are worried about getting their message "lost" in that kind of environment. We have to have the courage to move forward and do what is right for the listeners and the advertisers.
(9/25/2013 8:07:30 AM)
Ok. The obvious challenges with this article in the real world is that (last I checked):

1. More than 80% of the business is purely transactional where stations are slicing and dicing to secure a rate/share balance that satisfies corporate's favorite performance metrics (which largely center around making budget and delivering share).

2. Local sales management and sellers are largely ill-prepared to influence the spending/price-setting decisions of key accounts in their markets. Much of this challenge speaks to the deficient business/marketing acumen on the part of radio sellers (CSS has been trying to combat this for decades).

3. The "good old days" have gone the way of the VW bus and they ain't coming back. This is the new normal. Our media ecosystem has so dramatically changed that radio spends much of its energy on defense as its share of media spending gets siphoned off by the shiny new kids on the block.

Great article.

(9/25/2013 8:07:30 AM)
Ok. The obvious challenges with this article in the real world is that (last I checked):

1. More than 80% of the business is purely transactional where stations are slicing and dicing to secure a rate/share balance that satisfies corporate's favorite performance metrics (which largely center around making budget and delivering share).

2. Local sales management and sellers are largely ill-prepared to influence the spending/price-setting decisions of key accounts in their markets. Much of this challenge speaks to the deficient business/marketing acumen on the part of radio sellers (CSS has been trying to combat this for decades).

3. The "good old days" have gone the way of the VW bus and they ain't coming back. This is the new normal. Our media ecosystem has so dramatically changed that radio spends much of its energy on defense as its share of media spending gets siphoned off by the shiny new kids on the block.

Great article.

(9/25/2013 5:09:22 AM)
Paul,
Great article! I think you nailed it. Not talking about roi and expectations upfront is one of the biggest mistakes!!! It shows the client that you are not really interested in them but rather just making a sale. Talking about roi says to a client that you are care and that you want to be a resource!

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Radio Dropping Rates to Get The Buy

3-13-2013

It's the same old story, only the faces of salespeople have changed. Radio has an abundance of inventory and salespeople have goals to meet because the home office has debt to pay. If money is on the table and a savvy client knows radio will buckle in the negotiation, that client will wait it out, knowing another radio seller is coming in the door and that cycle will start all over again. In turn, some sellers would rather walk through the sales managers door, with an order, try to explain the lower rate, rather than leave money on the table.

That cycle translates into slow (or flat) revenue growth for the industry and unbearably long stopsets on radio stations across the country. Saga CEO Ed Christian says this is a big problem that the industry has to do something about. Yesterday his concern was aimed at national business. "Agencies are testing the bottom. They are spending where the spots are cheap and they will continue to do so when there is someone willing to provide the supply." Christian also said national radio business is down and his company is focusing, even more, on local ad revenue. He said in Milwaukee the national cost per point has dropped from $68 to $45 and in Des Moines it's gone from $45 to $22.

Christian also said there was an expectation that when PPM came along more money would flow to radio as a result. That was an over-promise that has not delivered, he said. Saga does not subscribe to Arbitron.

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(LEGAL) Keeping Your Rates Straight

11-2-2012

It's election time and that means a boon for advertising. But be careful with those rates. Sometimes, even when you act with all good intentions, things can go awry and you're faced with a moral decision. Fortunately, we have our resident legal expert John Garziglia to help you sort through just such dilemmas.

Radio Ink asks:  We just discovered we did not charge the lowest unit rate to a candidate running for local mayor. We did charge lowest unit rate to the incumbent mayor who won the election. Neither candidate knows. What should we do?

John Garziglia says:  If a candidate was entitled to the lowest unit charge for a class of time and was overcharged, the overcharge must be promptly refunded. 

 The FCC requires that stations periodically review their political time buys during the election season to determine whether refunds are required, and to issue any refunds promptly. The FCC expects stations to issue refunds to candidates before the election in order to allow candidates to maximize their campaign funds.

While a candidate may not be aware of an overcharge, the FCC requires broadcast stations to keep political files for two years. Therefore, anyone reviewing a station?s political file may see that one candidate was charged one rate for a particular class of time, and the opposing candidate was charged a different rate for the same class of time.

No station should wish to take the risk that an inspection of its local public file, by a member of the public or by an FCC inspector, would reveal an apparent lowest unit charge violation. The dollar amount of the overcharge to be refunded likely pales in comparison to what the station might spend defending itself at the FCC for failing to review political time buys and refund any overcharges.

With the election being just days away, now is the time for stations to review their political files for any overcharges. Charges in excess of the lowest unit charge can and do happen for a variety of reasons. For stations that sell broadcast time on an auction or quasi-auction basis, the lowest unit charge for a particular class of time will always be a moving target. Even for stations that try to hold rates, there is always the possibility of a particular class of time clearing at a lower rate than anticipated.

The FCC will take a dim view of any radio station that waits until after the election to identify and refund charges in excess of the lowest unit charge. Conversely, a station that does its review of political charges now, prior to the election, and immediately rebates or refunds overcharges will be doing exactly what the FCC expects of stations. 
Overcharges will happen. Radio stations are required to periodically review political time buys and immediately issue refunds for overcharges where required.

John F. Garziglia is a Communications Law Attorney with Womble Carlyle Sandridge & Rice in Washington, DC and can be reached at (202) 857-4455 or jgarziglia@wcsr.com. Have a question for our "Ask The Attorney" feature? Send to edryan@radioink.com.

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S&P Rates Outlook On Clear Channel As Negative

10-15-2012

After the announcement Friday that Clear Channel would be repackaging debt, Standard and Poor's Ratings Service has affirmed its negative outlook on the company. "The negative outlook reflects CC Media's high debt leverage and low interest coverage metrics, which we believe will have to dramatically improve for the company to have flexibility to meet 2016 debt maturities." On Friday, Clear Channel announced plans to issue $2 billion of priority guarantee notes due 2019 in exchange for $2 billion of its bank debt due in 2014 and 2016.

The rationale behind the Standard & Poor's Ratings Services' rating on Clear Channel, "reflects the company's steep debt leverage and significant 2016 debt maturities. The proposed transaction extends about $2 billion of debt from 2014 and 2016 to 2019 and reduces 2016 maturities from $12 billion to a little over $10 billion. However, the interest rate on the new debt is about 5% higher than the existing term loan B debt. As a result, we expect that EBITDA coverage of interest will be very thin at about 1.2x and that discretionary cash flow will be only modestly positive in 2013, hindering the company's ability to repay debt and afford additional refinancing transactions with similar interest rate increases. The transaction increases the company's flexibility to repay 2014 maturities (currently $1.5 billion), which previously could only be repaid on a pro rata basis, and now permits the company to exchange and extend $3 billion of additional loans. We still view a significant increase in the average cost of debt or deterioration in operating performance for either cyclical, structural, or competitive reasons, as major risks as the company proceeds with a strategy to deal with its 2016 maturities. We view CC Media's financial risk profile as 'highly leveraged' (based on our criteria), given its significant refinancing risk, narrow EBITDA coverage of  interest expense, and minimal discretionary cash flow compared with its debt burden. CC Media has a 'fair' business risk profile, because of its position as the largest global outdoor advertising company and largest U.S. radio station operator."

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Salespeople Should Not Negotiate Our Rates

8-7-2012

How many times has a salesperson come into your office with a piece of business, at a lower rate, that you've signed an accepted? You know the rate is too low, yet you sign the order and bank the bucks. Your seller has convinced you the client couldn't afford the higher rate and was willing to walk from the order and go across the street to your competitor with his money. This has been going on in radio so long that some radio clients dictate their own rate to salespeople. Cumulus' John Dickey says one of his assignments is to put an end to this.  After all, he says, you are not allowed to walk into Starbucks and haggle on the price for a piece of blueberry cake. Why should anyone be allowed to do it in radio?

Cumulus Co-COO John Dickey is on the next cover of Radio Ink Magazine (release date August 27th). Dickey covers a lot of ground, including Arbitron, consolidation and Cumulus' partnership with CBS Radio on sports. He also tells us about how he would like to see the radio industry gain revenue ground and to do that, he says, it all has to start with the rank-and-file on the street.

"If you think about the thousands of salespeople in our business, they are out today pricing access to radio stations, selling inventory. Quite frankly at whatever they feel like selling it for, within reason. They have that kind of autonomy. That?s a bad thing. You can't walk into Starbucks and have the person behind the counter negotiate with you on how much a piece of blueberry coffee cake is. Prices are posted. There is no impression that is given that you have an opportunity to haggle that price. You pay and you leave. In our business, it doesn't work that way. That's been hurtful. If we have 50,000 units of time to sell on our radio station in 2012, in 2013 we are going to have 50,000 units to sell. That?s not going to change. We have to do a better job of selling all of those units, but we also have to do a better job of selling these units at higher rates. Our sales system, our proprietary enterprise software that we've developed is helping us to solve that problem, but it is a work in progress."

Dickey says, radio needs to increase rates if our business is going to flourish. "We are very focused on inserting ourselves in the rate issue in each of our markets. It?s a part of our business that had never been managed effectively as our industry consolidated. It hasn't been managed effectively by corporate or by ownership. Those decision on what we sell our stations for have been done at the salesperson level. There is probably no other industry where salespeople have autonomy or leeway in the price at which they sell a company's goods or services. That is alive and well in our business and has hurt our business. I think one of the great benefits of consolidation is innovation and using technology to manage our business. We?ll get a handle on this pricing issue and have more control over pricing down to the market level, the account level, the sales rep level. We are working hard to make that happen."

When asked about rate cutting to get business, Dickey admitted every company is doing it. "I think everybody can put their hand up and admit to that. It would be unfair of me or anybody else to say one company is better or worse at it than the others."

For more from John Dickey subscribe to Radio Ink today by calling 561-655-8778 or order online HERE

(8/7/2012 6:37:07 AM)
Radio must be more relevant to be worth more to advertisers. Most listeners don't consider radio to be an essential part of their day and advertisers know it by the response they get. "Big" Radio left listeners behind with automation and consolidations that gutted diversity & creativity. Throw out automation and do real local radio. Produce 50+ local programs each week with multiple audio and video services and radio will sell itself and you can maintain your rates. Stop making corporate radio

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(LEGAL) Do You Need File Political Rates Online?

4-19-2012

There's a lot of discussion between TV and the government about political rates and filing those rates online with a TV station's public file. TV is worried about posting the rates for everyone to see and their is also concern about the possibility of collusion. So we asked broadcast attorney John Garziglia the following question: What should radio stations know about getting political rate information in an online public file?

The FCC?s upcoming anticipated rule change for television stations to post online the station?s political file, including the rates at which political ads were sold, was a significant subject of discussion at the just concluded NAB convention. 

The FCC is expected at its upcoming April 27, 2012 meeting to issue new television local public file requirements.  The new TV regulations are expected to require the information in a TV station?s local public file that is not now already available on the FCC?s website be uploaded to the FCC?s website, rather than being kept in a paper local public file at the station?s main studio. 

Of particular concern to TV broadcasters is the anticipated FCC requirement for an online disclosure of rate information.  Broadcasters are concerned that posting the lowest unit charges at which political time is sold will enable a compilation of commercially sensitive rate information which will adversely affect the television advertising marketplace.  Indeed, advertisers having access to a database of what is the lowest unit charge for each station?s classes of time cannot do anything other than artificially fix rates and distort the marketplace as the reported rates will fail to reflect quantity purchases as a metric of price. 

Thankfully, at least for now and likely for the upcoming election season, online political files are a television issue, not a radio issue.  While it is likely that sooner or later, the FCC will require that radio broadcasters likewise put radio local public files online, for now, there is now no requirement to do so.  There is likewise no restriction against a radio station putting its local public file online if desired, provided that a computer terminal is made available by which members of the public may access that online political file. 

As the political season amps up and radio stations hopefully enjoy some of the political ad dollars that will be spent by candidates and political action committees, it is useful to review some of the FCC?s political file requirements.  First of all, the FCC expects that radio stations will immediately put into a station?s political file all requests made for political broadcast time.  Although the FCC has not defined precisely what ?immediately? means, with the time for opposing candidates to request equal opportunities being seven days, immediately likely means the same day of the candidate ad buy or request for time, or first thing the next morning at the very latest. 

The information required to be immediately put into the political file regarding requests for political time includes the station?s disposition of the request, the charge for broadcast time, the scheduling of the spots, when spots are actually broadcast, the class of time purchased, the candidate?s name, his or her authorized committee name and treasurer?s name.  Similar information for issue ads relating to any political matter of national importance must also be put into the station?s political file, along with the name and contact information for the purchaser, and a listing of its chief executive officers, or a listing of its executive committee or board members as may be applicable.  

While the FCC does not expect that a simple request for rates by a political time buyer be put into the political file, if an inquiry by a candidate?s representative includes a request for available time, that inquiry is probably required to be put into the local public file.  
The public?s knowledge of the existence of a radio station?s local public file has been heightened over the past several months with an encouragement by some public interest groups for members of the public to review a station?s local public file.  The public?s awareness will be raised even more upon the FCC?s anticipated April 27th rule change for TV stations.  Therefore, it is prudent for radio station management to review now with staff its local public file procedures and in particular, procedures for the station?s political file.  If you need to know more about the FCC?s political broadcast regulations, a complete political law manual is available for review, download and printing at www.commlaw.com.

Fore more articles from John Garziglia go HERE
You may also like David Oxenford's BLOG

John F. Garziglia is a Communications Law Attorney with Womble Carlyle Sandridge & Rice in Washington, DC and can be reached at (202) 857-4455 or jgarziglia@wcsr.com. Have a question for our "Ask The Attorney" feature? Send to edryan@radioink.com.

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Stop Complaining About Competitors Dropping Rates - Part 2

Here is my follow-up to Monday's article "Stop Complaining About Competitors Dropping Rates." In that article, we gave you the first 6 tips to take control of your rates. (If you missed that article, just click on the red text in this story). Here are six more ways to take control of your rates.

7.) Sell on Value
Selling on value, rather than cost, is key to radio capturing the investments you deserve. The secret to the value formula is that value is more perception than reality. Value equals the customer?s expectation plus or minus the customer?s experience. When you train your account executives to sell on value, they quickly learn how to manage the value perception. At the customer expectation end of the equation it?s important to council the advertiser on the value of up-sells, repeat business and the lifetime customer value of every new customer your campaign attracts. Multiplying that lifetime customer value by word of mouth and referral rates and you can quickly establish very realistic and lucrative ROI expectations from your campaign. To manage the customer?s experience in the value equation you simply always leave room in your presentation to under promised and over-deliver. When you conduct your post campaign analysis and deliver your written wrap up, you?ll clearly validate how you delivered beyond the expectation, and delivered value as defined by the value equation.

8.) Understand ?Benchmarking

When you release a package or cave to a cut rate demand, you are establishing the real value of your product in the minds of your account executives. The best account executives care about delivering value to their customers. When they know one of their client?s competitors bought you at a $60 rate, they have a moral conflict selling their client at your $90 rate. It?s that simple. The low-ball rate you offer in one case eventually becomes your average perceived rate value because your team has lost confidence in the value you deliver at rate card. The best reps will respect you, and themselves, when you fight for rate integrity. Rate integrity is best preserved with a long term rate strategy. Your lowest and best rate should ALWAYS go to the clients who book high frequency consistently over 52 weeks. Never let a Johnny Come Lately capture a lower rate than your best customers simply because you are missing budget this month.

9.) Sell Marketing Bundles
You have much more to sell than spots today. Your presentations can actually earmark a value to everything in your bundle, and offer the total bundle at a monthly investment rather than a spot rate. Even if you ?bonus? (I hate that word) some of the elements in your bundle at least show your prospect a value for each and every element in your bundle. A sponsorship banner at a county fair, for example, is not valued at the cost of the banner, it?s valued by the exposure the client?s sponsorship achieves. So if you estimate 20,000 people will see your sponsor?s banner, the ?value? of a $50 banner to the sponsor (not the cost) is 20,000 people times 4 cents per person = $800, even though in your bundle price it might represent the cost only. Here are just a few of values you can include in various marketing bundles beyond spots;
? Exclusivity; no competitors can participate
? Marketing consulting
? Creative writing
? Guaranteed rotation of schedule
? Website links or banners
? Station or announcer endorsements
? Station contest participation
? Product placement at event and/or on air
? Sales meeting participation
? Social media exposure
? Sponsorships
? Sourcing co-op

10.) Tap New Wells
Many of the old traditional wells have been poisoned by radio?s weak transactional sellers! New businesses and new business categories not yet exposed to the rate discounters care more about monthly investment and return on investment than individual spot rates. You?ll find most of the fresh untainted wells are not in retail where margins are squeezed to the limit by online shopping and big box stores. In fact retailers by nature, delight in buying low and selling high?..that?s what they do for a living and they?re good at it. The services or professions sectors, doctors, lawyers, roofers and plumbers are 100% local. Consumers don?t go online to Pakistan when they have a toothache and local lawyers rates are not impacted by low Chinese legal rates. The service sector has many more prospects and a lot less pressure on margins. These non-traditional wells have much higher margins than the retail sector. Therefore they can achieve higher ROI?s from your campaigns. Tapping these fresh new more lucrative wells will always yield higher rates if you start them on the right foot. But it takes training. Using old retail hot buttons like ?traffic? or ?awareness? with these prospects just doesn?t work.

11.) Create Premium Packages versus Discount Packages.
Why do we think ?packages? always infer discounts? The best marketers sell premium packages. BMW?s ?sports package? for example, artfully takes the customer?s focus of the vehicle?s base price (the equivalent of your base spot rate) and focuses on selling a total package at a price considerably higher than the base vehicle price. Sure, they ?discount? the sports accessories in the premium package, but that package consists of a list of options that few, if any, buyers would buy in total. The BMW sports package includes their highest margin products, leaving more room to give the appear5ance of discounts, without touching the base vehicle price. 

Their average sale is always higher, not lower, and their profits are considerably higher selling premium packages. Many of your prospects and customers don?t care as much about ?spot rate? or base price, as they do about the total monthly investment and what they receive in return. (most who do focus on spot rate have been ?trained? by us to do so). Package your spot campaign with low-cost high profit options that don?t devour your spot inventory. Options like product placement, on-air contests, product sampling, online surveys, mobile, data base marketing, better creative, guest appearances, and more, can take the focus off of your spot rate and result in higher average sales and happier clients.

Your ?package price? should always be higher than you?re A.M.I. ( average monthly invoice). Average monthly invoice tells you want your market and your sales people perceive your station to be worth. A premium package that delivers more than just ?spots? will deliver sales higher than that average.

12.) Understand Buyer?s School
While you are going to seller?s school, know that your clients are going to buyer?s school. They know how to manipulate you into thinking it?s all about rate. The most important thing you can do is practice ENS Media?s Negotiating 101 (one-oh-one) Never, never, never give one unless you get one!  For every rate concession you offer, you MUST get a concession in return. You might ask for wider rotation, payment up front, more frequency, longer term etc. But if you reduce your rate without asking for a concession in return, the buyer will always believe you can reduce your rates even further. When you demand a concession before every concession you make, the buyer believes you?ve reached your limit.

Wayne Ens is President of ENS Media Inc and can be reached via e-mail Wayne Ens wayne@wensmedia.com

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Stop Complaining About Competitors Dropping Rates

by Wayne Ens
In a recent survey of 110 radio account executives we asked ?What is the biggest hurdle to sales that you face each day??  The most common answer? ?Our competitors are driving our rates down.? I?m sorry, but your competitors don?t set your rates at the local level, you do. We have numerous station managers who we consult and mentor who we have coached to significantly higher rates, and we continue to do so with great success. Admittedly, it has not been easy, but we?ve proven rates can and should be increased.

I?ve heard all of the defensive excuses for cutting rates, the most laughable is the ?perishable inventory? argument?.that it?s better to sell unsold inventory at any price rather than see it go unsold. I don?t think an audience that wants more news or music, or advertisers who want a stronger share of voice on your station, would agree.

The defenders of unsold inventory discounts always point to the airline industry as the icon of perishable inventory pricing. Do you know any airlines that are not in trouble? And how do passengers feel about airlines gouging them when they need them the most in peak periods? Why would we hold the airline model in high esteem? Business leader Jack Welch said ?There is always a better way. Find it!?  Here are six ?better ways? you can consider to motivate you to take control of your rates. We'll post six more Thursday of this week.

1.) Your Commission Structure
Many stations reward sales people, and sales managers, on gross sales, whether those sales are profitable or not. Talk about lunacy! I liken it to the real estate sales person who would rather sell your house for $450,000 than $500,000. With commissions in the balance in excess of $20,000, and only a couple of thousand dollars difference in commission between the low price and the high price, many agents would rather take the least line of resistance and ?sell? at the lower price (I use the word ?sell? very loosely). Car dealers don?t pay commissions on the total price of the car, they only pay on the gross profit of each car.

While your bean counters might protest it?s more difficult to manage commissions based upon profit per spot than on gross sales, you know your rates would go up if you paid more for better rates. Right now your sales people only care about the total sale, and have no incentive to drive rate. This strategy leaves you with the headache of ?inventory management.?  

2.) Leaders Need to Lead
Just say ?no? to rate choppers! I shutter when I hear a heritage station manager or market leader talk about the competitive pressures created by the underdogs in the market. And the programming and promotions people who have worked so hard to give those stations a leadership position must think we?re just order takers. The market rate is established by the market leader. Period. If the market leader cuts their rate by 10%, the underdog will follow suit with a 15% rate reduction and the downward spiral begins.
Market leaders have to act like leaders and be willing to walk from cut-rate business or be prepared to enter the never-ending downward spiral of rate cutting. 

3.) Practice What You Preach
You have probably told some of your clients about the importance of branding, and that only butchers and barbers can cut their way to success. It?s time to put an end to hypocrisy. You know that to a large degree you establish your image and credibility with your pricing policies. Can you say ?Rolex? or ?Mercedes Benz? ? 

And when you hear a 50% off sale at a furniture store or men?s wear store, you tell yourself ?Boy, they must have a heck of a lot of margin. That 50% off is probably all the product is really worth.? Could it be that radio?s small share of the over-all advertising pie is directly attributable to the credibility and image we?ve established for radio with our one day sales, unsold inventory bonuses and rate slashing?

4.) Focus Upon Your Real Competitors
Radio?s share of total advertising budgets is so small that it?s almost laughable to call another station that?s nipping at your heals ?a competitor.? I recall when I left the newspaper business to begin my radio career. A stand alone ad, you had to have a full page to ?stand alone?, in my paper cost $1,800 at the time. I was astonished that a stand alone ad on the radio was less than $30! Every ad is ?stand alone? on radio.

With that attitude I quickly became the station?s number one sales person outselling many seasoned veterans who were focused on other station?s rates rather than on the rates at the paper. I?m shocked when I ask a radio sales person today how much a billboard, a newspaper ad or a yellow directory ad in their market costs?..many don?t know! You?re reps have to be trained how attractive your pricing is relative to their real competitors.

Our market audits consistently prove that reps grossly under-estimate the rates at competing radio stations in town. Sure, every station has the  occasional ?stinky? deal. You probably have one yourself. J But don?t think for a moment that every advertiser gets the same rate as that stinky deal you uncovered.

5.)Train Your Sales People to Embrace New Media
Advertisers have always needed two media strategies, and intrusive media ?push? strategy and a passive media ?pull? strategy. In the old media world  most passive media, catalogues, newspaper, flyers, coupons, phone directories, invitation events, brochures, etc., were all expensive print products. ?Expensive? because of the heavy production and delivery costs of pulp and paper, printing presses, and delivery.

Today the production and delivery costs of passive media, anything digital or online, are basically free or very inexpensive. Compare the costs  of a full color web page running 24/7 for a year, to that same page running in the local newspaper everyday for a year and you?ll see what I mean.

Or compare the cost of putting a coupon on your website versus a printed one delivered by the post office in a coupon envelop.Traditional media?s share of ad budgets, largely print in the forms of brochures, coupons, newspapers, directories etc, is predicted to decline  more than 10% from the 85.9% captured last year.

By the year 2015 ?traditional? media?s share of ad budgets will shrink to 76.4%, still by far the largest share, largely because the shift to online  passive media is so inexpensive to produce and deliver. A properly trained radio sales force that understands the respective roles of intrusive and passive media in the new media mix can capture an astronomical growing share of that 76.4% and create an inventory shortage. The ?unsold inventory? problem will melt with the training of account executives to sell the new media mix with radio as a dominant player.    

6.) Quit Selling ?Spots? or Cost Per Point
At the local level, you commoditize your product, making you vulnerable to price comparisons, when you sell spots or CPP or CPM. A competitor will always claim to sell spots cheaper. I?ve often told advertisers ?We have a quarter hour average of six radio reps from competing stations, and everyone of them is going to hear your campaign and tell you that you?ve bought the wrong station or they?ll sell spots cheaper than we do.? But local advertisers don?t really want ?spots? anyway, and most don?t believe your audience claims and CPP numbers. Our research of 540 local advertising decision makers in three different markets reveals that advertisers don?t buy to get a lower spot rate or lower CPP.

They buy to increase sales. Period. When you consult with your clients to establish strategies that will increase sales, and present creative campaign ideas to achieve their goals, the schedules and spot rates are inconsequential. Often when I ask an account executive to tell me about a client?s campaign, they'll say something like ?They bought 30 spots a week? or ?they bought our 8 AM news.? That?s not a ?campaign??.that?s a spot schedule. A campaign has a marketing strategy, an objective, and creative communications solutions to achieve those objectives.

The advertiser cares more about how much they need to invest to increase their sales than how much a spot costs. What good is a cheap spot if sales don?t increase? And notice, we?ve taken the focus off of ?cost? and we focus on ?investment? and return on investment. 

Check back Thursday for the remaining 6 tips from this list.

Wayne Ens is President of ENS Media Inc and can be reached via e-mail Wayne Ens wayne@wensmedia.com

Wayne Ens is President of ENS Media Inc and can be reached via e-mail Wayne Ens wayne@wensmedia.com

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