And it is especially relevant for Radio.

A check of your inventory reveals you have a limited number of slots for advertisements. Unlike the newspaper that can add pages when demand for space is high (and remove them when it’s not), your stations can’t add or remove hours from the day. And while some stations with live formats will cram in extra ads when the demand for spots is heavy, listeners have supply and demand working for them, as well. When the supply of ads increases, demand for your air sound decreases, and listeners migrate elsewhere.

Achieving a balance of supply and demand in your ad sales is a crucial factor in maintaining profitability. When I was a newbie sales rep at my first station, the general manager made up the ad rates once or twice a week. Later, when I was managing a group of stations, I realized there had to be a better way than “trusting my gut” to price our air time.

The answer, of course, was yield management.

Surprising to me, even after our group of stations experienced a dramatic revenue increase using true supply and demand pricing, managers of other markets in our company were reluctant to take the plunge. Old habits die hard. Even managers — especially managers — can be reluctant to trade their known, comfortable methods to embrace an unknown idea that might disrupt the “normal” flow of business.

In the case of our stations, we had hit a revenue plateau that required a new solution because the old way was no longer working. If your stations are struggling in this difficult economy that apparently won’t be reviving soon, and you haven’t yet embraced yield management, now would be an excellent time to break free of what’s no longer working.

Once you start enjoying the benefits, you’ll find it a mystery why you waited so long.

In major markets having access to ratings information is vital. But in smaller markets, where local direct is king, the numbers are less important. Experience shows that less scrupulous stations frequently compensate for bad ratings by distorting the numbers. This adds to the clients’ general confusion and distrust of ratings in general. Who do you trust when every station is claiming “we’re number one!”?

At least one market manager decided to try a different approach. Taking the bold step of not renewing his ratings contract, he took the rather substantial sum he saved and applied it to persuading clients to make year-long commitments to his stations. When key major advertisers were offered an all-expense-paid two week vacation for two in Hawaii in return for a year’s contract with the station, the result was a 37% increase in station revenue.

Advertisers are people, too. They respond to personal inducement just as would anyone else. The money freed up by dropping your ratings service can be multiplied via innovative approaches into more profit for your stations. Once sales people see the potential, the question of selling without numbers becomes less important. That’s because sales reps are people, too. And they always love making more sales.

The same is true about Radio. As a multi-station manager, I often spent time with my staff brainstorming new ideas to increase our loyal customer base — both among advertisers and listeners.

Last month, I came across a new concept: a store policy designed to drive customers away.

Fortunately, this policy did not originate from any Radio station. Instead, it came from a well-known, national office supply chain. This was a franchise that was at the top of my “preferred business” list; low prices, convenient location, excellent selection of merchandise. For these reasons, it was my first stop when shopping for a replacement set of headphones for my PC. These days, headphones are encased in molded plastic suitable for guarding gold at Ft. Knox (assuming we have any gold remaining there). It required a sharp utility knife and several minutes work to free the headphones and position them over my ears…only to find them to be the most uncomfortable model I’ve ever worn.

After less than two hours of adjusting, repositioning, and pain, I returned to the store for a refund. It was then I learned there was a 15% “restocking” fee because I had opened the plastic package. I explained that I had to open the package in order to learn that the headphones were unsuitable; wearing the headset while it was still encased in plastic didn’t seem to work. Ah, but a policy is a policy, so I was charged $4 and change for returning an unsatisfactory product.

I found the entire experience unsatisfactory. So, in gaining their $4+ restocking fee, they lost a customer. I now travel slightly farther to a competing store and they get all my office supply business. There I found a better set of headphones (very comfortable!) for less money. And a formerly loyal customer has become a non-customer for my old office supply place.

Are your stations policies driving your customers away? While Radio doesn’t have “restocking” fees (thank God), think about policies that give new advertisers a discount while taking existing customers for granted. There may be other, more subtle ways that Radio discourages repeat business.

My recommendation: review your policies and make improvements where necessary. Your customers (and bottom line) will be better for it.

Then, after a period of time, I found I was hearing the same training but from different sources. Certainly there were variations on the theme, but overall few new concepts were introduced by the established “experts” in Radio sales training.

It was only when I moved to the world outside Radio that I started being exposed to new and different sales ideas. Suddenly, I was hearing some startling sales techniques, and immediately thought of how they could be applied to Radio sales.

One excellent resource for sales ideas is the field of Multi-Level Marketing (MLM) — otherwise known as network marketing. If there is a more difficult sales field than Radio, it’s MLM. If you haven’t yet, you might want to look into the techniques espoused by MLM experts Tom “Big Al” Schreiter, Todd Falcone, Art Jonak, Kim Klaver, and the terrifically-named Tim Sales. It’s not a perfect fit, but Radio — and your personal sales — can definitely benefit from MLM’s innovative approaches.

For too long, Radio sales training has been limited to the same pool of experts. It’s time to cast off the blinders and look to other fields for ideas on how to sell more Radio in 2011 and beyond.

Somehow, local retailers managed to sense a slowdown in business long before it revealed itself in national statistics.

They responded to their perceptions by cutting back on their advertising budgets. Our stations always saw a drop in overall revenue several months before the recession became apparent to everyone else.

The reverse was also true. After a time, while the media was still moaning about the slow economy, local retailers began increasing their ad budgets. Our stations’ revenues increased. And, a couple of months later — ta-dah! — the recession was over.

As a result, it was encouraging this month that some of the major radio groups are beginning to see sales increases of 4 percent or more over the previous year. It’s an indication that the economy is far from dead.

Given the right conditions, the economy’s natural tendency is to grow. In fact, it’s actually difficult to hold it back.

Unfortunately, we are not experiencing the right conditions. Instead of a government that encourages private industry and increased employment, it appears we have an administration that seeks to place more inhibitions, road blocks, burdens, and red tape on employers. The result is a chilling effect on economic growth.

The economy is trying to recover. We’ll keep an eye on our “Radio barometer” to see if the sales increases continue, and if Radio can predict the end — or continuation — of our current recession.

The stations were only selling 31% of their ad time.

I asked if the stations were using a yield management system.

The answer was “no”, because management felt “rate integrity” was important. They thought “yield management” was another way of saying “cut rates”.

Well, rate integrity is important. And so is flexibility. What these station’s management doesn’t realize is that yield management can give you both.

With a well-run yield management system, your station’s rates adjust to the advertiser’s demand. The higher the demand, the higher your rates. If the demand drops, your ad prices drop with it. The goal is to sell more time, have less “wastage”, and increase yield.

So here’s a question for any station that hasn’t considered yield management: Is it better to get something for an ad slot or nothing? Changing 31% sold to 40% or 50% sold can and will make a big difference to your bottom line.

If my friend’s stations see the light, I’ll report the results here. But if they continue on their stubborn path of not considering a good yield management system, they’re missing out on the best of both worlds.

But in the middle of the doom and gloom, there are glimmers of hope.

In a few markets, some stations have avoided double-digit declines; a very few have managed to actually increase profits. In virtually every case, these exceptional stations owe their success to…exceptionalism.

Unlike their competitors, these stations have integrated themselves with their community to the point that they are an indispensable part of that community. In many cases, the station’s call letters have become synonymous with the word “Radio”. This level of integration enables these stations to survive when virtually all others falter.

Such a status is not achieved in a few months or a year. It is acquired over decades of service to the community. It is also more than a few superficial promotions or sponsoring a fundraiser here or there. No, this level of achievement requires complete and absolute dedication to the community; providing a superior level of service in all facets of Radio without the expectation of a reward.

So here’s a salute to those rare stations that have come out on top when so many others have suffered. The coming year will hopefully be brighter. But regardless of the ups and downs of the economy in 2010 and beyond, the exceptional Radio stations will continue to enjoy greater success.

Unfortunately, most Radio sales reps can’t or won’t convince the advertiser to air a large enough schedule to obtain truly remarkable results. This underselling of Radio hurts the advertiser, your station, and Radio as an industry.

Many years ago, a very sharp sales rep I worked with — we’ll call him “Jerry” — taught me how to turn down an order.

Turn down an order?!?

The client wanted to air a schedule of 25 ads for the week on our station. While the schedule would have added around a thousand dollars to Jerry’s sales total for the month, Jerry just shook his head.

“I can’t accept this,” he told the client. “Because when it doesn’t work, you’ll blame me.”

Jerry then proceeded to explain to the advertiser how Radio really works, and how in order to be truly successful, the client should be airing 25 ads a day. When the advertiser replied he had never heard of such a thing, Jerry said: “It’s because they’re afraid to tell you.”

For Radio to work–to truly blow the doors off–three things are required:

1. A good product or service at a good price (customers aren’t stupid);
2. A compelling message that breaks through the ad clutter (notice, I did not say a louder message — screaming only insults the customer), and;
3. Sufficient frequency to ensure the audience hears the message.

We’re not talking a “frequency of three”…we’re talking a frequency of 20, 30, 40 impressions in a week.

We’re talking using the power of Radio to dominate a station or group of stations. This requires what used to be called a “newspaper-sized” budget. A full-page ad in the newspaper doesn’t dominate anything. But take the budget for that full-sized ad and place it on one station for the week and the advertiser will own that station.

Jerry’s client was convinced — he ended up buying two ads per hour every hour for a week — and had the best week in his history. All because one Radio professional was willing to tell a client the truth.

It’s time to stop underselling Radio. In the current economic conditions, including the rapid decline of newspaper, it makes more sense than ever before for Radio to step up and claim its unfair share of the ad pie.

The problem is not store closures or empty strip centers. It is confidence and spending.

I think Radio as a whole is fine. The latest RADAR study shows 92% of the population listens weekly.

We just somehow have to get clients back to previous spending levels.

I think Radio will eventually shake out okay. The few group owners that survive will be financially sound with manageable debt. There will be some public companies but mostly with large market holdings. Medium and small markets are not suitable for public ownership. Maybe no Radio is.

A business with a limited market area and limited inventory at some point has to rely only on price. You cannot do that in Radio because of market dynamics. Price cannot go up forever and the Big Radio myth is that if you raise your price advertisers will raise their investment. Most advertisers keep investment the same and run fewer ads driving down results. Then the stations have to find even more advertisers but now the advertisers have to be willing to pay higher prices. This is why Radio stations go through cycles.

So, large companies–especially public–that have a never-ending appetite for more profit will eventually hit a dead end with Radio. Many already have. Even if they grow by expansion–as all of them did in the 90′s–that road will eventually end.

We can add “products” like interactive, but that only takes you so far. It’s also a big time distraction to selling the core.

Radio is far better suited for a local owner who wants to make really good money and knows that every now and then he is going to have a down year. The competitor is going to surge. The unexpected is going to happen. And he will have to learn to live that year on $300,000 instead of $500,000.

A return to sanity can be reached if Radio sales prices are low. Six times multiple; eight times max, with a manageable debt load. The difficult eccentric local owner will replace the difficult eccentric corporate management team and it will be back to the future.

In middle and small markets there will be a return to more things like news and local coverage. Newspapers are dying. There is simply not enough local news in these smaller markets to justify an hour a day on five local TV stations. But there is plenty for a three-minute newscast on the hour via the local Radio station. Like it used to be. The Internet is a factor, but not so much for local news.

The future of the Radio business will be more like the past, albeit with a better eye towards quality. Listenership will decline some as will revenues, but as long as we remain the only really viable commercial advertising source that allows a listener to totally multitask while consuming it, we will have a place.

This fall, I complete 35 years in Radio. I think that qualifies me for an opinion liks this. I am now–officially–the old man.

Although the “experts” still never listen.

—-

“Anonymous” is a skilled Radio executive with extensive experience in sales, marketing and management in small, medium, and large markets. He started “on the street” selling Radio over 35 years ago and has trained hundreds of Radio salespeople in how to get results for their clients. He currently manages a multi-station cluster for a major broadcast company.

My friend hates her job. She’s also resigning on Monday.

I guess her DOS and the “smart people upstairs” just made one change too many. They took away just one client too many. They dropped the commission rates (again) just one percentage too many. They made it so incredibly difficult to be successful in media sales, not to mention, they’re absolute monsters in the many, many, many sales meetings they have every week. Who can thrive in an environment like this? Forget about thriving. Who can survive?

I myself am a radio sales veteran. I grew up in the business, literally. My father had me voicing spots at age three, cleaning the toilets at age twelve, running the boards for NASCAR races at age sixteen, and full-time sales at age twenty-two. I’ve seen the best of radio, and I now see the worst. And what I see is another industry in the final throes of a drowning death.

Creativity is gone. Ingenuity is gone. Ambition is gone.

Radio has become a job you have for three months until you get your real job. And the long-term sales reps that may still be hanging on to their jobs? Good luck. I suggest updating your resume.

So I guess my mooning here is for my friend. For my past, and for every other career radio salesperson out there who might read this. It’s not worth it. Your skills are VERY transferable, and what’s more, many employers out there love to hire media sales reps because it’s such a difficult industry. Stop trying to make things bearable, and stop telling yourself it’ll get better when you’re sold to a smaller group.

It’s not going to get better any time soon. Take my friend’s lead and just let it go. Even if you brought in twenty new local direct clients next month, it won’t be enough to resurrect your entire team, and change the course your stations’ owners have chosen.

Get out there and sell the most profitable thing you’ve ever sold: yourself. There are many people waiting to buy YOU. And they’re not in radio.