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.

After the fourth commercial, most people tuned out — either figuratively or literally.  And if the tune out was literal, they often did not come back.

But this was in the day of rigid 30 and 60-second commercials.  Hardly anyone sold 15-second ads, and 10 and 5-second announcements were never sold, much less offered.

Today, we have created commercial breaks of up to 10 ads — strings of 30-second, 15-second, even 10 and 5-second ads — that coagulate into a meaningless jumble of words, sound effects, and music that is ever more easy to tune out.  Of course, the reason for this is revenue.  With the Radio Advertising Bureau’s announcement today that Radio revenues were down 22% compared to the same period last year, the revenue angle is more important than ever before.

However, those same ’70′s studies also indicated something more disturbing.

The length of commercials in a break is less of a factor than the number of ads that comprise the “cluster”.  To most listeners, a 60-second ad is no different than a 30-second ad — it’s just another interruption.  If that perception holds true among today’s listeners, then an eight-ad “cluster” of 15-second announcements is far worse than one of four 30-second ads.  Even though both consist of two minutes of commercial time, the group of 15-second ads is perceived as twice as long.

There is no easy answer to this dilemma, for revenue is king.  Without sufficient dollars coming in, no station can long remain in operation.

And, at the same time, the increasing noise level of “endless” 5, 10, and 15-second ads allows us to commit suicide slowly — driving away listeners to other media choices where commercials are more easily controlled, or ignored.  For once the listeners have departed to other outlets, it becomes increasingly likely they will not return.

For most Radio salespeople, success is making the sale. Closing the deal. Bringing back a nice order. Seeing the sales manager smiling as you turn in the big-ticket, multi-month buy you’ve worked on for weeks.

But what constitutes success for the client? What yardstick does he use to determine if his ad campaign has paid off for him? For most clients, the goal appears to be to “sell a lot”. However, his definition of “a lot” is probably very different from yours.

In order to achieve a goal, that goal must be measurable. This requires a specific number on which everyone can agree is reasonable and achievable. It means setting the client’s expectations to a realistic level rather than “a lot”.

So, how do you develop a goal for your client’s ad campaign that measures the success of your stations’ efforts to deliver customers to his store? Whoa…this is a scary concept!

“Do you mean to say the client should expect a specific number of our listeners to shop his store based exclusively on the ads our stations air?”

Yes, that’s exactly what I’m saying.

If your station reaches 100,000 people each week (cumulative audience or cume), how many of them need to go to the advertiser’s business for him to sell enough products so that he makes back all the money he invested with your station, plus a reasonable profit?

To answer that question, we need some information about the proposed ad schedule and the advertiser’s business, specifically:

• The total amount of the advertising investment on your station(s)
• The return on investment (ROI) desired by the advertiser, expressed as a percentage
• The advertiser’s profit margin, as a percentage
• The amount of the average sale
• The advertiser’s closing ratio (out of 10 customers visiting his store, what percentage does he sell?)

Armed with these facts, we can determine exactly how many of our 100,000 listeners must respond to the advertiser’s ad message in order for him to recover his ad budget plus a reasonable profit.

If this sounds like a lot of work, it really isn’t. That’s because Radio3K.com has a nifty free tool called the Return on Investment Calculator that takes the above information and instantly gives you the answers.

In our scenario above, our hypothetical advertiser has an ad budget of $3,200, would like a 20% return on his ad investment, has a 40% profit margin, an average sale of $985, and closes 19% of the customers who come to his store. Based on this information, your station only has to deliver 51 people out of your cume of 100,000! That’s one person for every 1,960 listeners.

Your question to the advertiser: “When our 100,000 listeners hear your ad message, do you feel that 51 of them will find it compelling enough to respond by coming to your store?”

Suddenly, the burden to deliver is no longer on your station. The strength of the advertiser’s message is the determining factor for the success or failure of the ad campaign. Also, the advertiser is no longer expecting “a lot” of response…he only needs 51 people to come in so he can close 19% of them, giving him 10 sales, and all his money back plus 20% profit.

Managing the advertiser’s expectations via return on investment is smart selling. Try it!

There is a buzz among the sales reps. This is a good deal!

“And it’s good only for new advertisers.”

You’ve probably heard this many times before; a station will bend over backwards to attract new advertisers, while ignoring existing, loyal customers.

Why?

I know, there’s always the fear that: “If we give them a 20% discount, they’ll cut their schedule back by 20%!” That won’t happen if the discount is presented as a bonus—a reward for the customer’s loyalty over the years.

If anyone is worthy of a reward, isn’t it the customer who’s been a regular advertiser on your stations for two, five, ten years? A customer who is appreciated (and who knows it) is less likely to abandon you during tough times. Yet our often short-sighted approach is to reward new customers while ignoring those we have worked with for years.

Everyone appreciates a reward—think back to your last pay increase or promotion—and advertisers are no different. Don’t give them a reason to go elsewhere with their business.

A wise Radio mentor educated me long ago that each ad on your station is worth exactly…what you can get for it. Each decision to purchase by the advertiser (or agency) boils down to answering this question: “Is the benefit of airing my message on this station worth more to me than the money?” If the answer is “yes”, the sale is made. Conversely, the Radio representative wants to obtain the maximum payment for his station’s time, while answering this question: “If I don’t sell this time to this advertiser, will anyone buy it—or will it go unsold?” The fear that we will be unable to sell the time drives us to weaken our position and accept a lower rate.

After instituting a yield management system at our stations, our entire concept of rate was altered. When an advertiser resisted paying a higher rate, we were in a position to determine if we could “give” on the rate, or should stand firm. To our initial surprise, we found that standing firm more often than not resulted in making the sale anyway, and at the higher rate. The advantage of having the law of supply and demand working for us allowed our stations to increase rates by an order of magnitude within two years. It made the difference between being marginally profitable and substantially profitable. I don’t know about you, but I’d go for “substantially profitable” every time.

Advertisers (and even agencies) aren’t devils, despite how you might feel in the middle of any negotiation. In the months ahead, the loss of marginal advertisers who go out of business and pressure from big accounts to reduce expenses will tend to increase your unsold inventory and push your average ad rate lower. Don’t panic and make a deal on rates you can’t live with over the long term. Eventually, business will improve and you’ll be stuck with low ball ads eating up your time—and your profitability.

Negotiations must be a win-win for the relationship to prosper. Even when dealing with the devil.