Dealing With the Devil

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Have you ever agreed to a long-term, low-rate schedule and later come to regret it? It has happened to many of us. The allure of a large gain in total revenue can blind us to the long-term consequences.

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.