Underselling Radio

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In an earlier post, we talked about the fact that your Radio clients don’t require everyone to respond to their ad message; it is necessary only for enough people to react to the ad to produce a return on investment for the advertiser.

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.

Recueing Radio

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If your stations are like mine, sales are horrible. We’re down for the year and it’s getting worse, with the average sale WAY down.

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.

A Fallen Hero

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I had lunch with a very good friend of mine just last week. She’s sold radio in a top 50 market for over 20 years. She’s busted her rear drumming up new business, good economy and bad. She drives 30 miles out of her way to pick up checks from her local small direct clients–just so their ads will clear traffic by Monday morning. She sweet-talks the production department so they’ll push her clients’ spots to the top of their to-do lists. She doesn’t have time to fill in her weekly planner (due by Friday COB to the DOS), and even if she did, she’d need a few extra sheets. She rags ad agencies so they pay on time to meet commission deadlines. She’s a Radio Girl at heart, and she’s exactly what every sales manager always wants in a rep.

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.

Clustering Toward Oblivion

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Back in the 1970’s — almost medieval times — several studies took place to discover the optimum number of commercial announcements that could be aired in a “break” or “cluster” without causing listener fatigue.  Depending on the study you believe, I recall the number was between three and five…let’s call it four.

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.

The Dumbing Down of The Media

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Over the weekend, my wife was watching a program on television — the History Channel or Discovery, I’m not sure which — on the topic of the Dragon’s Triangle. This so-called “mysterious” area is allegedly the Pacific Ocean’s counterpart of the infamous Bermuda Triangle.

As part of the “evidence” presented, the program’s narrator mentioned the loss of an air force transport aircraft — while showing video of a World War II B-17 “Flying Fortress” bomber — and then covering the mysterious disappearance of an air force fighter — while showing video of a U.S. Navy Panther jet with the letters “NAVY” clearly visible on the aircraft’s fuselage. Either the producers were too lazy to find video of aircraft that matched the narrative, or they were too stupid to realize the difference.

Nor are these isolated incidents. Several months ago I watched a news report where a clueless reporter covered the movement of a navy transport ship, referring to it as a “battleship”. The contrast between a transport and a “battleship” would be obvious to a third-grade student. That some reporters cannot discern a difference speaks volumes.

And this raises the question: if the media cannot get these things right, how can we believe them on anything? In the case of the so-called “Dragon’s Triangle” program, I immediately discounted all their “facts” as ill-informed nonsense.

Once upon a time, journalists were trained to get the important, factual details of a story and report what they observed in an objective manner. Alas, those days appear to be a far-distant memory. And this does not bode well for the future of the media — or mankind.

Earn An Extra $1,000 A Week in Your Spare Time

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An extra $52,000 a year in revenue would be a good thing, wouldn’t it?

Well, it could be just the beginning — you could turn that $52,000 into $104,000 a year, or even $208,000 — if you start thinking creatively.

I’m a big believer in yield management, mostly because it helped rocket our stations to an unanticipated, and delightful, level of profit when it was applied correctly. What was amazing to me was that the managers of other markets in our group were reluctant to embrace a method that was obviously producing results. Don’t close your mind to new ways of generating more revenue.

Most stations have an abundance of unsold air time. The percentage of unsold time might range from as low as 10% to 50% or more, depending on your market and station. Right now, you’re getting zero dollars for that unsold time. Unlike a retail merchant, you can’t warehouse time. Each day, you receive a full allotment of 24 hours of which so many minutes each hour are reserved for commercial announcements. At the end of the day, any unsold minutes are lost.

But what if you could sell all your commercial minutes? What would that do to your cash flow?

Let’s assume you air 12 minutes of ads each hour. Friday afternoon at 3 o’clock, the traffic department tells you that 40% of your ad time from 6 p.m. Friday to 6 a.m. Monday is unsold. That’s approximately 345 30-second ads that are producing no revenue.

Your salespeople man the phones and contact your best customers first and work their way down their account lists. The offer: every fourth unsold 30-second ad on the station from 6 p.m. Friday to 6 a.m. Monday for $250. Secure four clients and suddenly your unsold time producing zero dollars has been transformed into a profit center. Do this once a week for 52 weeks and add $52,000 to your bottom line.

For stations in larger markets or with higher rates, divide the unsold time and sell it to four (or more!) clients in rotation for $1,000 each (or whatever your market will bear), and multiply your return.

Once you’ve started selling out weekends, look at other time blocks, such as early week, or Monday-Thursday 7 p.m. to 6 a.m. Wherever you have a large percentage of unsold time, figure out creative ways to package it to produce revenue without impacting your regular advertisers.

Everybody loves a bargain, and you would certainly love to bring in cash for the air time that is otherwise unsold. It’s a win-win situation that can add significantly to your profitability. And you’ve got nothing to lose but your spare time.

Great Expectations

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How do you define success?

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!

Thinking Ourselves into Trouble

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The numbers don’t lie: Radio revenue is taking a nosedive. The economy — sluggish at best in 2008 — looks dismal for 2009. More layoffs are ahead as Chrysler and GM reorganize and downsize, with the ripples of their ordeal affecting thousands of suppliers and hundreds of thousands of workers.

And yet…

As unemployment approaches 10%, 90% of the workforce remains employed.

As tens of thousands are laid off, hundreds of millions are still earning a weekly paycheck.

As the stock market struggles to climb above 8-thousand, millions in profits continue to be made.

So, how much of our economic woes is the result of real, tangible actions, and how much is a product of negative thinking?

The recession/economic downturn of the late ’70’s hit the U.S. hard. We experienced double-digit inflation, skyrocketing gas prices, gasoline rationing, and a malaise that suggested the country’s best days were behind us. President Jimmy Carter even informed Americans that our children would experience a lower standard of living in the future and we should get used to it. It was the end of life as we had come to expect it to be. We had become the land of “no more opportunity.”

Then, something remarkable happened.

A new president arrived on the scene with an optimistic outlook. America’s best days were ahead of us. And, sure enough, with a change of attitude more than anything else, the United States entered a period of prosperity that spanned almost 30 years.

Certainly we have economic problems. GM and Chrysler didn’t get into trouble overnight. Their woes are the result of a series of bad management decisions over decades that have brought them to their current condition. But the wonder of this country is that — with a change of direction and an optimistic outlook — things can and will get better. It has happened before. It will happen again.

While the media almost gleefully pounces on the latest bad economic news, remember: people are still buying products, the majority of businesses are still in business (and even making a profit), and the citizens of this country have an irrepressible faith that things will get better. It may take a different president, and it will certainly require more tough decisions, but the spirit that saw us through 233 years of booms and busts, wars and peace, good times and bad, will again reassert itself.

If only we will let it.

Why Do I Hear Better Music in Supermarkets and Restaurants Than I Do on the Radio?

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This is an article from a couple of years ago. While somewhat dated, the points are still valid. Besides, recycling is one of the few ways I can be “green” and still live with myself.


Somewhere on the road to the 21st century, Radio took a wrong turn.

No, it’s worse than that.  Radio slid completely off the road and went into a ditch.  And now, Radio’s wheels are spinning in a futile effort to gain some traction.

Let’s look at the evidence.  In virtually every market across the U.S. Radio’s numbers are down.  Time spent listening, persons using radio, and worst of all, revenue — all down.  Listeners are voting with their fingers by switching to other sources of music entertainment. [And the lousy economy has only sped up the process.]

And when you hear a better selection of music coming from a supermarket or restaurant’s ceiling speakers than you do on any radio station in your market, you know Radio has a problem.

Unintended Consequences

So how did such a great medium get into such a pickle?  A number of factors, including consolidation and technology, have combined to lure Radio astray with the promise of easy and certain success.

As audience measurement efforts increased through the 80’s and 90’s, more companies turned to music research in order to eliminate songs that would drive away listeners in their target audience.  Unfortunately, this tool slowly encroached on and eventually replaced many skilled program and music directors who created station play lists and formats using their instincts combined with research instead of survey numbers exclusively.

Not long after this trend started, the first wave of deregulation arrived, soon followed by a second, even bigger wave.  The large number of independent stations in each marked were soon consolidated into three or four clusters of stations controlled by large corporations.  Driven by pressure from investors, these companies were reluctant to take chances with unproven formats.  The loss of a share point or two meant millions in lost revenue and plunging stock prices.

Experimentation, with a few exceptions, was out.  Research was in.  Research the audience, research the music, and develop a “safe” format formula that attracts listeners and generates revenue without taking any chances.  With the exception of a few morning shows, creativity was also discouraged.  “Safe” music is played, titles are back-announced (or not), and an exciting format becomes — unexciting.  On the street, the word they use is: “boring”.

And, it made sense to corporations to use these same carefully-developed formats in other markets across the country.  Why go to the expense of duplicating the research when the results are already in hand?

Trouble in Radio Paradise

Radio did not live happily ever after.  After a few years, Radio stations had lost the individual “personality” that had made them unique to listeners.  Research had homogenized the music and formats to the point where all Radio stations sounded alike.  Given this blandness, compact discs or cassette tapes were preferable alternatives to many in the audience.

Radio has a history of re-inventing itself.  When television came on the scene in the 50’s, Radio was declared “dead”.  Radio responded with innovation and the golden 60’s era of rock and roll was the result.

Radio in the 21st century is far from dead, but the need for re-invention has once again arrived.  With hundreds of competing media outlets, including satellite, iPods, and the internet, Radio unable or unwilling to respond risks becoming a dinosaur.  Unfortunately, the conditions for re-invention are not good at the moment.

In the 1950’s Radio ownership was diverse and corporations were limited in the influence they could exert.  Innovation came from small groups and individually-owned stations able to exercise a level of creative freedom and experimentation that is rare today.  With Wall Street’s demand for return on investment, few want to risk trying something different.

The British SAS commandos have a motto: “Who Dares Wins”.  Great risk offers great rewards.  However small the number, some stations will dare to experiment…and these will be Radio’s hope for the future.  When Radio is pulled from the ditch where it’s mired, the tow truck will be labeled: “Innovation”.

Until the re-invention begins, I’ll see you in the supermarket aisle.

Has It Been That Long?

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Almost an entire month without a peep of activity on this blog? What’s going on?

Well, business is going on. We’ve been involved in two massive projects, each with a strict deadline and no wriggle room. Since I’ve never even seen a wriggle room, let alone try to furnish one, I’ve been diligently moving ahead with my portion of the project. And this poor blog suffers.

Or, maybe it is actually better off.

Anyway, I didn’t want to see an entire calendar month pass without some type of post, and this short item is the result.

Things will be better (or worse) next month. Nothing ever stays the same.