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.

What’s in A Name?

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Why is it that Radio and TV sales people sell “spots” and newspaper people sell “ads”?

Does what you call a thing make a difference? A lot of people on Madison Avenue certainly think so.

It’s my position that one Radio ad is equal to one newspaper ad. We demean our product by referring to a Radio ad as a “spot”, and inadvertently elevate the product of one of our competitors.

Here’s a belated New Year’s resolution for 2009: ban the term “spot” from your vocabulary (unless you’re talking about removing something from your clothing). Let your advertisers know they’re purchasing a quality product, not a blemish on their wardrobe.

Less is…Less

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Clear Channel’s recent layoffs are merely the latest in a continuing series of employment cutbacks in Radio, and certainly more reductions are coming in the days ahead. However, the elimination of sales positions is a double-edged sword.

One very successful market manager I know believed in hiring as many salespeople as possible. He felt a larger staff put more pressure on the stations inventories, driving demand and higher rates. He was willing to suffer a few poor performers—for a time—in order to achieve his sales goals.

Another successful manager demanded performance from every rep and marginal players had 90 days to become producers. Failure to achieve earned them a brief “exit interview” and a final escort to the door.

Which approach is better? My personal experience has been that the larger sales staff works best. There’s no doubt that a smaller sales staff means fewer bodies on the street and less pressure on the inventory. And in tough economic times, I would certainly monitor everyone’s performance closely. But isn’t that something we should be doing regardless of the economy?

There’s no good answer, and I would be interested in hearing about what’s working or not working in your market. Your comments are welcome.

A World Insane

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The United States Congress has placed an admitted tax cheat in charge of the Internal Revenue Service. Some of the very people responsible for the housing crisis—that led directly to our current economic problems—are in charge of getting us out of the very same crisis. What’s next? Osama bin Laden in charge of Homeland Security? He certainly is “knowledgeable” about potential terrorist attacks and that—according to congress—makes him qualified for the position.

While I make every effort to stay away from diving into the sewer we call “politics”, this series of events makes me think the U.S. has gone nuts.

But let’s shrug that off for the moment. I mean, how much damage could one dishonest man do to the tax system that touches the lives of every man, woman, and child in the country? Instead, I want to focus on another aspect of insanity: the media.

Today, I saw a newsletter from Ari Galper in which he takes the media to task for bombarding us with a steady stream of negative news. As I pointed out in a recent post, this depressing barrage of discouraging stories only serves to further erode our confidence in the system that has brought us the highest standard of living in the history of man.

The first step Ari recommends in fending off this continuous attack of negativity is to shut out as much of the “news” as you can! I wholeheartedly second this motion, but in so doing it made me think about the form of slow suicide the major news media are in the process of inflicting on themselves.

Think about it. The newspapers and TV (and to a lesser extent Radio) focus on the bad economy, job losses, businesses moving offshore, the threat of inflation, and today, the murder-suicide of a family of eight in California. News, yes…but what is the result? Does such reporting motivate you about the inherent strength of our economy, or does it prompt you to hold back, to save money for even rougher times that may be ahead? And when you don’t take the family out to eat, or out to a movie, are more jobs lost or gained? Are advertisers more likely or less likely to advertise in those same newspapers or on those shrill TV networks?

In their eagerness to report on how dismal the times, some media outlets are digging their own graves.

This condition cannot continue indefinitely; the economy will either quickly recover—despite the ham-handed efforts of government—or it will plunge into the abyss. With either outcome major newspapers, many of which are already on their deathbeds, and the hysterical television networks will have lost much more than revenue. They will have lost readers/viewers, yes. But they have also lost credibility, and that is much, much more difficult to restore.

Only in an insane world would an organization assist in its own demise.

Welcome to planet Earth.

Negotiator or Hostage?

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You’ve seen this scenario dozens of times in the movies and on TV: the bad guys (robbers, terrorists, etc.) are inside a building with hostages. Outside, police SWAT teams surround the location, and a negotiator communicates with the hostage-takers.

The bad guys have demands: food, transportation, release of prisoners, whatever. The police respond by offering to meet some of the demands in return for the release of some of the hostages. And so it goes, until the hero or heroes take some action to save the day.

Now think about the last time you “negotiated” a schedule with a client. Were you really the negotiator…or were you the hostage?

Negotiators get something in return for giving something. The client says: “Your rates are too high.” If you lower the rate without getting a concession in return, you’re a hostage. Instead of responding: “Maybe we can do a little better on the rate”, you instead say: “I can reduce the rate by this much if you agree to extend the schedule an extra two weeks.” That’s a negotiator speaking.

One of the benefits of a well-founded yield management system is that it gives you the leverage needed to get the most out of client negotiations. You know where your peak demand is as well as days and hours of lesser demand. By adding some lower-demand, lower-priced ads into the schedule, the client gets a better rate, and you sell more time while leaving more of the peak demand ads available for sale to other advertisers.

The economy is going to be rough for the foreseeable future. Improve your negotiation skills now and refuse to be held hostage to unreasonable demands for reduced prices. Then, you’ll be the hero that saves the day.

Feeding On Fear

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The bad news floods out of our Radios, TVs, and newspapers, and we internalize it. Not an hour passes without news of increasing unemployment, declining sales, and dismal forecasts. Eventually, after continuous exposure to such depressing propaganda, we accept it uncritically.

We start to believe it.

Once you’re convinced the economy is in a tailspin, you begin to act in accordance with your beliefs. In short order, we’re all adding to the doom and gloom.

Psychologists have demonstrated through numerous studies that you absorb whatever you’re exposed to. Surround yourself with negative news and depressing people and you become disheartened; associate with positive news and uplifting people and you become encouraged to achieve what others might consider impossible.

Short of turning off your receivers and canceling the newspaper, you can’t avoid the negative news. But even with the negatives, there are positives to be found. Concentrate on the good news—scarce though it may be—and work with a positive attitude that things will turn around.

The recovery starts with you and proceeds one person at a time.

Let’s get started.

What Are They Thinking?

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Radio’s continued financial success depends on a strong economy. The logic that somehow the government can fix the economy is flawed thinking; government cannot create wealth. Certainly, government can create jobs—repairing roads, building bridges, adding a bloated government program or ten—but these jobs do not create wealth. Only the private sector produces a Steve Jobs or Bill Gates, and people like them create millions of jobs (and make others wealthy, as well).

Now, in order to stimulate the economy, the government is planning on sending another round of rebates to taxpayers. Well, pardon me, but wouldn’t it be better to pass tax cuts and allow wage earners to keep what is theirs in the first place? The idea that a third party should take a large chunk of your earnings only to return a portion of it is typical of government thinking.

With the economy temporarily in turmoil, families are looking at their budgets and cutting back on expenses. These reductions will be felt by advertisers, who will also cut back. It will be felt by your stations, who will also reduce expenditures. Will government likewise “cut back”? No way. Instead, we’re hearing plans for more expansion: universal health care, another trillion dollars in bailouts, and more.

Government efficiency is an oxymoron. The best way to resolve our current economic crisis is to get government out of the way; cut taxes—especially capital gains—and slash government spending. Yes, the pain will intensify in the short term, but it will be short, followed by a strongly resurgent economy. Unfortunately, the road government is now planning to travel may minimize the intensity of the pain slightly, but will prolong it for years to come.

Team Up with the IRS

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There’s nothing that could make my blood boil faster than having a client fail to pay for his Radio schedule. While scrupulous attention to accounts receivable can minimize the agony of not getting paid, there are always some accounts that go bad each year, accounting for more lost revenue than you’d like. With the advent of tougher economic times, the likelihood of an increase in bad accounts is something every station will have to face.

Today, while talking with an accountant, I learned that the IRS can be an ally in turning the tables on a deadbeat client.

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“What Did You Do…?”

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In the opening scene of the movie Patton, the late George C. Scott in the title role gives a stirring speech to an unseen group of men prior to battle. After describing the aggressive action he expects from his troops—perhaps nervous about what was to come—Patton says:

Thirty years from now, when you’re sitting around your fireside with your grandson on your knee and he asks you, “What did you do in the great World War II,” you won’t have to say, “Well… I shoveled shit in Louisiana.”

A Radio Ink article from January 6, 2009, estimates Radio revenues will decline by 13 percent or more this year, making for a lot of nervous Radio troops. As the economy flounders and Washington politicians panic, things may indeed become worse. However, Radio—from among all the traditional media—is best positioned to weather this financial storm

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“Think” Revisited

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As I mentioned in an earlier post, the book Think And Grow Rich by Napoleon Hill has many inspiring stories that came out of the 1929 stock market crash and resulting depression. Along with his uplifting prose, Hill made a number of predictions about the future that were wildly off the mark. None of them were worse than what he envisioned for Radio.

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