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My Problem With Your Rate Hike Story


Over the last two days our inbox and comments section has been brimming with your feedback on our two stories featuring Cumulus Co-COO John Dickey's call to raise rates. Everyone has an opinion on why radio is stuck in the 7% quicksand. This letter somes from a Radio Ink subscriber who says part of the challenge on the street is when radio is battling for share of the radio buy and not focusing on increasing the entire revenue pie. 

Dear Ed:

Ive been selling radio advertising for 20 years (17 in sales management) and Ive hated negotiating the entire time. I would love to eliminate agency CPP battles, promotion requests and required freebies with every buy!

Problem part one is that media advertising organizations have trained their buyers. Weve taught them that we are indeed negotiable! This is true for TV, Cable, Newspaper, Billboards and, out of category, the auto industry. Unfortunately, like the auto industry, without a top-down, industry-wide initiative, it might be difficult to get that cat back in the bag.

Its all well and good to pontificate on high, but there is a serious issue where the rubber meets the road at the market level. When Group A drops rate or bundles in (for free) under-performing stations to grab share its definitely tougher for Group B to compete for the business without doing something similar. I've let multiple deals go due to this mentality of our cross-town competitors. I just couldnt compete.

Part two is company leaders demanding that markets price for share. Ive heard this from our competitors and from our own company leadership! Listen up sales managers! Price for share! Dont lose that buy, but keep your damn rates up! WTH? This mixed message is infuriating and shows a disconnect at the top of an organization.

Part three is the supply and demand issue. Yes, I know...if sales people would get off their butts and sell, there would only be demand and little supply. The reality is that radio is more perishable than bananas and I personally have cut/signed last minute deals to fill unsold inventory. Ive grimaced and taken a low-rate deal in the last week of the month to hit budget. BUT, Ive also (recently) raised rates mid-month and walked from everything that wasnt at an inflated rate when avails allowed it. So, maybe Im part of the problem. Please understand that I would rather be part of a global solution.

Part four is commissioned sales people. Someone replied that commissions are to blame. NOT SO! Almost every sales team in every industry has some form of commission structure. Its a wonderful way to compensate and motivate salespeople...and managers. Every seller on my team understands that XX% of $100 is more than XX% of $80. BUT they also understand that XX% of $80 is better than XX% of $0. This puts the sales people in a position to do more selling to their managers than to the accounts! Managers also understand that a creatively structured buy is better than a non-negotiated loss. As long as our competitors are pricing for share, and our buyers know well negotiate, the gloves must come off when necessary.

This is an industry (all media) problem that will not be fixed by one Big-C Radio Group alone. Im not talking about price fixing, Im talking about fixing price.

(1/3/2013 3:14:23 AM)
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- NY
(8/10/2012 9:42:26 PM)
Radio needs to get back to the basics. Stop going to the same radio users and start calling on businesses not on the air. What most radio sellers seem to forget that we sell an can't touch or hold a radio spot, a spec commercial makes radio tangible. Clients want to be on the air when they hear a commercial. The more spec commercials you play the more $$$ we all make. Stop pretending to sell by checking your email for orders and hit the streets with in person sales calls

- John Fuller
(8/10/2012 12:44:23 PM)
In all our years in radio, has it ever occurred to anyone that perhaps 7% is pretty much the average percentage of advertising budgets that our audio-only broadcast medium should optimally be at? We always tell clients truthfully that we have many more listeners than they have customers, so our job together is to convert and deliver as many of them as possible.

Let's properly define what we mean when we say, "Radio has to do a better job." And if we do that, rather than raising rates and grubbing for money to meet budgets dictated by corporate suits, we may even grow beyond 7%, as many clients already illustrate with notable success.

I hear too many ads on the air that are an absolute embarrassment to our industry, but there are plenty of gurus who know how to create effective ads. That's where we might focus. It's all about the customer's customer.

- Dennis Jackson
(8/9/2012 7:40:21 PM)
If you are a value illustrator and really know motivation beyond the CCP of local consumers and have taken the time and effort to establish a client bond rather than just taking a 25 year old agency buyer's order for your rated station. You will get higher rates. Unfortunately, for all too long, we in radio, have been lazy and taken the easy way. Make it cheap and throw in free stuff

- Daniel Mitchell
(8/9/2012 1:42:05 PM)
If John Dickey is serious about addressing this out-of-control problem, I give him lots of credit. Radio really cannot ever attain it's revenue potential while salespeople are empowered to price it's only product. Only ownership can determine pricing since only ownership has all the factors involved in determining the company's profit picture. John, do this:
Have a rate card for each Cumulus station. Issue a directive to all managers that deviation from each card is no longer allowed as of Monday. Have all managers schedule a Saturday morning meeting with their sales staff to explain the policy. Order each manager to fire the first person to violate this written corporate policy. Fire the first person and allow the remaining staff to be aware of the dismissal. It's goos for survivors to see a corpse, occasionally. John, one further thought: A lot of Cumulus stockholders read this publication and are counting on you.

- Phil

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