To paraphrase the late bluesman, Willy Dixon, if it wasn’t for bad luck, South Africa wouldn’t have any luck at all.
I needn’t dwell on all that ails our poor economy, COVID-19 being the latest and most serious. It’s common cause that in hard-pressed economic times, one of the first things to take a hit is ad spend.
Of course, there’s barely an industry that isn’t affected by this latest virus. Or should I say infected? In the current climate, just surviving is winning.
On a more positive note, as any politician will tell you, never waste a crisis. In times like this, people turn to radio to remain updated. And being confined to home, radio comes into its own in terms of the Reithian exhortation: To inform, educate and entertain. With traffic down to a minimum, drive-times cease to deliver the big audiences advertisers have come to expect.
In effect, you’ve got drive-time size audiences all the time. Why not charge drive-time rates all the time? Make hay while the sun shines, at least until the crisis passes.
Now to the task at hand…radio’s survival. As I’ve repeated ad nauseum if you live by the numbers, you’ll die by the numbers. That is, when audience figures are up, it’s a feast. When audience figures are down, it’s a famine. Don’t rely on the numbers, they fluctuate.
Here’s the basis of my argument: radio is a fixed inventory organisation, much like airplane seats, car rental and hotel bed nights. Advertising rates, besides being a perception of value, are a factor of supply and demand. Being a fixed inventory organisation, supply is fixed or, in economic terms ‘inelastic’.
So, the only device at one’s disposal, is to respond to demand. Ergo, when demand for airtime goes up, rates go up and vice versa.
This has, unfortunately, been distorted by certain radio stations hiking their rates into the stratosphere when demand is high and then euphemistically offering “added value” in the form of free spots or selling ROI. The latter practice basically involves offering clients massive exposure for limited spend e.g., spend R100 000 and get R200 000 exposure. In other words, free spots. Remember, when you discount a product or service, you devalue it.
And so, the industry has scored an own goal. Rate cards are meaningless, merely an indication of what a station hopes to get for its airtime. One of the reasons is incorrect pricing strategy. A radio station should strive to sell every spot every day at the highest possible rate. This fluctuates with demand.
We’re dealing with a highly perishable commodity. What doesn’t get sold today can’t be carried over to the next day. It behoves sales managers, therefore, to get whatever they can for distressed inventory.
To add another wrinkle to the process, once the schedule has been agreed on, the purchase in some cases goes to the client’s procurement department. They, in turn, strive to reach as many targeted consumers as possible, as often as possible and at the lowest possible cost.
And so we negotiate, but not from a very strong bargaining position. Incidentally, in any negotiation there has to be give and take and you have to be prepared to walk away at some point. I’m told, a good outcome is when both parties feel screwed over. Instead of a win-win result it turns into a win- whinge situation.
Let’s look at pricing strategy, at the beginning of each fiscal year, management projects how much they hope to realise for their airtime. This gets broken down into the total number of avails across the year, taking into account high season, low season ,etc.
The name of the game is yield management. How much juice can one squeeze from the total number of avails? Say, the sales manager sets a target for making budget with 80% of total avails sold. If this strategy is successfully implemented, it means that target is reached and the station still has inventory left over for anyone who needs to get on air at the last minute, albeit at a higher rate.
Out of inventory, out of business
When you’re out of inventory you’re out of business. Many stations fall into the trap of selling spots via hard sell sales outfits at eye-watering discounts, thereby setting an unhealthy precedent, which they find difficult to extricate themselves from. Not only do they deviate from one of radio’s key strengths, namely, selling solutions, not spots; but, in the process, they devalue the platform. If all one is doing is flogging spots, then expect to see margins squeezed.
The sales manager’s main function should be inventory management. Reps need to be trained on how to determine a need, challenge, opportunity or void in a client’s business and provide a solution in order to take the focus off price and put it on value.
So, make the most of this opportunity. But remember, when times are good, don’t get too cocky and when times are bad stay cool. Tough times don’t last. Tough people do.
Finally, it’s worth noting that Isaac Newton conceived of his most groundbreaking ideas during the Great Plague of 1665. No doubt, as you shelter in place, you can come up with one or two creative ideas yourself.
Stan Katz is a radio legend, highly experienced in all aspects of the medium. He has a distinguished career transforming radio stations and has created a new model for profitable radio in Africa. He has condensed 40 years of radio advertising experience into one online course: The Ultimate Radio Sales Course, which will launch globally on March 25, 2020. Sign up now and master the art and science of radio sales in the comfort and safety of your own home. You’ll earn a certificate of competence on completion of the course, which includes quizzes and games.
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