Who Has The Rate Resistance Problem? Could It Be You?
Editor’s Note: The views and opinions of this article do not necessarily reflect those of the MAB. Contact the MAB for information on the MAB’s official editorial policy.
By: Paul Weyland
President, Paul Weyland Communication Strategies
Some of us met up at the Radio Show in Orlando and discussed rate resistance. Several people thought advertising agencies were becoming more demanding than ever. Others complained about local direct clients. “Especially in small and medium markets, they just don’t have the budgets anymore to buy broadcast.” More on that in a minute.
The greater truth is this. Those with the biggest objections to higher rates and higher budgets are not the agencies and not the local decisionmakers, but instead our own local broadcast salespeople. Huh? Yes. In fact, I’m ashamed to say that most resistance to radio advertising rate increases and higher budgets for local direct clients comes not from clients themselves, but instead from radio and TV sales reps.
One of our Radio Show group said he’d heard that salespeople usually ask clients for no more money per month than they, the radio reps, make in their monthly paychecks. I had to agree with him, because I personally had that very experience. As a first- and second-year rep, nearly all of my local direct orders were under $2,500 per month. Why? After thinking it over much later, these were my only reasons. Number one, that’s about the number that the other, more seasoned sellers at our stations were asking for. But Reason Number Two? At that point in time, $2,500 seemed like a lot of money to me.
For me, that cycle finally broke in Year Three, and it happened totally by mistake. I was pitching a car dealer on a big idea, and instead of asking for my usual $2,500 a month, I took a chance and told the client that the cost would be $5,000. And the client said, “A week?” And instead of saying, “No, a month,” I said, “Yes, sir,” and to my complete surprise, he told me he’d spend that “from now on.” So at that point, the spell was broken for me. I figured that if this client had no problem accepting a larger budget, maybe the same might be true for other customers, and it turned out I was right.
My epiphany came in my third year. For others, this revelation might have come earlier, but in my experience, that would be rare. In fact, I know a lot of seasoned media reps who are still shy about asking for real money.
Maybe they’ve been shot down enough times by now that they’re convinced it’s just easier to ask for a less robust budget, get the sale, and get out, because that’s what works for them.
However, even the happy-go-lucky salesperson might be tempted to ask for much more money if he or she could be convinced that they could get easy yeses from their clients. So let’s discuss some ways to make that happen.
Use iron-clad, evidence-based logic in your presentation. By knowing a few details about your client’s business, you can get the confidence you need to ask for more. How much more? How about four times more? In other words, instead of asking for, say, $2,000 per month, why not ask for that much per week?
Knowing the client’s average sale and her gross margin of profit means everything. Armed with this information, not only can you close much bigger deals, you can also more easily manage your client’s expectations about advertising results. Otherwise, when a client calls and says, “Cancel my advertising. It’s not working,” you have nothing with which to defend yourself. Why would you ever put yourself in that position?
Understanding ROI gives you power. And power leads to confidence. No more mediocre pitches.
Let’s take a furniture dealer, for example. Let’s say your local furniture store’s average sale is $1,000. The owner’s gross margin of profit is 40-45 percent (go to www. paulweyland.com and download the free ROI PDF). So for each thousand dollars a week spent on your station, how many sales would the client have to make to break even?
Well, if the client’s cost of goods is $650, that means gross margin, the amount she could reinvest in her business, would be $350. So how many $350s would she need to pay for the $1,000 she invests on your station? Less than three new customers. How many people are listening to your station? How many people come to your website in a week? Three people out of whatever your number might be seems like a pretty good calculated risk to me!
Understanding this concept means you have everything you need to defend doubling, tripling or quadrupling the amounts you’re pitching. It takes away the client’s meager budget suggestion and gives the control to you.
On the situation with needy, greedy advertising agencies and their rate-grinding, I can’t tell you what to do. That’s entirely up to your station’s management and what they feel is best for your station. But with local direct clients, I guarantee that most of them are underspending. Calculate their ROI and see for yourself.
For smaller markets, use the small-market advantage to ask for much more money than you’re getting now. You tell clients, “Well, thank heavens you’ve got the small-market advantage.” “Huh?” they say. And you reply, “Your gross margin and average sale are the same as your brothers and sisters in the larger markets, but here in a smaller market we have smaller rates, so you could literally own the media in our town.” Use this argument and you’ll land bigger contracts.
I practice what I preach. I have taught this technique in all-sized markets in every state in this country, and many other countries as well. And do you know what? Out of all of those thousands of media reps I have encountered through the years, I have only heard of two of our salespeople who were actually murdered for asking for too much money. So your odds are good! Give it a try and see for yourself. I mean, come on. What’s the worst thing that could happen?
This article originally appeared in RadioInk Magazine.
Paul Weyland will be speaking at the Great Lakes Media Show, March 5-6, 2019 in Lansing. For more information and to register, click here.
Paul Weyland helps broadcast stations sell more longterm local direct business. Reach him at paulweyland.com or call 512.236.1222.