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Caving on Rates
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I thought the Rate Integrity discussion would wear itself out, but we continue to get pro & con e-mails on the subject.
It's about time and place. We all know of highly-rated, mega-market stations down as much as 40%. Then there are small market stations, flat or pacing up double digits. One might examine where they are on that scale when establishing rates, If pacing were down more than seven or eight percent, I might take a look at both my rate structure and how I think about rates.
As you read this, I'm presuming our Big Goal is to Make Goal.
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Con: Caving on Rates
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I understand your article, and my station happens to be of the "old" philosophy. We have seen time and time again that once you cave on the rates, your clients lose trust in your product. And on most occasions, you never bounce-back. In other words, once you lower your rates for a period of time (ex: "fire sale", a month, a week, etc...) your clients will continue to think that the lower rate is all your worth and will refuse to pay more than what they did before. How do you counteract that argument?
This is the central question - well put and not uncommon. We've all heard the expression caving on rates. There are two major issues here.
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Caving
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Caving on rates would suggest a weak moral condition; by Caving on rates, we're demonstrating cowardly, weak, or spineless behavior. We gave in - we Caved. We are unworthy.
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Not Caving would suggest strength, toughness, determination, steadfast forbearance, heroism, unwavering in the face of enemy fire. We might lose business, let avails go unsold and miss our month, but We Hung in There.
The person who wrote this is a smaller market AE. They heard this stuff from a well meaning sales manager who heard it from another and another back to the first AEs, coincidently named Adam & Eve. The expression Caving is one of those emotionally charged, subjective clichés that have little to do with the business of BUSINESS.
They are a simplistic response to Business problem. Establishing good rates, is the result of the mathematical analysis of demand versus current and projected supply. The market is the determinant of our rates. By buying or not buying us, the market determines whether our rates are too high or two low. If you're at an 85% sellout - that's a signal to raise rates. It's about math not a Terminator attitude.
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PRO: Regarding Rates
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If the core value of the station is the rate - we have a serious problem. It says we have little else going for us. (As we know from the recent Katz experience, National business is about little else than rates.) Here's an e-mail from a Station Owner.
I'd like to share a concept in line with your thoughts.
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PRICE is the dollar amount at which an item is sold. It includes the COST + PROFIT.
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COST is how much money we spend to make it. PROFIT is a variable.
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An AIRLINE FARE is something very different. a FARE is a PRICE (COST + PROFIT)
+ CONDITION OF USE - which may command additional profit.
That's the concept that broadcasters miss; Condition of Use. We don't have a problem with the idea that an airline seat on a 747 from point A to point B has several different selling prices - based on several different Conditions of Use. Examples:
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When you buy
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Where you sit
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How you pay
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When you travel
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Whether you can change or cancel or get a refund
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Who's buying? Large corporate client? Frequent flyer member?
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Where you buy (online is usually cheaper than over the phone)
The airlines are very comfortable within the idea of "redirecting demand" by offering different fares to encourage maximum use of inventory. The airlines have a computerized avail system. None of their agents can change the prices, but since they have all the prices and conditions of use, they can offer options. Can't we do that? We almost never think how we could use the same strategy.
In my experience, most broadcasters don't do this because they don't know how to negotiate and they haven't thought about how to make the process work for them - instead of against them.
Let's redefine RATE to mean COST + PROFIT + CONDITION OF USE.
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Tomorrow - Regarding the KATZ RATE SQUEEZE
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Seventy-Seven People Are Ahead of the Trend
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That's how many (77) have attended How to Jump-Start Your Year in Today's Tough Economy. They've downloaded their own copy of the workshop and while you're reading this, they're on the street right now using the tips and ideas they saw and heard.
We've uncovered dozens of ways to beat this nasty economy. It's 90-minutes of pure practical Things You Can Do. There's so much material - you can pick and choose. THE choice goodies that produce best for you. (A rep called to say that the moment the presentation was over, she called a client who wanted to cancel - saved the business and got additional bucks.)
The ENTIRE sales staff? $99 bucks. (If the company won't pop, get a group together and split it. In fact we've had many single signups.)
Tuesday, Jan 13 and Thursday, Jan 22. Jump-Start Your Year in Today's Tough Economy.
Click Here for Details & Registration
Thursday, Jan 21 - same as above but FOR MANAGERS AND SENIOR SELLERS.
Click Here for Details & Registration
P.S. By request we've just added Radio Negotiating 101 to the workshop. What to do and what to say - when the client wants to cancel, cut back or wants a better deal. How to not only save the business but prime them for more budget.
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