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Monday, August 13, 2012
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Who Sets the Purchase Price?

I'm intrigued by the article at Radio Ink, "It's As If You Don't Want to Raise Rates."

Cumulus Co-COO John Dickey's comments are being panned and applauded, depending on who's writing to the editor. I strongly suggest you go through the comment section of this article. It shows reasons why the radio industry is going to continue its struggle to be taken seriously again.

"Digital dollars are growing more important, not because they are more important but because advertisers are beginning to understand how important accountability is." We'll end this with a comment about Mr. Dickey's perspective.

Let's start with another person's response to the people who commented that John Dickey should take a walk in an account rep's shoes. We'll call this fellow Paul, because he didn't have the nerve to leave his last name: "The pathetic, limp-wristed, noodle-neck, spineless wimps of salespeople comments posted here tell me that radio is lucky to be selling anything. Sales is not negotiating, it's persuading. Fortunately, few of the commenters will be employed in radio in 1 year. Go play with the internet."

Two items, Paul: a) If you think media buyers are "playing" on the internet you are going to have a rude awakening, whenever jarred from your myopic view of the building approach to ad buying; b) "Persuading" is an old style sales technique. You are obviously not worried about getting repeat business, where performance is a deciding factor and customer satisfaction comes first.

Today an account rep better be willing to negotiate, and be able to offer the buyer something they can't get in a thousand other places (like simple impressions).

Here's a little advice from respected research firm BIA Kelsey: "Digital will account for 25% of the local ad market in the future." You can read more on this, and see a great deal of detail as to why, by visiting the ClickZ "Stats" page.

Other comments on the Radio Ink article stretch from agreeing that the radio industry needs to force account reps to accept only established rates to my own belief that if you need to control your sales person to that degree you don't have a smart-enough sales person.

Isn't the concept of paying commission enough to drive a sales rep towards getting the highest price? Paying commission against only "collected" dollars is, in itself, a guarantee that the company gets paid before the staff. (And, I think this is a fairly standard practice in radio today. Is it not?)

David Saperstein taught me a very important sales message early on: "Raising rates is a lot harder than walking away from a bad offer." The problem is that radio has accepted too many bad offers, and it's diminished the quality of what it offers in a poorly executed product.

What the radio industry has been putting on-air over the past 15 years has severely damaged the ability for anyone in radio sales to sound sincere when stating "we can sell your product." Use the HD Radio fiasco as an example. If the radio industry couldn't conceive a campaign that convinced the masses HD Radio was worth shelling out dollars for, why would anyone think it (radio) is capable of creating a campaign for a product that's not "radio"?

I'm not sure if this quote comes from John Dickey, or Radio Ink's Editor Ed Ryan, but it's disheartening: "After all, if everyone decided to hold their ground and even raise rates, all would benefit and make more money." These words show a misunderstanding of how various groups within the radio industry have been at each other's rate-throat for years (you're not going to reverse this). It also shows a view that the ad buyers are stupid enough to not seek options.

Remember that BIA Kelsey comment about increased digital revenue? There are plenty of feet on the ground in each market now, offering "new" to companies growing tired of "old." Radio industry sales folks are knocking on the same doors - using the same old appoach of GRP and CPP rates - with no proof that their product produces sales for clients.

I'm sure that John Dickey read his brother's (Lew's) 1994 book "The Franchise Building Radio Brands." That was his first mistake, as radio - even back then - isn't a brand. Instead it offered numerous brands, as in air-talent. Even the old powerhouse CKLW knew it wasn't the station that was being bought by advertisers and audience; it was the jocks. That's why it had a practice of assigning jock names to dayparts. When one personality left, management would simply find another similar-sounding person to replace him (it was always a "him").

Station credibility started to go downhill when they shifted to the idea that the station is the brand.

Mr. Dickey - both of you - the value of what you hold is not in the buildings and signals. The advertisers that you chase are not interested in putting money behind an innocuous sound that offers no proof of performance. You'll get a real taste of this when launching "SweetJack," your Groupon wannabe.

Digital dollars are growing more important, not because they are more important but because advertisers are beginning to understand how important accountability is.

To think you can increase values in the radio industry by "sticking to your higher rates" is delusional. It's based on the concept that the people spending money are too stupid to look at alternatives.

Stupid they are not. Reciting that "93% of American listen to radio once per week" may be, though, if that's all you offer in a world where I can definitively say "1.75% of all the people you reached bought what you are selling on my media."

That is the radio industry's new competition and, in many cases, rates are much lower than what John Dickey believes radio ads are worth.

Cumulus may be the second biggest radio player, but looking at what the biggest player is now doing and the logic it's using has got to make you laugh - CC's launching comedy formats! How many times has this been tried and abandoned already?

How much is that doggie in the window? The sign may say $15, but I'll bet you can get it for $9.95.

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