One of my radio friends would like to get your input:
If you owned a radio station that reached a small community (total population 50,000 or less), what would you charge on average for a 60-second spot?
I'd love to offer an open and shut case for a specific rate per 60. There are so many variables you must consider.
First, your audience size is a factor. What percentage of the market do you reach? I'm fortunate to sell for a station that reaches more than 25% of the 18+ audience with listeners having the option of 50 signals per Nielsen. We're a household name in this county of about 45,000. But we don't just look at this factor.
Second, who is your advertiser? By this I mean what is the average business that advertises with you and what do they spend? I think you will find the bulk of advertisers are mom and pop businesses. What does a typical advertiser spend each month? I consider the average dollar amount spent and what it takes in frequency to reach all my listeners. Just to toss out a number, let's say $300 a month and to effectively reach all your listeners you need one commercial per daypart 6am to 7pm weekdays to reach your listeners. Then a good rate is $300 for 3 per day Monday through Friday.
Third: What do competitors charge? Look at column inch rates in print, other stations you compete with and all other typical choices your potential advertiser would choose. I like to be mid-range in price. Again, you must factor in your audience size and what the average business spends. Naturally, you want the highest rate you can reasonably charge but be careful not to price yourself so high only the biggest can afford a schedule. If Covid taught us anything, it's that the bigger advertisers gave us crickets while the little mom and pop stayed with it because they had to have a paycheck too.
Last, what does your station need each month to cover the bills and set aside some bucks for that rainy day? Your formula of how much work versus expenses can be a factor in rates charged. I like that amount to be very easily attainable. For example, if I need $20,000 a month my staff at 75% to 80% capacity should be able to hit that mark. This accounts for vacations, illness and other factors where your efficiency can be a factor. So, the spot rate and package price reflects all of this. In other words, if your staff working at 75% can get you to breakeven servicing X number of accounts, you want that extra 25% to go to cultivating a profit. Naturally the other factors might be more crucial than this but nothing affects the bottom line like money or the lack of.
If you have the reputation of market leader you can charge more. When I was in one market of 4 stations, there were two country and two contemporary stations and we were big time rivals. The pair I worked for were the market leaders. We charged double the rates of the two remaining stand-alone stations we competed against. We got our rate and most ad dollars. When a client would blast us for high rates, we'd respond with 'you're a business owner so you know if my competitor could charge what I do they certainly would but they just can't deliver the results we can. Simply put, you get what you pay for'. We got $14 on a combo buy when my competitors were charging $5 and $2.50 respectively and we had double the commercial load because our sales department was not a revolving door. My competitors went through frustrated salespeople quickly. I'd caution that if only a handful can afford you, you might find yourself hurting in the near future. Many companies are changing co-op advertising rules and are moving away from radio and especially print. Those agency buys are getting fewer and further apart.
In my market, the average client (mom and pop) spends $200 a month. Yep, dirt cheap. Naturally we have bigger clients in the $500 all the way to $2,769 a month range but I have 5 at $200 for every one at $500 a month. Our rate card shows a 30 at an open rate of $10. All my accounts are on my annual plan with 'no penalty cancellation' (that renews as an until further notice). It still amazes me how many will stay on all year and thereafter when they know they can cancel today if they want. I run a 7 to 8 out of 10 staying on all year with one guy in year five now. It's a winner here if you have the guts to try that. I tell people, 'you might plan on a couple of months but I'll write it as an annual because it gets you the biggest bang for your buck. You can cancel at any time without penalty but I suspect you'll be so happy with your results you'll stay with us'. When you're #1 in your market, it's a pretty easy hurdle to sign annuals.
Final note. Find that sweet spot. There's a sweet spot where you can sort of pick and choose your clients from the crowd wanting on the air. We found ours and my boss asked about a rate increase. I suggested we stay where we are for now. We can spout we have not raised rates and anyway we are in that sweet spot.
