Radio Sales Café

Overcoming the hijackers: How to retake control of your local direct rates

by Paul Weyland, reprinted with permission of RBR.com

“Our market’s different,” says the manager of a medium-market station. “Increased competition, the bad economy and little agencies are driving our local direct rates down.” Isn’t that a shame?  As a local manager you pay all of the bills. You pay salaries, electric bills, insurance costs, the rent, etc. and then little agencies, or clients or even your own salespeople dictate how you have to price your station in order to get a buy (in addition to the “added value” you are expected to provide for free).

During the peak of the economic collapse, cheap rate packages might have been a necessary survival tool for some broadcasters in some markets.  But isn’t it time now to start phasing out of that mode and start selling value over price again?  The answer is YES. Coming up with big ideas that clients will want to buy is not always easy but sure can be a lot more lucrative and satisfying.

Tired of your rates being hijacked?

Then do something about it. Draw the line in the sand by implementing some positive changes.

1. Immediately increase your local direct rates by at least 10 percent across the board.  Don’t spend weeks thinking about it, just do it, regardless of ratings or lack of them. If nothing else, at least you’re creating a little more cushion on your side of the line for negotiating. If you don’t see a rash of clients threatening to cancel, do it again in a few months. We must make every effort to raise the bar on rates.

2. Schedule an on-going series of sales meetings with the sole purpose of redefining station value in the minds of sellers. Face it, most rate resistance comes from salespeople, not the clients. Once your sellers are convinced that it’s in their best interest to ask for more (higher rates, bigger orders mean higher commission checks), the rate cycle will begin to change in your favor. Value almost always trumps price.  Your audience has value. Ideas that generate more customers to clients have value.

Reward sellers who are asking for and getting the higher rates. Ask them to share  their stories with the rest of the staff.

3. Refocus on negotiation skills.  Coach your sellers away from haggling over price and back toward selling the value of an idea and the value of the audience.  Always ask for more. Take what you’d normally ask for a month and try asking for that much per week (what do you have to lose?).

If the client asks for more, you ask for more. If the client takes something away, you take something away. Unless the client sells Christmas trees or something that seasonal, begin with asking for an annual contract.

Negotiate everything. Nothing is free.

4. Set yourself apart from your competitors. In sales meetings and one-on-ones, stress that you are no longer in the business of schlepping cheap spots and “packages”. Selling the lowest price is the easy way. That kind of behavior is what got us into this downward-spiraling rate mess to begin with. Decision makers usually consider rate-cutting media sellers as pests. People who bring them great ideas are considered by clients to be resources. Your sellers should be considered resources to local clients, not pests.

Think about it this way. You are now in the business of coming up with creative ideas that could be easily worth a million dollars to a local client over a 5-year period (that’s only about $4,000 more per week).  We’re talking about great ideas that don’t involve the advertiser having to discount to get new customers. The right client will be willing to pay you much more for in exchange for a great creative plan and you deserve to get paid handsomely for great ideas that the client is incapable of coming up with himself.

When a client brings up a competitor’s lower rate, consider this strategy, “Yes, but we represent a different playing field. They’re trying to seat you at the “little table”, small ideas or no ideas, for small prices. We think you should be sitting here at the big table with us. At the big table, we’re interested in identifying and solving consumer problems in the consumer’s language, not clichés, so that we can bring you more customers without having to discount your price.”

5. Reward sellers who close annual contracts at higher rates. Once the annual contract is signed by the client, you have some “protection” from competitors (including little agencies) who will try to take your business from you. The contract also allows you time to make the campaign really work for the client. It also allows you time to build a long-term relationship with him. Long-term contracts are the only way to go. Publicly recognize your sellers that bring in annual business. Privately question the ones who don’t.

6. Redefine what constitutes an “agency”.  How much longer can you afford to recognize and placate those pesky, parasitic little “agencies” that spring up and take your local business away from you? Why do you allow agencies to tell your clients they have a “special deal” which allows them to buy your station cheaper than the client could buy it from you directly? Is that kind of “agency” really the kind of company you want to be doing business with moving forward?

Consider structuring an agreement with the agency that makes the arrangement more comfortable for you. For example, take away some key dayparts and programs in exchange for a “special agency rate”.  For example, “Here is the low rate you want. However, it does not include newscasts, M-F morning drive or Saturday mid-days. Nor does it include live appearances. We price those differently.”

Further, what really constitutes an “advertising agency” to begin with? Maybe it’s time to weed some of them out. Shouldn’t agencies provide you with finished, ready-to-air commercials? Should they have more than just one or two clients? Do they really meet your stringent credit requirements?  Reframe your definition of what an agency is (or is not), get rid of a couple of the most irritating ones and then in the future, stick to your guns. We’re trying to pull ourselves out of this rate-grinding mess, not get in deeper.

When local agencies are not buying you at all for any of their accounts, what’s keeping you from going around them and coming straight to the client with ideas? What do you really have to lose by doing that? I have had annual contract clients that kept me direct at high rates, when all the other stations had to go through the agency.

While it’s true that some local businesses have been damaged by the economy (some irreparably so), plenty of other companies have plenty of cash to spend and they are ready to spend it with companies like yours if you consistently bring them great ideas.   

Where are these companies with money? Well, the defragmentation of the Yellow Pages has freed up product/service categories that were once largely unavailable to broadcasters. Consider medical specialists, garage doors, attorneys (divorce, personal injury, corporate, bankruptcy), movers, retirement and senior services, independent insurance agencies, loans, home repair services (heating, A/C, roofing, electrical, siding and windows, foundation repair, remodeling, tree services, lawns, plumbing), etc.  There are lots of companies out there that have never been called on by broadcasters, and many more who have never been called on properly.

The only way to get your rates back up is to take control over them.  You ultimately dictate rate, not the agency. Not the client. Not your salespeople. And you’ll get there by consistently leading the discussion away from rate and back to the value that your ideas and your audience bring to the client’s business.

The excuse, “Breaking even with last year is the new normal,” is becoming cliché.  Beginning now, increasing rates and getting more long-term local direct at rate card should be the new “normal”.

(source and contributing writer: Paul Weyland is a local broadcast sales trainer, speaker and “hired gun”. Get his popular book “Successful Local Broadcast Sales” at bookstores or online. Paul can be reached and/or hired at 512 236 1222 or at www.paulweyland.com)