Lets step into the "way-back" machine and review an article from the early 2000's. There are lessons to be learned about raising rates and taking the sales department out of the equation and approaching the change from a position of strength that applies to any media company...
You're getting ready for the last 3 quarters of this year, and you've been told you have to increase your overall sales goal by a minimum of 7-10 percent because lackluster sales and increased costs are putting you already behind in the budget. As a sales manager, you decide that the quickest way to get there is to increase rates, but then you think again. You know your sales reps would rather have a root canal than go out to their clients and increase rates, even though it could be as little as 3 percent, which in some markets amounts to almost nothing.
So, why the resistance from your reps? Wouldn't this make them more money? Alas, they lose clients if rates increase. Sound familiar? Of course it does. This scenario is going on every day in radio stations across North America, and as a result, you're getting squeezed by both your general manager and by your reps. Where's your exit visa?
A couple days ago, the front page of the Portland Oregonian business section had this leadoff article: Comcast Will Raise Cable Rates In January "In what's fast becoming a New Year's tradition, Comcast Corp. plans to boost cable TV rates across the Portland area... by 6 percent. Rates for standard cable have risen by an average of 6.8 percent over the past 5 years." Comcast justifies this raise by saying it has improved reliability and customer service. Well, in Houston, that's a crock. Customer service is worse than ever, and they are raising rates there, too. Almost every business I know is raising rates. Comcast is raising its advertising rates, too - for the 11th year in a row (according to my source in Portland). Let's face it; the cost of doing business is going up because of energy prices, the wars, etc. The general managers I speak with say that, on average, it will cost them a minimum of 5-8 percent more to run their stations, compared to last year. So why can't we raise rates, too? We can and should!
Every year, the newspaper industry sends out "the letter" to advertisers, stating that the cost of paper is going up and they are going to have a standard 10 percent rate increase effective January 1st - much like Comcast. Why does the newspaper industry send out this letter and not have their reps relay the message? Simple: It takes the negotiating out of the reps' hands, and it doesn't infringe on the relationship the rep has with the client. The clients get "the letter" and know there's not much they can do about it since it's stated as fact. Smart move, newspaper! Why can't we do the same? We could - and we should if it makes sense to do so to begin 2nd Quarter. More than likely your clients are seeing surcharges from fuel increases, monthly or semi-monthly rate increases from suppliers, and everyone is watching what is happening at the gas pump as prices jump twice daily.
Here are some pointers on making this as painfree as possible:
- Your sales rep notifies the clients, explaining that the GM is sending a rate increase letter, which they will receive in the next few days.You want to prepare the clients so they won't feel blindsided.
- The general manager, not the sales manager, sends the letter.This takes it out of sales completely, coming from a higher authority.
- In some small to medium markets, it might be better to raise rates by the dollar, instead of percentage.
Here's an example of the rate letter from one of our general managers:
Mr. John Frugal, Penny Pincher,
Inc. 1111 Cost Per Point Lane, Cash Flow Cove, CA 91111
I would like to thank you very much for the advertising investment you made in KKWW-FM.
That expenditure was a very wise investment for your company.
As you know, the New Year is here and a lot of change is happening as we near the start of 2nd quarter, and we once again hope to be one of your marketing partners. We look forward to being an integral part of your formula for success as you increase your market share and your awareness in the minds of inland empire consumers.
While it was a good year, it was also a challenge - with the war, rising gas and energy prices.The overall cost of doing business has risen considerably over the past 12 months. In order to meet these demands, KKWW-FM will have to raise the cost of advertising across the board by 10 percent. By doing this, we can continue to provide you with an exceptional radio station that will continue to give you the return on investment you need to be a leader in your industry.
Unlike most other advertising mediums, KKWW-FM has not had a broad rate increase for the better part of the past five years. In fact, there have been only a few cases of marginal rate increases. As you know, KKWW-FM has always been one of the most cost-effective and efficient advertising investments in the marketplace. Even with this rate increase, we believe KKWW-FM will remain affordable, efficient, and fair when compared to other choices available to you.
Once again, I appreciate your business, and I look forward to working with you. If you have any questions, or if you just want to share war stories with me, please feel free to call me at 999-799- 3554, extension 200.
Jeffrey Smith, General Manager, KKWW-FM