A Plan To Eliminate Radio's Advertiser Turnover Forever

 

Turnover among advertisers seems to be a disease within the radio industry. But what if we looked at advertisers differently? Could we stop the turnover?

First, we have to address the causes of turnover. I think it boils down to a few things:

 

1. Clients are sold high expectations, then let down when those expectations are not met.
2. Salespeople are so eager to make a sale that they will accept schedules that cannot possibly work.
3. Clients (and salespeople) don’t understand what works on radio, so the creative is often ineffective.
4. Our industry has high sales turnover. Clients just get tired of hearing from yet another new rep.
5. Clients don’t understand the value of dominating a single audience and therefore jump ship to other stations when their ads don’t seem to work. They don’t give ads enough time.
6. Clients succumb to high-pressure techniques but then swear they’ll never advertise with that salesperson again once the agreement ends.

 

The harsh reality is that most of these problems are caused by radio people. Because we are under enormous pressure to meet budgets (understandable), salespeople have less time to develop client relationships and to properly educate advertisers about what works and what does not. (And frankly, there are lots of reps and managers who don’t even have those answers themselves.)

 

Uneducated advertisers are our fault. We have to take the time to develop them, help them understand why repetition over time is necessary, how to build top-of-mind awareness, and how to run campaigns vs. running spots. We need to be willing to say no when we know a schedule won’t work. That’s hard, with so much budget pressure. Yet when ads don’t work, the advertiser blames radio and the station. And if we place the blame on them after the fact, we look like cowards. These are conversations to be had up front.

 

But beyond these issues, there is a factor I’ve never seen used in radio. It’s called “lifetime value.”

 

Last week I met with a radio group head and asked what the lifetime value of a small advertiser was. She paused, then said, “I’ve never stopped to think about that.” She then guessed a small advertiser on her stations was probably worth a million dollars.

 

The light immediately went on.

 

What if rather than looking at a small advertiser as an annoyance, you looked at them as a million-dollar customer? How would you treat them differently? What would you spend to acquire them and keep them?

 

I own a direct marketing business, and one thing those of us in direct marketing are willing to do is spend as much money as possible to acquire a quality customer, because we understand their lifetime value. If I spend $1,000 to acquire a customer, it seems high — unless, of course, you realize that customer over the next 10 years may spend a million dollars with me. Suddenly it doesn’t seem like a lot of money, as long as I’m finding the right customer. (That is a different discussion for another time).

 

In the direct marketing world, we also know our stats exactly. We can tell you how long the average customer stays and the exact time most will want to wind up their original contract. What if you calculated that? The data is certainly there.

For instance, in a membership program, a direct marketing company knows that someone paying $50 a month for a service will typically back out in month seven. Since they know that, they can work to prevent it: In month five, they’ll activate a client-retention program. Sending a little unexpected gift or reminding the customer of all the value he or she is getting — by providing even more value — will stop most cancellations.

 

What would the value to you be of a plan to stop advertisers from backing out or being taken away by others?

 

Another big issue in direct marketing is buyer’s remorse, and cancellation in the first or second month. That’s why most marketers send a box of gifts to thank customers for their business. People tend to be less likely to cancel after they get your welcome package.

 

What if your station treated customers like direct marketers do: creating a truly wonderful welcome package, building a retention program, and being willing to invest to bring in the right customers?

 

Recently a hotel pitching us for our convention business went all-out during a visit. They sent a limousine for us, they had our logo projected on the wall, they had a cake with our logo imprinted on it, and they had people placed around the property in costumes related to the event we were proposing. The same day we visited two other properties, but they did nothing like that. That first hotel stood out, and they are the one we want to do business with. They made the extra effort, and were willing to spend to get our business.

If you look at every radio advertiser as a gift, and one you need to invest in to keep, it will change how you sell, what you spend to attract the right people, and how you train your staff and your clients. And it will have a big impact on retention and turnover.

 

 

Comments

[Paul Rogers]

Overpay for a broadcast property .. hang lots of debt on the business .. then hire whoever you can convince to sell radio spots to sell enough ads to bail out the owners greed/ego who paid too much to begin with. Clear Channel would be just one example. Go to court and force the banks to pay $21 Billion for a Pig In A Poke so MittRomney and his VC Pals can live happily ever after. Impossible business model based on bad math .. greed .. and a dynamic market changes .. what was once values at $26.7 Billion on the back of a napkin and then sold to a group of investors is worth 1/10th of what it sold for in 2008. Just to put things into perspective, Rush Limbaugh's Net Worth is $350 Million or more than 10x the Entire Market cap of what Used to Be Clear Channel.. now known as I-Heart-Burn Radio.

[Dennis Heinz]

My Lord, 20 years later this is still a topic? I would have thought the industry would have figured it out by now. This articles' subject matter gets written about every couple years. Not a good reflection on an industry. Glad I am out. Radio is a bean counting industry period. "Just Get all the Money" an AE is told. No regard for the AE or the client. A GM that invests quality time (90 days)with new AE's will reap the benefits 10 fold. That just does not happen anymore. I know I did it and had a great stable of sellers.

[Panama Jack]

"Over ten years" hah! What's the lifespan of the average salesperson in today's Radio disaster. Ten months? A year? (That might be pushing it).

What's needed is to actually train salespeople to sell saturation schedules with enough frequency to trigger top of mind awareness that results in measurably higher sales. Don't let the advertiser water it down either. If they want results over a short timespan, sell them the super soaker.

How many sales managers out there offer a package that super saturates with a very high frequency? I'm not talking about a remote either.

[Mel T]

So we are guilty are "selling schedules that could not possibly work", eh, Eric?
What does such a schedule look like? 2 spots a week? 4 spots a week? You really don't know, do you? Nor does anyone else. There are plenty of ads that ran only ONCE and achieved the desired results. Advertising on radio is something you don't understand. Stick to rubbing elbows with the Dickeys, Eric. It's something you are good at.