Be Number One And Still Lose Money!

money

By John Pellegrini

It happens in every market of every city. It happens more often than any other major crisis that can occur in radio. And, despite the frequency, this colossal mistake goes almost entirely unnoticed. But the results are always devastating. Stations lose money, sales staffs get fired, management gets fired, and stations change formats. Varieties of excuses are given, but the actual cause, the one mistake that can be blamed for all these catastrophes, always goes unrecognized and unpunished. It is the single greatest money losing mistake that we make in radio and continue to make every day, week, month, year and decade. And I’m going to spell it out for you so that you’ll never find yourself making this mistake again. Because everyone involved will make the mistake over and over again until they learn why they shouldn’t.

The mistake is, at its essence, very simple. Of course, why wouldn’t it be? If you look at history, all great catastrophes that were caused by humans started with a simple mistake that compounded into huge tragedy. The benefit is because it’s such a simple mistake, it is easy to correct. It may not help the tragedy that is currently occurring, but you can prevent future tragedies by remembering how to avoid the mistake.

Okay, here it is: The mistake is made when programming thinks it’s more important than clients. Very simple mistake, yet this is the MAIN reason why so many stations ranked number one in their demos continue to fail miserably in turning those rankings around into profits. Programming thinks it’s more important than the clients.

Why is it that some stations that are ranked number one in their markets are still nowhere near others in terms of billing and profits? Why is it that stations with high ratings can lose clients to stations in the same format with lower ratings? This happens when programming thinks it’s more important than the clients. Why is it that some radio personalities continue to get numerous outside appearance bookings, endorsements and lots of extra money from clients while other, higher rated radio personalities get nothing? It happens when programming thinks it’s more important than the clients.

Now, I want you to remember here that the operative word is “more.” Programming thinks it’s “more” important than the clients. There’s nothing wrong with programming thinking that it is asimportant as the clients. The danger lies where programming thinks it’s MORE important than the clients.

This is a tough line of reasoning to take because there is a very fine line of difference here. But it is that difference that causes a station to make or lose millions of dollars in revenue every year. So pay close attention to what I’m saying here, and read this article several times to make sure you get what I’m saying. These losses are merely the result of taking an attitude too far.

As production people, we have to walk that fine line between talent and clients every single day, even more so than the sales staff. And unlike the sales staff, we don’t get anything extra when it all goes smoothly. So that’s why it’s vitally important for us to understand the nature of this beast of a mistake and try to remedy these situations before they happen. If you’re in programming or in sales and you’re reading this article, know that this is the result of over fifteen years of watching the same mistake being made in every single market around the country. Obviously, no one has figured this out yet. Otherwise, the same mistake wouldn’t keep being played out every day.

Here’s a typical scenario: An advertiser is a big fan of a station personality and wants to have the personality do some commercials and maybe even an in-store appearance. The personality agrees initially, but then the client asks for certain things. Maybe it’s a personal endorsement. Maybe it’s more commercials for the schedule. Maybe it’s an extra hour at the store or an extra day, whatever. The air personality refuses to do these extra things because “they weren’t part of the original deal,” or demands to be paid much more money than originally agreed upon. Plus, when the event happens, the personality (being the big deal “star”) only talks to the station people on sight. They won’t meet the customers of the business. They won’t meet the staff of the business. They won’t do anything at all except their minimal requirements, and then they’re out the door the minute they finish their last requirement.

Here’s another typical scenario: A client wants to do a big contest promotion with a station. The station programming department decides that the client has to offer a lot more—prizes perhaps, pay for the air staff, whatever. Plus, the client has to buy a bigger advertising schedule and pay for numerous other expenses as they arise.

There are usually two results to scenarios like this. 1) The client gets pissed off and pulls all his advertising from the station, or 2) the client goes along with the situation, but never does another contest or promotion with the station again. They may continue to advertise, but not anywhere near the amount they used to.

Nine times out of ten, what you see happening almost immediately is the client decides to give other stations in the market a try. And they usually wind up giving a larger chunk of the money they used to spend on the big deal station to a lower rated station. Why? Because the lower rated station gives the client what the client wants, all because programming thought it was more important than the client.

Now, let me set up some parameters about the differences between thinking “more important” versus “as important,” and how it could have made a difference in these scenarios.

In scenario number one, the air personality decided that the client was trying to get him or her to do extra work without pay. The typical line of reasoning goes like this: “That cheap bastard wants me to do extra work, but won’t pay me extra? Screw him! I’m bringing in all this extra promotion for his damn business! I’m bringing in all my audience to spend money at his business! He owes me part of his take!”

However, when an air personality thinks that he is “as important” as the client instead of “more important,” the line of reasoning goes like this: “The client needs some extra promotion? No problem. It’s not that much extra for me, and if it makes a difference for his business, then he’ll keep hiring me more often, and I’ll make a lot more money in the long run.”

In scenario number two, the station decided that the client was trying to get something for nothing and it was up to the client to pay for the additional expense brought on by all this extra promotion. The typical line of reasoning goes like this: “That cheap bastard wants our incredible station to promote his business. He wants us to bring our audience to him. Well, then he’d better prove to us that his business is worthy of our promoting it to our listeners. He needs us to make him look good. We are the stars who can make or break his business, so he’d better make it worth our while to even mention his name on the air.”

However, when a station thinks that they are “as important” as the client instead of “more important” the reasoning goes like this: “Okay, let’s show the client that we really go to bat for them, and let’s make this the most successful event that his business has ever seen. Then, he’ll be more interested to spend more money on us and continue to bring us business every year.”

Yes, I know I’ve simplified things. That’s so you can adapt these scenarios to every single promotion you’ve done in the past year to see which side you were on, because it really is a simple difference.

Now I’m not saying to bend over backwards and kiss the client’s ass while giving away everything for free. But I am saying that sometimes we seem to expect the clients to do that to us. The truth is, you can always tell which station in the market has which attitude by the amount of billing they have. Stations that make their clients as important as they are wind up with the most money at the end of the year. No matter what the ratings are, the most profitable stations are the ones who make the clients feel as important as anything else on the station. That’s also why some stations, despite being lower rated, out bill their competitors in the same format. Now, let me add that you should notice I didn’t say make the client “more important;” that’s just as dangerous, because you can lose money trying to please the client who’s become accustomed to having the world handed to them on a silver platter.

Here’s another example, one that recently happened at a previous station in my career. Friends of mine told me about it. A well-known national client wanted an air personality, well-known in that particular market, to do endorsements for the product. The air personality agreed. Then, the spots were recorded and the client approved the spots. The air personality then demanded to be paid the talent fee IMMEDIATELY, not in two weeks, not in thirty days, but right there and then. This major national client who always paid everyone else in thirty days and never went overdue, had to write a special check just for this air talent. Now, mind you, this client routinely spent millions of dollars for their national advertising each year. But, in order to accommodate the air talent, they cut a special check for the paltry talent fee. The air talent got the money and was never hired by that client ever again. The sad part is, the client liked the air talent’s spot so well that they were thinking of using the air talent for their national campaign. But after the little talent fee fiasco, they never called again.

By being greedy and unprofessional, the air talent shot their chances of making huge amounts of money as a national spokesperson for the client. How huge? At least as much, if not more than the air talent was being paid by the radio station in annual salary. But the air talent never learned that, and never learned their lesson either; from what I’ve since been told, this person is still pulling this nonsense on talent fees with other clients. Word is getting around that the talent is “difficult to work with” because of money demands. The air talent isn’t getting anywhere near the amount of endorsement spots they used to get and, of course, is blaming the salespeople of the station for not doing a good enough job “promoting me to the advertisers.”

In these days of cutthroat mergers and consolidations, the bottom line is money. Stations are going to have to make more money, and if it is found that programming is getting in the way of stations making money, then changes will be made in programming. And, as I’m trying to point out here, ratings successes sometimes have nothing to do with it.

Does that mean we have to cater to a client’s every whim? Of course not. But it doesn’t mean we should insist that advertisers jump through hoops for the privilege of buying air time on our “illustrious signals.” If you truly believe that the sole purpose for advertising is to provide money to fund putting your brilliant programming on the air, then do us all a favor and get out now. Like it or not, the only thing that’s going to matter when the smoke of consolidation clears is how much money there is on the books. If your station isn’t billing the way the corporate powers want it to be, you’ll be out, no matter how good your ratings are. The vast wasteland of radio has-beens are filled with stories like these. If the ratings aren’t translating into dollars, then what good are they?

What it all comes down to, folks, is this is a business. Some will say it’s the entertainment business, but let’s face it, entertainment is a service. Therefore, we are in the service industry. Sure, we claim that our service is providing entertainment to our listeners, but don’t ever forget that we don’t make any money doing that. We make money by providing a service to our clients. And if the clients don’t think they’re getting their money’s worth from the services we provide, they’ll go somewhere else, regardless of ratings. The real service of this industry is the advertising medium that we provide. Everything a station does from programming to personalities is supposed to generate a positive environment for the station’s advertisers to sell product. That’s the only way we make any money. That’s the only way the bills get paid, the lights stay on, the door stays open, and you keep getting a paycheck. If the clients feel like they have to jump through too many hoops in order to get the results they want, they’re not going to stay.

I’ve seen this happen countless times in this industry at stations I’ve worked for and at stations that were competitors in the market, even stations in other cities that employ people I know. Time and time again I’ve seen stations with great ratings wind up biting the dust due to wrecking relationships with advertisers over the petty, egotistical whims from programming and air talent. The smart broadcasters make the client feel like a partner. The smart, profitable stations make the clients feel like they have an investment and a stake in the successes of the station, because they actually do! By spending money on the station, they’re investing in the station’s future. By spending money on a specific air talent’s show or having a specific air talent do their commercial, they’re investing in that talent’s career. Look at your advertisers with that kind of attitude, and I don’t care where your ratings are, you’ll always be a little more ahead of the game than your competition.

Advertisers don’t need ratings to justify spending money on stations. I remember many times over the years certain clients telling me, “I don’t care if that other station has bigger ratings, I’m sticking with your station because you guys always go to bat for me.” This kind of client loyalty happens a lot more often than you might think it does. Just make sure it’s happening for your station and not the competition.

Now, how do we fit into this, production people? How can we help make the client feel he or she is getting their money’s worth from our station? Little things, of course. When you play a commercial or a promo for a client over the phone for approval and they say, “That’s great, let’s get it on the air,” why not thank the client for the business? That should be automatic, but many times it isn’t. Yes, I know the salesperson is the one who should do it, but why not you? It’s only a few words, and it really does go a long way in keeping a client loyal. Besides, let’s face it, salespeople come and go faster than the newest number one song. Keeping a good relationship with the station’s clients will make those salespeople transitions much easier to deal with. That way, no matter how bad a salesperson screws up a commercial order, you can still personally call the client, because you’ve got a good relationship with them, and get the matter straightened out, instead of having to wait until 5:00 p.m. on a Friday afternoon for the salesperson to remember to call.

So, the next time you’re on a phone call with a client and they say, “Thanks for doing a great job on my spot,” just simply say, “Well, thank you for your business.” That’s all you need to say. No sacrifice on your part, just six words. But it will make a big difference with the clients.

The plain truth of the matter is, radio is in serious trouble. The major conglomerates are beyond being mortgaged to the hilt. The business of doing business in radio is going to cost ten times as much as it used to because the whole industry’s net worth is so overly inflated that a giant economic correction is going to occur next decade. There will be a lot of radio stations going bankrupt. And a large number of mid-level employees like us will feel the pain. The big-wig executives who created these consolidation messes will clean up with their multimillion dollar bonuses and get out quickly, just like the corporate raiders of the 1980s did. The handwriting is on the wall. The only think that will save your hide is to remember that the money-making part of the business will be the only part anyone is going to be concerned with any more. Ignore this at your peril. Radio is no longer what it used to be and never will be again.

If you’re the kind of person who believes that programming is more important than the clients, then I suggest you get a gig with NPR or PRI as quickly as possible. That’s the only way you’re going to find a job in the next decade. Money is all that matters anymore, and if you don’t help generate any for your station, they’ll find someone to replace you who can. Truth be told, even the people at NPR and PRI are starting to feel the economic squeeze, and more often than not, if you want a job at either of those outlets, you’d better be able to provide your own funding. Click and Clack, the Tappet Brothers (Tom and Ray Magliozzi) are classic examples. They got their PRI show because their auto repair business was the initial sponsor. We’re all about to become the sales staff, folks. Your commission will be the right to keep your job. It’s sink or swim time. How long can you tread water?

Comments (0)

There are no comments posted here yet