Why Does Radio Need Outside Sales?

[landtuna]

I keep reading that virtually all radio advertising is purchased by agencies. I'm not sure I buy that but if true why does radio need sales feet on the street? Wouldn't it suffice to have an order-taker to answer agencies phone calls and no door-to-door cold callers?

 

[secondchoice]

Many be in a top 50 market the agencies have most of the money, but in rest of the world there is a lot of "local' money. In a non rated market, 90% or more of the revenue is non agency. Many local sponsors have COOP dollars they do not even know about, which requires a couple of face to face meetings. As for the big markets, CC and Cumulus (and most large corporations in and out of radio) have accountants who job is to figure cost savings. If the local sales department (or any department to be honest) could be replaced and not result in negative profitability it will or has. That is why "local" programming is a thing of the past. One announcer can VT or by satellite cover many markets for about the cost of one market. As long as there are viable small business people in America there will be "local" sales folks.

 

[Goat Rodeo Cowboy]

Agencies do not deliver contracts in a truck like a heating oil delivery. Even in a market with generous amounts of agency channeled advertising contracts, there is a need for sales people to be the contact with the agency.

 

[TheBigA]

Agencies do not deliver contracts in a truck like a heating oil delivery. Even in a market with generous amounts of agency channeled advertising contracts, there is a need for sales people to be the contact with the agency.

Exactly, and the key job of a radio salesman is to make sure you get more than your share of the pie, create special marketing projects that do that, and then do the follow-up to keep the agencies happy.

And it's not just the Top 50. There are agencies in most of the Top 125, and even lower. If there's big money to be had, there will be an agency looking to get a commission. There are lots of agencies, and lots of media choices. More and more advertisers are looking for help to make media decisions, and the agencies present themselves as representing the client.

 

[davideduardo]

I keep reading that virtually all radio advertising is purchased by agencies. I'm not sure I buy that but if true why does radio need sales feet on the street? Wouldn't it suffice to have an order-taker to answer agencies phone calls and no door-to-door cold callers?

Agency dollars are available in proportion to market size.

In the highest billing markets, the majority of dollars going to stations with relatively salable ratings will be placed by agencies.

The smaller the market, the less the percentage of revenue comes from agencies.

There are three classes of agencies, national (think campaigns for Coke, P&G, autos), regional (think regional car dealer associations, such as Southern California, regional retail, etc) and local (local major retail and local products in larger markets). The dollars they place are done based on ratings, but stations have to pitch cost per point, value added, merchandising and new media promotions, etc.

National is handled generally by a rep firm, which has offices in the major buying centers. A station will have a national sales manager... a dedicated person, or part of the job of the GM or the GSM... and it's lots of work. I was NSM in a top 15 market as part of being GSM (among other things), and it took a lot of time.

Supervising sellers who only visit agencies is a major job, and in big agency towns (in the top 15 market mentioned above, we had over 100 agencies hand house agencies and 3 sellers doing nothing but agency sales) a dedicated staff will do agency work.

Agencies are not cold-called. But a relationship that builds confidence and trust is essential. Again, in the case mentioned, a seller might visit the larger agencies several times a week... even in the era of fax and email and such.

Getting maximum dollars out of agency sales may actually take more time than with retail. But in larger markets, direct business is tough because stations often cover much more area than the sales area of a non-agency account and few can pay radio rates. The good accounts for radio will tend to be agency accounts in these markets. Go to smaller markets and most business is retail.

 

[landtuna]

Thanks all for your very concise explanations. I hadn't realized agency interaction was so personalized and labor intensive. My dad was a salesman (not radio though) and he had a mix of small and large customers. He used to say most of the work was with the smaller guys since relationships and past performance used to suffice for the big guys (not to mention the discounts that came with order quantity) and turnover of the big accounts was practically nil.

 

[bossbill]

National and even regional advertisers often ignore peripheral markets because they erroneously think that everyone is listening to the metro stations. In our market, the metro stations are very difficult to receive. Nevertheless, we get less and less national business every year. Meanwhile, the big box houses have decimated small local businesses, which are our lifeblood. There is not "lots of local money" anymore. Even co-op is drying up, as national companies offer local retailers less and less of it.

If we didn't send our local sales people out to forge relationships and work with our limited supply of viable clients to help them compete with the box houses, we would have virtually no revenues. Local sales people have always been important, and in today's world they are more important than ever.

 

[toddort]

What Bill W. said times a thousand for us small market operators

 

[davideduardo]

What Bill W. said times a thousand for us small market operators

And, besides the big box stores, let's not forget the terrible impact of Docket 80-90 on smaller markets.

I was overseeing a combo in Lake City, FL, when 80-90 was implemented. the number of stations in the county more than doubled, and the "10 spots a day for $300 a month" guys made much of our community service unsustainable. There were twice the stations, with no more money on the street for advertising... and then we got a WalMart and downtown died. Ugly.

 

[TomT]

Now for the real double whammy--the requirement that all advertising contracts contain a non- discrimination statement. Which the station will be required to confirm when renewal time rolls around.

We're currently in a new renewal cycle, Arkansas, Louisiana and Mississippi must file by February 1st, Alabama and Georgia come up after that, followed by Indiana, Kentucky & Tennessee.

Grew out of the "no urban no Spanish" controversy of a few years back, where some minority broadcasters claimed that "advertising contracts" contained such clauses, excluding them from agency buys. Doubt this was actually the case--more likely was in e-mailed requests for rates & avails from agencies. So what did the Commission do? Shoot the victims.

This requirement sounds simple if you know absolutely nothing about the business. Apparently a requirement for all new FCC Commissioners. Even if you have an attorney camped out at the station looking at every sale there is no-way to comply with this rule on every sale. (Which is my case since I am an attorney and own a couple of stations).

Folding into the thread on outside sales:

1. Many agency contacts originate with an e-mailed request for rate and avails arriving "out of the blue." The account rep e-mails back rate information, agency sends an order with instructions for downloading copy. An advertising contract has been created--but where do you put the non-discrimination notice? (We add it to the signature line of the e-mail)

2. Returning to the question of why you need outside sales--Account rep works with local dealer or franchisee to get co-op dollars, which entails working with the manufacturer's agency for copy approval. We've pulled lots of $$ from Ford working with our local dealers that way--benefits Ford, benefits the dealer. Eventually there is an order--but with such a triangular relationship it's hard to figure out where the order originated. E.G. Rep talks with local dealer, who contacts his rep at the manufacturer, who contacts their agency, who sends copy by mail or e-mail (standard script with place for local tag, for example), and authorizes a coop amount with the local dealer-who calls in a places the order. There's lots of writing to establish the elements of a contract--but where do you put a disclaimer?

3. We have a number of small local agencies we deal with. The account rep. must visit them in person to get an order--and ofter the order consists of scribbled notes from the agency & a spot e-mailed from another radio station. Is this an advertising contract? Yes--offer (by agency to buy time at certain rate for certain number of spots over certain period) and acceptance --by the station by running the spots. Can we get a formal signed contract, so as to include the non-discrimination clause? You're joking, right? We're lucky to see any money in under 4 months.

4. Then there are the meat and potatoes orders from local direct that really keep most stations alive. Most sales are based on relationships created between sales person and advertiser over many years. Which is why you need outside sales people. Which is why the "no urban, no Spanish" no discrimination clause requirement is impossible to comply with. The car dealer, the local restaurant, the hardware store or bank don't really need you--they are buying because they like the station, or the sales rep, or because their competitor bought.
Throw a lot of paperwork at them and they throw you out on the street.

Example No. 1--sales rep has lunch with the local jeweler, comes back with an order written on a napkin. Jeweler is a regular advertiser, but is off and on the station based on holiday promotions (Christmas, Valentines, Mother's Day) and whenever he has particular sales or trunk shows. The rate has been established--salesman just needs to get copy & times for the flight.

In contract law this is an example of a continuing relationship that establishes a contract--the farmer delivers grain to an elevator, or the coal truck drops off coal to a plant as needed. The price per bushel is fixed by the grain market, or by previously agreed price per ton, with the coal. Either the buyer agrees to take all that can be supplied, or has agreed to pay based on his needs (we need more coal, send the truck...).

The problem is that each flight (in the case of our jeweler) can be construed to be a separate contract for the sale of advertising time--requiring the stupid disclaimer.

Example 2: Local full line car dealer has a pattern of buying Thursday through Monday--but not every week. Sales reps need to check with the manager every Wednesday to get an order. If they can find the manager--who is often out on the lot or on the phone. Normally our chief saleswoman does this--but she's out this week. My business partner & I are traveling to a meeting out of town last Wednesday--he has to make 4 phone calls before he can finally catch the manager in for 30 seconds to get an order. Just 5 minutes before our office manager/traffic person is to leave for the day. Written sales contract? That manager would through you out of his office.

And (veering off topic again) there are those network affiliation agreements, or program barter agreements that include a requirement that the station air the network's spots. Advertising sales contract? Of course. One written by the network--take it or leave it.
Then there's the political ads--order and check Fed-Exed the week before the election from the candidate's committee, rates taken from the station's published political rate card. Of course there's no non-discrimination clause. For the most part other Federal law requires you to run those spots (especially if from a Federal candidate).

 

[Goat Rodeo Cowboy]

TomT: a copy of your post should be placed on the desk of every member of Congress!!!

P.S. If you and I were to ever join the same civic club or be appointed to the same committee of some organization, they would insist that one of us resign. There cannot be room for TWO PEOPLE who would ever spell out in detail such nasty little bothersome details of life!!!! ;D

 

[davideduardo]

Grew out of the "no urban no Spanish" controversy of a few years back, where some minority broadcasters claimed that "advertising contracts" contained such clauses, excluding them from agency buys. Doubt this was actually the case--more likely was in e-mailed requests for rates & avails from agencies.

I agree that the FCC solution is a paperwork nightmare and does nothing to achieve its goals, as it puts the burden of proof on the seller of advertising, not the buyer where the alleged discrimination took place.

This is like policing victims instead of the perpetrators.

However, the problem was and is real. Many buys had "no black" or "no Hispanic" dictates given to the buy staff at agencies, usually verbally. An ethnic station would find out only in conversations with the buyer that they were not being considered.

And this was not "some" minority or ethnic targeted broadcasters, but every ethnic targeted station in America. It wasn't a clause in the contracts, just a "dictate" which means a verbal instruction (from the Latin "dictatum" or something spoken for another to memorize or write down).

This goes back to the 60's and 70's when a Spanish language station in LA could call on a local retail account and be told, "I don't want those people in my store." Or even in the 80's when calling on a luxury car dealer group only to be told "Your people don't buy my cars, they steal them." The prejudice at the buying side was and still is quite real.

But the FCC somehow thinks radio can change the moral and social values of advertisers. Dumb.

 

[davideduardo]

Grew out of the "no urban no Spanish" controversy of a few years back, where some minority broadcasters claimed that "advertising contracts" contained such clauses, excluding them from agency buys. Doubt this was actually the case--more likely was in e-mailed requests for rates & avails from agencies.

I agree that the FCC solution is a paperwork nightmare and does nothing to achieve its goals, as it puts the burden of proof on the seller of advertising, not the buyer where the alleged discrimination took place.

This is like policing victims instead of the perpetrators.

However, the problem was and is real. Many buys had "no black" or "no Hispanic" dictates given to the buy staff at agencies, usually verbally. An ethnic station would find out only in conversations with the buyer that they were not being considered.

And this was not "some" minority or ethnic targeted broadcasters, but every ethnic targeted station in America. It wasn't a clause in the contracts, just a "dictate" which means a verbal instruction (from the Latin "dictatum" or something spoken for another to memorize or write down).

This goes back to the 60's and 70's when a Spanish language station in LA could call on a local retail account and be told, "I don't want those people in my store." Or even in the 80's when calling on a luxury car dealer group only to be told "Your people don't buy my cars, they steal them." The prejudice at the buying side was and still is quite real.

But the FCC somehow thinks radio can change the moral and social values of advertisers. Dumb.

 

[TheBigA]

But the FCC somehow thinks radio can change the moral and social values of advertisers. Dumb.

I don't think that's true at all. The Commissioners themselves admitted there are limitations in what they can do. They can only control broadcasters, not advertisers. It's up to the advertisers to come up with their own standards. Immediately after this rule was passed, the American Association of Advertising Agencies set similar standards to attempt to control the problem on their end.

It seems to me hard to justify having a federal agency allow discrimination to take place on the public airwaves, regardless of the effectiveness of the rule, or the amount of paperwork it creates.

 

[davideduardo]

But the FCC somehow thinks radio can change the moral and social values of advertisers. Dumb.

I don't think that's true at all. The Commissioners themselves admitted there are limitations in what they can do. They can only control broadcasters, not advertisers. It's up to the advertisers to come up with their own standards. Immediately after this rule was passed, the American Association of Advertising Agencies set similar standards to attempt to control the problem on their end.

It seems to me hard to justify having a federal agency allow discrimination to take place on the public airwaves, regardless of the effectiveness of the rule, or the amount of paperwork it creates.

But...

The alleged discrimination here was on the part of advertisers or advertising agencies. They are accused of not buying certain types of stations based on the kind of audiences they had.

The stations that get bought have no control over the other stations that are on the buy. And even more so, they had no control and usually no knowledge of the stations that didn't get bought.

A big buy in LA might be 10 stations deep. That means that 77 stations licensed to the metro do not get bought. No station can certify that they know that no illegal practice was used to determine the buy.

I can't imagine that radio stations have any control over the fairness of agency buys. I guess one could say that the existence of the requirement forces buyers to think about the practices they engage in, but at the end of the day this truly is an effort to legislate conscience.

 

[TheBigA]

I can't imagine that radio stations have any control over the fairness of agency buys. I guess one could say that the existence of the requirement forces buyers to think about the practices they engage in, but at the end of the day this truly is an effort to legislate conscience.

Well, that's kind of what government regulations are all about, aren't they? Like payola laws.

 

[TomT]

Yes, but the danger is in the anal nature of the FCC. Miss one piece of paper (quarterly issues)--or even have a fire and lose several quarters worth--and it is an automatic fine.

For something no-one reads.

I fear the same thing coming on this non-discrimination clause. And if you read my post again, you'll see the problem. No commercial station can possibly keep up with this mandate.

 

[borderblaster]

There are reasons the strip bar ads are on the male-leaning rock station and not the female leaning A/C. There's a reason other ads targeting females aren't on the rocker. Are we going to outlaw all targeted advertising?

 

[landtuna]

BorderBlaster makes the point that crossed my mind. I guess for something like ketchup you would not necessarily target certain groups of people but for everything else you either include or exclude demo's who statistically don't (or are not inclined) to buy your product. That, to me, is not discrimination.

Discrimination would be a company, say an ethnic food store, calling an agency and the agency refusing to accept the business because "they're not our kind".

And since I belong to the "invisible 55+ who don't buy anything and are unresponsive to advertising" I feel discriminated against and am planning a major law suit. As soon as I can figure out who to sue. ;D I mean, isn't age discrimination still illegal?

 

[davideduardo]

There are reasons the strip bar ads are on the male-leaning rock station and not the female leaning A/C. There's a reason other ads targeting females aren't on the rocker. Are we going to outlaw all targeted advertising?

No, just those cases where the buy excludes an ethnic station or stations for no other reason than the ethnic group is deemed undesirable. That's bigotry and racism.

Obviously, a tanning product targeted at people with very fair skins would exclude stations with predominantly African American audiences because the product serves no useful purpose for that particular group.

But a "no Black or Spanish (sic)" dictate for, let's say, a fast food chain, gives the impression of segregation: we don't want to invite African Americans or Hispanics into our stores.

Similarly, there are Black beauty products that would have no use to non-Blacks and there are food items used by Hispanics that would have limited or no appeal to non-Hispanics. Not buying stations with predominantly non-Hispanic white audiences is not discriminatory as it is factual that this audience "has no use" for the products... unlike the fast food example where all peoples alike could eat there, but the owner does not want to invite certain groups to come in.

It is even quite legal to have a "no controversy" dictate, where ads will not run in political and social themed talk shows or in risqué morning shows not perceived by all to be appropriate. In that case, the brand does not want to be associated with that kind of atmosphere, but may want to reach the very same audience on other shows and stations they also listen to... thus, no discrimination.