It's Time To Raise Your Rates. Here's How.
Updated: Jan 19
My Sales Management article was published in the April 2022 issue of Radio Ink Magazine.
The discussion on how to raise rates starts with an agreement that demand drives the rate. What contributes to demand, and where do we have influence or control?
Seven Demand Impacts + a Bonus Topic on Terms and Conditions
1. Market – The size of the local economy and its trend line, the available pool of prospects, market size tied to the media planning goals of agencies, and the population profile all affect demand. You may not control these macro factors, but you can manage the narrative. Leverage any positive content in your sales marketing to boost the demand story.
2. Seasonality - Demand fluctuates across the year, so should rate forecasted by month. The starting rate on a demand curve in January will look vastly different for the same inventory unit in May or December. Raising rates should start at the bottom, not just the top of a scale.
3. The Sales Department - This core demand driver acquires new customers, renews existing clients, and promotes value to the marketplace. How the team is directed in the quality of their prospecting, how terms and conditions are applied (more on that later), and the team's value perceptions all impact demand. Here you have the most control as a manager on increasing rates.
4. Ratings - Ratings typically impact price in a purely transactional sales environment. However, any level of negotiation is an opening for rates to be unbound by ratings. Ratings should be married to your brand's broader list of value characteristics and underpinned by additional research tools. As a reminder, your best ratings are your stations' results for advertisers.
5. Promotions - Building brand value with lifestyle events, community outreach, and supporting client initiatives contribute to demand. Social posts of successful promotions, highly visible events, and sponsor testimonials often help shape value perceptions and change rate sensitivity. Local promotions continue to be critical to protecting the value of radio.
6. Format Characteristics - News-talk demand patterns and, therefore rates, differ with political advertising pressure. Long-form time blocks contribute to the rate variations and demand for this format. Sports have unique demand tied to play-by-play during specific seasons affecting inventory. Music formats see increased activity in the spring and summer months as concerts and outdoor events push demand. These format differences are clues to opportunities to raise rates earlier in the sales cycle.
7. Competition - If you were the only game in town, what could you charge? In our fragmented media environment, competition is more prevalent than ever. The increased competition creates commoditization and downward pricing pressure. Offset the downdraft by promoting the quality of your content and delivering unique audience interactions. Differentiation builds value and pushing value to the front of the sales conversation will support higher prices.
Shift the Focus – Negotiate Terms, Not Rates
Rates introduced before you finish building value will prompt more rate objections, and it's better to negotiate the schedule parameters, not the rate. To raise rates, they should be on the backside of the sales process. Bundling on-air, digital, and event assets make the proposal comprehensive and minimize the rate details. A proposal should have different investment levels as options tied to varying rates in a schedule. Terms and conditions can also stretch the discussion to encompass other negotiations rather than rates.
Terms and Conditions Avoid the Discounts
A discount not given is the same as raising rates. The discount mindset of the last few years fades as rebounding demand requires going up, not down in rate. Terms and conditions are a huge factor in managing the negotiation, and in the process, we will use the inventory that is spoiling, which creates more revenue. It is essential that any terms and conditions be beneficial and convenient for your customers and not used as sticks or fences to seem punitive.
What Terms and Conditions Work Best?
Now is the time to meet with your sales team to consider a clear list of terms and conditions. What terms and conditions are you already using? Does the list need review to keep it fresh with current sales or market circumstances? Roleplay with your team on how they fit into the sales process. Terms and conditions are not a one-way street; they should help both sides in a sale. Most importantly, do not use terms and conditions you are not ready to enforce.
In closing, to quote Warren Buffet, "Price is what you pay. Value is what you get." Price and value are intertwined, and how sales teams understand and present both plays a critical role in raising rates and avoiding discounts.
Thank you for reading this article, and please pass it along to your colleagues.
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About The Author:
Alec Drake openly shares revenue management strategies and sales improvement ideas in the "Sales Success Library" at Alecdrake.com. He is a regular contributor to Radio Ink Magazine, where he leverages four decades of experience to write about sales and management. Alec is the founder of The Radio Invigoration Project (T.R.I.P.), a support initiative for local radio sales and promotion staff.
Drake Media Group, LLC retains exclusive rights to any original content in articles written by Alec Drake or published on any third-party platforms and featured in any podcast.