By Jack Messmer

Who should set the prices for radio spots?
David Benjamin doesn't have the answer yet, but he is asking the question. The CEO of Triad Broadcasting raised the issue recently at the Kagan Radio Summit in New York. He suggested that radio ad pricing should be determined at a higher management level than is currently common in the industry and that groups needed to more closely control what their inventory is being sold for.

"Pricing is critically important in the industry," Benjamin noted when RBR sought out more about his thinking on the subject. "We can't manufacture an infinite number of units-although some people have tried recently. There is a finite number of units that you can sensibly run per hour. And thereafter it's simply how you price those units. My only point at Kagan was that at many companies the pricing strategy and authority is pushed very far down in the organization. It seems to me that senior management ought to be very aware of the prices that are being charged-not only at the cluster level but also for individual stations. At the very least track those rates and perhaps take some hand in setting them."

At the corporate level, Benjamin notes that when senior management people look at pacing reports, they really do look at dollars, but don't look much, if at all, at the rates being charged by their various stations. "Some companies are better at it than others," he acknowledged.

"If you track your rates, which we're doing now [at Triad], station-by-station, there are a lot of surprises out there," Benjamin said.

In most stations today, the decision on whether to accept a certain rate from a would-be buyer is generally made by the sales manager. "In reality the sales managers are handcuffed because the order comes back [from the account executive] and the deal has already been done. So then the sales manager is in the awkward position of having to send the salesperson out again-that in many cases does happen-or accept a somewhat lower rate," Benjamin observed. He questions whether allowing such latitude in negotiations by individual salespeople might be giving advertisers and agencies too much leverage.

"Even allowing sales managers to determine rates is pushing it pretty far down in the organization," Benjamin told RBR.

Just getting a handle on the issue is difficult. "So many advertising proposals are different. It's like automobile pricing in that respect," Benjamin said. "Why isn't there one price for a car? Well, because every car's got different features-you're mixing and matching-and the same thing is true in pricing radio. Many schedules are not similar. They're not similar with regard to dayparts, they're not similar with regard to quantity, they're not similar with regard to times of the week. So it's hard to lay down blanket rules and blanket prices. But by the same token, how many CEOs really know what the specific rates that they're getting in certain markets are and what the trend of those rates is?"

At Triad, Benjamin hasn't yet changed how prices are set, but he is gathering the rate data, station-by-station, from each market. That's been difficult to do and it's met with some resistance from employees because it takes a lot of time, particularly at first. "We are making an effort to find out what all of our stations are charging-every month, on a regular basis-and to see what those trends are. I'm finding out something else. I'm finding out that the market managers are sometimes surprised-because they don't have the facilities to really track it," Benjamin said. "It's not an easy exercise to figure out what the rates are. You have to look at every daypart. You have to look quarter-to-quarter. There's a lot of analysis required to figure out what rates you're getting."

While Benjamin hasn't yet made any company-wide policy changes, just gathering the data is causing some changes to take place. The results are being shared with Triad's market managers, and Benjamin says some of those managers have begun making changes in how prices are set, now that they have a clearer picture of what's really being charged by their stations.

For example, Benjamin said that the analysis discovered in one market that the lead station-the highest rated station not only in Triad's cluster, but in the entire market-was getting lower rates overall than its fourth-rated sister station.

Tracking and analyzing rates is difficult and takes a lot of staff time, but Benjamin asks what could be more important? "In many ways, from an economic standpoint, the business is all about rate," he noted. "In a fixed-cost business, even a 5% overall increase in rates is going to yield a 10% increase in broadcast cash flow. So if you can manage your inventory just to get 5% more a year in rate-excluding units-you are going to be able to get a 10% growth in BCF."-JM