From our May, 2011 Manager’s Business Report (MBR): Every Radio station today is looking for a digital strategy that actually makes them money. Here are the four key problems facing Radio today that a Revenue Sharing program addresses:
Stagnant Revenue – According to the RAB, Radio revenue in America is down 25% over the 5 years from 2005 to 2009. And the 6% increase in 2010 barely puts a dent in that loss:
Declining time-spent-listening – Radio’s “Daily Time Spent” in America also slipped 1.9% last year, according to eMarketer – on top of a 3.1% drop in 2009. In real terms, that’s down from 101.6 minutes in 2008 to 97.5 minutes in 2009 to 95.7 minutes in 2010.
Low Return on Digital – While digital dollars are growing in importance for many stations, their impact on the bottom line remains fairly small.
A Paucity Of New Clients – 80% of businesses have never been approached by a local Radio or TV sales rep. That’s probably because many Radio sales reps don’t believe smaller enterprises have the money to invest in a successful radio campaign. The problem for Radio is there are precious few ways to introduce the medium to these new clients without a significant up front investment.
Revenue Sharing provides a unique and dramatic opportunity to address all these problems. Here’s how:
Revenue Sharing is fairly simple – Your on-air promos, liners, emails, website and social networking offer both web-based coupons to consumers and large exposure for businesses. Local businesses use the site to offer steep discounts and special offers. In turn, listeners and every-day subscribers get offered a great deal. Offers come with a price tag in order to earn the discount – something like $35 for an $80 massage. The offers don’t materialize unless a certain minimum number of customers sign up and deals typically expire after 24 hours. It’s called Revenue Sharing because stations share the revenue from these deals with suppliers of the products or services.
Radio has several distinct advantages over “daily deal” sites like Groupon:
Much Larger Reach – By appealing to a station’s listeners and website users along with the email and social networking that “daily deal” sites offer, Radio’s deals offer much greater reach than internet only based companies.
Better Presentation – Radio hosts can ad-lib around the deals to make them come to life – so messages don’t get stale or sound overly produced and become even more to effective. There is not a more effectual motivator than the human voice.
Easier to Participate – Even low-tech people can take part by hearing your offers on the Radio, not just the internet. They get to hear offers even while they’re driving around, listening while at work or browsing around in stores.
Better Targeted – Deals are specifically tailored to your station’s demographic by your own sales staff so they can be more effective for the deal provider – and you make more money.
Starting From Good Relationship Radio already calls directly on local businesses and has developed relationships with many clients! Something daily deal sites like Groupon can’t do with their telemarketing from Chicago to solicit new clients.
And here’s the “Secret Sauce” for Radio:
Sales Staff Love It – Newer sales reps especially have a difficult time getting traction so you end up paying them a draw over an extended period of time for little return. Now they have a way to “get their feet wet,” generate revenue and develop lasting relationships right from the get-go while learning the way to satisfy customer needs for longer term sales results. Listen to the experience a new sales rep from Mapleton Communications had when he first began selling the Revenue Sharing Program my company’s partner prepared for his station.
| Listen to the experience a new sales rep from Mapleton Communications had when he first began selling the Revenue Sharing Program my company’s partner prepared for his station: |
Relationships – There’s a high cost of entry for radio campaigns that cut through the clutter: for instance, a 3 month campaign of 500 rating points at $100 CPM costs $50,000. That’s too big an investment for many small businesses prospects. Just like you wouldn’t propose marriage on a first date, clients don’t want to jump into an expensive campaign not having first developed a relationship with you and not trusting the return will be what was promised. Revenue Sharing is an effective first step in introducing clients to radio and begin building these necessary long lasting relationships.
Foot Traffic – Businesses get amazing exposure with Radio added to the mix; hundreds, even thousands of people will flock into their establishments. And they buy things other than just the initial deal. For example, when people buy a coupon for dining they also purchase wine, appetizers and desserts where clients can makeup their costs.
Anticipation – Your audience will soon anticipate the next deal and because it ends at midnight, your station’s listeners will learn to listen early next day for a valuable deal they might want. This anticipation turns into ratings as people begin to listen earlier to get on each day’s new deal.
Sharing – The word spreads rapidly about these deals through word of mouth, social networks, emails, on the air mentions and your website. People email, text and tweet friends about deals they could use together or simply know they would enjoy. People love businesses that offer deals to their customers so they’re more willing to hit that “Like” or “Follow” button on Facebook and Twitter.
There are many other benefits to stations for running a Revenue Sharing Program. Following a few of the key ones:
Revenue Generator – All stations are looking for a digital strategy that actually pays big. This is it.
New Direct Business – Your teams create partnerships that include Revenue Sharing instead of requiring money up front so deals can now be from radio’s non-traditional clients; clients whose products and services are targeted to customers whose profile matches that of your station. And you can develop these accounts into long term, high revenue, direct business for the station when they need to develop their brand or promote product features other than a discounted price.
No Limits – There’s no ceiling to the revenue you can generate. In your current model selling units, you’re limited by your availability of inventory.
No Up Front Investment – Stations put out no money. They get a check each month as a percentage of the total revenue! This is no per-occasion marketing plan. It’s free, no-cost marketing in a Revenue Sharing partnership.
You Can Prove Your Station’s Results – clients can measure how their advertising performs. They will know how many people actually responded to their deal.
An Additional Source Of Inventory – your station has a ceiling for both spot costs and how many commercials you can run each hour. Many deals will generate thousands of dollars at a time without adding more spots!
As well, there are tremendous benefits for your clients with Revenue Sharing.
Quickly Generate Cash Flow – Top sites have generated sales in the tens of thousands for some business owners. No other advertising model rivals the rate at which you can inject cash flow into a business.
No Upfront Promotional Costs – Business owners pay nothing upfront. In contrast to traditional cost per thousand impressions (CPM) or cost per click (CPC) advertising fees, a cost-per-sale charge ensures that the client only pays when a sale is generated for their business.
Measurable Results – Vouchers require that the customers actually visit your client’s storefront in order to redeem them. When they do this, they can easily track the profits and expenses for each voucher sale that’s generated.
Create a “Lineup” To Imply Excitement – People hate going into an empty restaurant. They want to go to a busy place. So if someone is starting a new restaurant, this is how to get the ball rolling, fill their eatery and…start a “Lineup.” By generating a lot of excitement and word of mouth, it projects the impression that your client’s business is a vibrant and successful enterprise right from the start and people were lining up to get in.
Radio Campaign – Clients love radio for Revenue Sharing because not only do they get a website, email blast and social network campaign, they also get a Radio campaign … providing unmatched business exposure!
Revenue Sharing helps increase audiences with an enormous payback for listeners.
Great Deals – Listeners love it! They get great deals on experiences they might never enjoy: spas, tourist attractions, restaurants and home living improvements are among the myriad categories people love to get deals on.
Great Gifts – Listeners can give the gift of local adventure to friends, family or anybody who needs to get out more. They’ll be giving presents worth twice what they paid – without going shopping or paying shipping costs.
Convenience of Purchase – Listeners can buy from the comfort of their own home no matter what the weather outside. And if they’re out and about, they can buy right from their smart phone before it sells out!
Safety in Purchase – As part of your local community, listeners feel confident about buying from your station and have faith you’ll deliver what you promise. Over the last few years the evils of privacy invasion and advertising saturation have caused the net to lose luster. People now know that there is a large amount of garbage content online – even from their social networks. Enter the familiar – TV and Radio. People trust TV and Radio more than any other medium including social networks – by a wide margin of more than 4 to 1 according to a Borrell Associates’ recent study.
But watch out: as with any good thing, there are hazards to avoid while building a Revenue Sharing Program for some clients.
Overkill – Can the business handle scale? Does the client have the ability to fill the large volume of orders that can happen with a popular deal?
Quick Buck Artists – There will be some operators who, perhaps in desperation, opt to make a quick buck without consideration of the deal’s relevance to your station’s target – or even the offers possibility of success or fulfillment.
Client Up-selling – It is unsettling to a go to place to get something as advertised only to find out it is not available and then have the retailer try to up-sell you with a substitute. Also watch out for clients that offer “come-ons” as opposed to complete discounted packages.
Out of Business – After paying for and receiving a coupon to a business that was on its final kegs, customers have been known to arrive to a location to find a storefront up for lease.
Second Class Citizens – Some businesses treat their new customers like second class citizens. When calling for an appointment for a purchased service, one coupon bearer was told the first available appointment for “Groupon people” was ten months later.
Employee Satisfaction – with these promotions, a strong predictor of profitability is employee satisfaction. Often there is a lack of staff members to handle the flood of new customers giving the business a bad customer service rap. For restaurants, some waiters hate these promotions as people tip on top of the discounted price, not the regular price, which might reflect on the service offered.
Greater Expenses – Typical deals featured on these sites are discounted by at least 50% off the original retail price. Your client receives typically only keeps 50% of all voucher sales. Thus, business owners generally earn only 25% of what they’d normally make from a regular price sale on one generated through a daily deal website.
Brand Dilution – The large price cuts that are required to be featured on Revenue Sharing deal sites can damage a brand’s image; especially brands that are associated with higher quality products and services.
–Neil Gallagher is a new-strategy consultant for Radio Revenue Sharing, Radio Management, Programming and Sales. Neil has been a successful Divisional V/P Radio Manager, Program Director and Account Executive. He can be reached through his website www.neilgallagher.com.
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