When It Comes To Advertising Sales Proposals, Size Matters
September 13, 2016
In advertising sales, we typically focus on more ... more products to sell, more sales calls, all in hopes of getting more accounts and more revenue. But could that actually be a BAD thing?
Most media properties these days are owned by public corporations, and the number is only getting larger. The shareholders don't measure success based on things you get out of a CRM. Yes, they look at year-over-year growth, but they really want to see PROFIT ... a word we don't hear thrown around nearly enough in the sales department.
Logically, making a $2,000 sale doesn't help your company if it costs you $4,000 or more to deliver the product, sell and service that account -- and that's IF the client pays its bills. Simply put, any sale that costs your company more than it generates only hastens your demise.
You have limited sales resources, so profitability demands that you go big or go home. But the question is HOW BIG? I posed this question to Jerry Kackley, president of the K Group consultancy, who has been advising media companies for more than 20 years.
"Over the past five years, K Group has analyzed the base of over 50 local media properties -- in excess of 200,000 advertisers," Kackley says. "This analysis showed that about 40% of these advertisers appear to be money losers. This is due to (1) the small (transactional) campaigns sold to these advertisers and (2) the fixed costs associated with selling costs and the cost of setting up an advertiser in our billing, traffic and CRM systems," he adds.
Kackley continues: "These two factors might be acceptable if these smaller advertisers could be retained for multiple years (and developed into strong advertisers) but that is not typically the case. In fact, a large share of these smaller accounts only advertise two months on average and then churn. The fixed set-up costs are never recovered."
A separate two-year study in eight metro markets conducted by K Group showed that the average "ask" of new advertisers was just under $2,000, despite the fact these accounts had an average potential value of more than $15,000. In fact, only 8% of these asks (from new accounts or incremental asks from existing accounts) exceeded $4,000, yet these limited number of asks represented between 71-84% of the incremental revenue generated by the property.
But there's even greater harm that comes from leaving money on the table. "A lion's share of advertisers are sold campaigns that have very little chance of getting results," Kackley says. "Too few dollars, too few advertising impressions, a sales rep more concerned about the cost of the campaign than for the expected results. How do we get a result for an advertiser when our reps make such timid proposals? The answer is we typically don't, and when that happens the advertiser walks away - unhappy," he adds.
Go figure! A rep you thought was a superstar, because they're bringing in lots of new accounts, may be doing you more harm than good if they're mostly small dollar wins. In addition to not achieving profitability, "I tried you guys and it didn't work" is what the next rep who tries to sell them will hear.
Bottom line, be VERY selective about pitching small dollar proposals to your advertisers. In most cases, even if you win, you'll lose.
Note to Leadership:
Measure your managers' impact on PROFIT, not just on revenue, nor how well they can cut budget to the bone. Start by determining your break-even point for local accounts. It will vary based on the cost of doing business in each market. Then determine how many of your active accounts fall below that line to determine if you have a problem that needs addressing.
Note to Sales Managers:
Earlier, I told you to stop worrying about measuring activity and to start measuring revenue. Let me amend that thought. Start looking at PROFITABLE sales made by your staff. If your salespeople have high-maintenance dogs on their account list that are actually losing your company money and keeping them from selling profitable accounts, give them an out. Coach them to "sell up." Better yet, don't let them make proposals that will lose you money in the first place.