How Many Budgets Really Get Budgeted?


As Peter Drucker said, “The purpose of a business is to create and keep customers.” About a month ago, I witnessed the following conversation between a broadcast sales rep and a local direct client:

Client: “All right, I’ll give you guys a shot.”
SP: “Thank you. By the way, what’s your budget for this?”
Client: “$1,750 for the month.”
SP: “Okay, we’ll make that work for you. Thank you. We’ll be in touch soon to work out the copy details.”

And that was it. The seller left. I asked the client, whose name is Harry, how he came up with that budget. He grinned and said, “Frankly, I pulled it out of my butt.”

I’m afraid that in too many cases that’s where local direct budgets actually come from. And the salespeople just take that number and run with it. Typically, the client’s budget is much lower than what he/she could actually afford to invest, but hardly any of us ever bothers to challenge the number. The reason? It’s touchy. The seller is concerned about upsetting the apple cart. Or, he is convinced that the client has a secret formula for coming up with that specific amount and so it goes unquestioned.

In this case, the seller has committed “scheduling malpractice.” I saw the schedule and there was no frequency. In fact, based on his rate card, the salesman should have been asking for that much per week. Now he’ll have to spread that tiny uncontested budget over four weeks. The client won’t get any frequency. That, combined with a mediocre commercial (cliché-riddled, all about the client…not about the consumer), means that the campaign is almost guaranteed to fail.

I also noticed that there was never any discussion between the salesperson and the client on how many sales the client would have to make to break even on the advertising. The weekly schedule now stands at a measly $440. That amounts to a little less than 10 ads per week…on a station that runs about a thousand commercials per week.

This client’s average sale is $250, on a gross margin of profit (after the cost of labor) of 40 percent. To break even on the campaign he would have to make four sales. If he made six sales per week that would a 50 percent return on advertising investment.

However, when I asked Harry how many weekly sales he expected for the money he was spending, he casually mentioned the number 25. Since a conversation about return on investment never came up at all, I’m pretty certain that the salesperson has absolutely no idea how many sales his client would need to make to pay for the schedule. That means that if indeed the client complains that the advertising “didn’t work,” the salesperson will probably be blindsided with no strategy to defend himself.

So, considering all of the evidence, what could go wrong? Everything. The client will soon realize that nothing much came of his campaign, especially based on his unreasonable expectation about results. The seller will probably not contact the client again until near the end of the time the ads are running for fear that the client will cancel. When he does make the call, I wonder how much he’ll ask the client to spend for the next month? I’m guessing  another $1,750. The client will either reluctantly say yes, or he’ll turn into another former broadcast advertiser who tells his friends that he tried radio or TV and “it doesn’t work.” And so the spiraling cycle continues.

Just because most of us got into media sales by mistake is no reason to do business by mistake. Brush up on how to calculate ROI. Learn how to make ads that identify and solve consumer problems. Don’t jeopardize your relationship with the client because you’re too timid to ask for enough money to support a real schedule.


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