(By Paul Weyland) “The client is never satisfied with the results she gets from our station,” said the salesperson. “They are always threatening to cancel. I’m losing sleep just thinking about it.” Unfortunately, this same scenario plays out every single day in every size market. The client just never gets enough response to continue to justify his advertising.
A couple of weeks ago, I got another call from an exasperated salesperson telling me her largest client, a local employment recruiter, was getting ready to cancel. “She spent a lot of money on commercials and a remote in a week and said she only had 57 people sign up, and she’s threatening to cancel.”
In this case, the client recruits radio listeners to work at local fast-food restaurants. Evidently, with low unemployment, it’s getting harder to keep good people in lower-income jobs. So this recruiter runs radio commercials and radio remotes hoping to get good people to work at some of these fast-food chains.
The recruiter is spending about $2,000 per month in a small market. I heard three commercials the recruiter was running, and they weren’t bad. With enough frequency, they should have caught a few fish — and they did. In fact 57, in the client’s own words. So what went wrong?
On the street in my younger days, I ran into precisely this same problem. I recall the sleepless nights, the haunting harassment from bullying clients, and ultimately the inevitable cancellation itself. Knowing what I know now, those cancellations probably would have never happened. But hindsight is 20-20, isn’t it?
The fact is that back then, I had nothing with which to defend myself in front of disappointed clients. And now, it’s too late to go back and change the past. But it’s not too late to save the clients you have on the air now. In fact, not only could you save them from canceling, you might even get them to spend more.
I have worked with recruitment agencies in the past. They are like bounty hunters. They round up interested people for the industry they’re working for, and then they’re paid a commission on each new recruit they sign up.
During the oil boom, Fargo, North Dakota had one of the lowest unemployment rates in the nation. And companies like McDonald’s were paying big bucks to get people to work there. In fact, they were even offering new potential recruits a signup bonuses, in addition to a much better wage than just the minimum.
So what exactly is one new recruit worth to a chain restaurant? Could it be $500? That is, would the big restaurant company pay a recruiter $500 per head for each qualified recruit? Based on what I knew about the situation in Fargo, that would be about right, maybe even a little bit low. And what would gross margin of profit be for the recruiter herself? Well, after the cost of labor she was paying her two assistants, she would retain between 50 and 60 percent of that $500 that she could reinvest in her business.
If she managed to recruit 57 new people from her radio campaign, that would mean the restaurant chain probably paid her $28,500. Fifty-five percent of that would be $15,675 that she would keep after the cost of labor. Hmm.
So, knowing that, in reality, how many new recruits should she actually need to justify a $2,000 expenditure on advertising? About eight would be correct. And that would be a much smaller number than 57, wouldn’t it?
After having this discussion with the salesperson, she went back to the client and went over these numbers. Now, the client is OK with her results and the pressure is off the salesperson. And where did the client get the idea that 57 wasn’t good enough for a $2,000 ad spend? Could it be that she pulled that number out of … you guessed it, thin air? You bet.
How many other accounts could be saved by doing the simple ROI calculation before a campaign even gets started? Why do we always do things the hard way in this business, when doing it the easy way would manage client expectations about results and at the same time, make the client more comfortable with perhaps spending far greater amounts of money on our stations? Why are you hitting yourself? “Ouch!” Why are you hitting yourself? “Ouch!” Why are you hitting yourself? If you and your staff would like to learn more about how to calculate ROI, give me a holler. I’d be happy to help you.
Paul Weyland helps broadcast stations sell more longterm local direct business. Reach him at paulweyland.com or call 512.236.1222.
Hey Matt, thank you for your comment. I love Google Analytics and I agree that more clients should be aware of them. In fact, by helping your local clients download and interpret these numbers, you become even more indispensable to them. And no, the ROI numbers still remain the same.
Great stuff as always Paul. I still have the ‘formula’ for ROI from years ago. If anyone reading this doesn’t have it – it’s worth the time to read – not to mention learning about ‘the craposphere. 🙂
Curious Paul – has your formula changed now that 85% of consumers Google search versus picking up the phone? (IE look at Google analytics vs phone calls) Website conversion and playing secret shopper with clients is more critical than ever and aall too many don’t believe it.