Why do so many radio ‘package’ offerings default to discounting their spot rates?
Smart packagers create premium packages as a way of taking the focus off of their base product pricing.
Take BMW, for example. When BMW offers their ‘sport package’, customers do not question the basic BMW price, and are left to negotiate on the much more profitable ‘options’ portion of the sport package.
Each option, like sport wheels, spoilers, tuned suspension, sport seats, steering wheel and low profile tires, by themselves cost a fortune. But as a ‘package’, you get all of them at a discount while paying full pop for the base automobile.
In radio, our station promos, digital properties, sponsor credits, on-air contests and other elements of our programming should actually be priced with huge margins because they are not perceived as ‘commercials’ or programming interruptions by the listening audience.
When you ‘package’ this high-margin inventory at a discount rate, you can take the focus off of discounting the spot rates in your ‘package’.
The packaging guidelines we use at all of the stations we consult include;
1.) All packages should be priced at a minimum of ten percent over your average invoice price. The amount of your average invoice tells you what your clients, the market and most importantly, your sales people think your station is worth.
Why go to all of the trouble of creating a special package if it can’t give you a lift to that value?
2.) All packages include brand sell commercials for the advertiser at full rate, with only the added value being discounted.
It’s well known that you do establish your image, in part, with your pricing policy. Of course the quality of any product, the service the seller delivers, and the convenience of the buying process all play a role in the image, but pricing is a key player in the marketing mix.
Is there really twice as much time and material invested in building a Mercedes versus a Hyundai, or does premium pricing play a role in the image of Mercedes?
And more importantly, which car do you think has the highest profit margins?
Maybe it is time radio started creating premium packages?