Of all the decisions radio companies in the United States have made in the last few years, none has proven more costly than the reduction in the size of their sales organizations. This decision alone, which continues to be compounded to this day by the further elimination of sales managers as well as other important sales resources, needs to be reversed.
The radio business needs to rebuild its sales departments.
One of the many important lessons we have learned from the Ehrenberg-Bass Institute for Marketing Science is that there are two pillars that underpin the financial health of any business: Physical Availability and Mental Availability. In their book, How Brands Grow Part 2, Professors Byron Sharp and Jenni Romaniuck state simply, “brands, even in complex high-involvement or intangible categories, compete largely for mental and physical availability. Growth depends on building these two market-based assets at a faster rate than the competitors.”
By cutting its salesforce in most cases by more than half, radio effectively reduced its physical availability, in turn impairing its ability to support its legendary mental availability.
Physical Availability
Physical Availability is exactly what it sounds like. A brand needs to be physically present and within reach when their customers want or need to make a purchase in their category.
For example, in Tulsa, Oklahoma, there are 20 McDonald’s locations. There are also 10 Burger Kings and 14 Wendy’s restaurants. A customer in the mood for a quick cheeseburger has almost twice as many chances of driving by a McDonald’s as finding a Burger King or a Wendy’s. With such a huge advantage in physical availability, it is not surprising that McDonald’s generates twice as much revenue as the other two companies combined.
This simple principle is just as evident in a B2B context like radio sales. In radio sales, every seller is a store.
Radio’s case is particularly interesting in that, when the first company announced its intention to reduce its salesforce, the other companies followed suit, rather than seeing their larger sales operations as a competitive advantage.
It’s as if McDonald’s closed half of its stores and then Burger King and Wendy’s followed suit.
We believe that the systematic elimination of salespeople and especially sales leadership has led to a far-reaching list of unanticipated negative consequences for the radio business, not the least of which is the drop in total revenue over the last decade.
According to BIA Advisory Services, total radio revenue is projected to drop below $13 Billion in 2025, down from its high point of $15.3 Billion in 2016.
The conversations that are not happening
One important difference between a radio seller and a server at a McDonald’s restaurant is that McDonald’s servers are 100% reactive. When a customer walks up to the counter, all the staff can do is satisfy demand (“I’ll have a Quarter Pounder with Cheese, please”) and maximize demand (“Would you like fries with that?”).
Radio sellers – even the most reactive – always have the option to create demand. This is especially true if they are accountable to a sales manager. As the number of sellers and sales managers dropped, so have all the conversations in which sellers created demand for their inventory.
Less creation of demand means fewer customers. Every cluster we have looked at is serving less than half of the customers they were serving ten years ago.
Less creation of demand also leads to an increase in Key Account attrition. And, in cases where the company has succeeded in preserving their Key Accounts, the sellers find it almost impossible to dedicate the time and the bandwidth required to develop future New Key Accounts.
As the revenue shrinks, so does the industry’s ability to support its once legendary mental availability.
Mental Availability
If physical availability is what makes a product or a brand easy to find when a customer is ready to make a purchase, then mental availability is what makes a product or brand easy to remember at that same moment.
If there is one thing that the radio business has always done exceptionally well, it is building the mental availability of its brands. From their talented, funny announcers outdoing each other to command the attention of the listeners, to the promotional stamina the radio stations lent important local causes, to the money they spent on media, like television and billboards, radio was always exceptionally good at staying top of mind.
The trick, of course, is that maintaining mental availability costs money. One leader with whom we spoke recently described the snowball effect of losing revenue, which reduces the resources required to maintain mental availability, which reduces the future demand for the medium, etc.
The road back
The folks at Ehrenberg-Bass talk about mental availability as the thing that builds the potential of the enterprise, while physical availability is the thing that turns that potential into revenue.
We believe that the radio industry still enjoys much more mental availability among listeners and advertisers than its current sales organizations have the bandwidth to monetize.
We urge radio company leaders to commit to this one straightforward objective: To finish the year with more salespeople and more sales managers than they have today.
