by Matt Plapp
Recently the topic of ROI (return on investment) has been in the news more often. It’s pretty easy to figure out why. Companies are getting smarter and more frugal with their dollars. Not just for marketing but for everything they do in their business. I remember a few years ago when I was running our family business I got some great advice from a friend and accountant, Scott Malof. We were looking at buying some large equipment. In the past we would buy it based on the demand of our customers and making our employees jobs easier. Scott agreed with that, but encouraged me to look deeper and at the ROI on the machine and the time it would take to pay back the investment. Sad to say I had not done this before, and for this particular purchase it was really clear that we did not need to buy this machine. It would have taken 10 years to get back the investment and by that time we’d be using a dinosaur.
Onto my reason for this article. Recently I’ve seen upwards of 100 media presentations for my clients. We’re putting together 2012 marketing plans and in this process, meeting with anyone and everyone who has an idea that will drive sales and profits. What’s really apparent to me though is that most sales people don’t understand their clients needs or business model. The investment levels of their proposals many times are no where near where they should be and their sales pitches only benefit one person….THEM! How do I know this…I DID THIS MYSELF early in my career.
Back story, in 1999 I was on one of my first radio pitches. I was presenting to a roofing company. I was working for WGRR Oldies 103.5 in Cincinnati. The client had told me their average roof sold for $5,000. So I went back, put together a schedule that I thought met this clients needs. I came back a week later with a $20,000 6 month radio campaign. My thoughts were of the 120,000+ homeowners our station had… surely we could sell 4 roofs! Wow, I was green:) Looking back I laugh and think about the # of sales reps across the industry that are not trained on what their clients need. In hindsight, my campaign would have probably needed to bring in 40 roofs over 6 months to just recoup their investment and for it to really payoff around 80-100. I would have probably still thought we had 100 listeners in the market for a roof. But once you go DEEPER and factor in reach, frequency, competition, etc, the facts are we would have had to have 700-1,000 customers in the market for this client to see the 80-100 deals to have a great ROI. Looking back I’m confident this would have been a bad deal for the client.
Recently I was meeting with a rep for a media company. He’s a pretty good rep, he understands how to build a relationship, he knows his product, he’s not pushy and over persistent, but he does need a lesson in ROI. His presention was for a client whose average purchase is $30. His plan called for a monthly spend of around $6,500. Now I don’t take all marketing dollars and expect an ROI that month. I give credit for branding and purchases down the road. But for this type of client, around 70% should come back that month. So based on his proposal, his station would need to bring in 5 -7 new customers per day or approx 152 per month. THAT’S NOT HAPPENING! Could they bring in a few customers per day, yes, but not 5-7. In this instance reps tend to look at their budgets and commissions before they do their clients needs. And they are looking at their budgets because their managers are looking at the stations budgets. HOW DO I KNOW? Been there done that. Most of my friends are media reps. I know exactly what they are thinking, and typically it comes from a lack of training and the fact that a stations budget is hammered into their heads more than sales training. They just want to succeed and too many times they’ve put trust in their managers who have never worked in a small business.
In closing, don’t let this be your reps. Take the time to train them on how to find out what the client really needs. Better yet, ask some of your best clients to come in and talk with your staff about how to create packages that will hit their needs and what questions to ask. Don’t let your rep go in a meeting with a $100,000 pitch to a client with a $50,000 TOTAL media budget. Give them the tools they need to help their clients succeed. Once they start looking past commissions and budgets everyone wins!