In this week’s Programming To Win column, Fred Jacobs applies Pareto’s “80:20 Rule” to radio. Approximately 20 percent of listeners make up 80 percent of listening hours. So how do you super-serve your most loyal P1s? And where else in radio can the 80:20 rule be applied?
Fred Jacobs
By Fred Jacobs
Big change is coming to radio. Now I know you’ve been hearing that for more than a decade. But as Cumulus takes over Citadel and Randy Michaels returns to radio, as managers get a better handle on PPM, and as the industry continues to adapt to the impact – positive and negative – of digital media assets, change is in the air…again.
Since consolidation, companies have been grappling with optimal cluster strategies as they pertain to employee structure/flow charts and how to create “efficiencies.” Amazingly, most broadcasters are still trying out various configurations to maximize cluster sales, having already attempted many different concepts, most of which have not been successful.
Looking back on the years since consolidation took hold and more broadcasters went public, it is surprising that many are still struggling to determine “best practices” for running radio stations and cluster – in local markets and across their national portfolios.
In the ‘90s, there was ample time to figure these things out. Competition from other media was essentially stable, and the economy was rock solid. Going into 2012, there is instability across the landscape, from sales to programming to ratings to competitive forces. The environment is, at best, challenging.
Today, stations aren’t merely competing with one another in the same town. They are dealing with advertisers who have options – other traditional media, Groupon, the web, and even Pandora. And we’re not talking about just dollars here. Radio competes with these other entities for human resources, too. Despite a high unemployment rate, the radio industry struggles mightily to find good people. As any local manager will tell you, the success rate on new hires is abysmally low, especially in sales. This exacts a tremendous cost on stations, financially and otherwise.
So what’s the solution here? Well this piece in FMQB cannot solve the problems or challenges facing the radio business. But it is clear that a maxim that was coined more than 100 years ago may present a pathway to better success for radio.
You’ve all heard of it – “The 80:20 Rule” – or Pareto’s Principle, devised in 1906 by Italian economist Vilfredo Pareto. He knew what he was talking about. A few decades later, quality management specialist, Dr. Joseph Juran referred to “the quality few and the trivial many.” That sums up the way things often work in business…and in life…and how radio might rethink some of its givens, especially in this “new normal.”
You may dine at a variety of restaurants, but the chances are good that the 20% of the eateries you frequent account for about 80% of the meals out you consume.
And probably 20% of the TV channels you watch comprise around 80% of your overall viewing.
There is no shortage of examples that strongly support “The 80:20 Rule.”
So what does it mean for radio?
Well, if you apply “The 80:20 Rule,” it has resonance in just about every department of the station. When it comes to audience building, Arbitron will tell you that whether it is diary or metered measurement, the rule holds up well. I’ve seen data in enough PPM markets to convince me. In fact, the numbers are a bit more like “75:30,” but you get the idea – about 30% of consumers account for about 75% of total listening. Once again, a smallish percentage of your audience makes up the lion’s share of listening.
So why then do many stations focus on converting P3s into P2s or P2s into P1s when focusing on that “Core 20” is so much more productive?
A couple of years back at one of their client conferences, Arbitron featured Bill Black, a Starbucks marketing exec, who boiled it down nicely. Starbucks essentially has two core groups – “Super Regulars” and “Coffeehouse Enthusiasts.” While other segments contribute to the whole, it is these two customers that drive the majority of their revenue.
Thus, this is where the company focuses their efforts. They welcome business from sporadic consumers and they have their eye on young coffee drinkers who could evolve into one of these two core groups. But their emphasis is on their “Core 20” – those special people who drive sales, who are loyal, and who are recommenders.
Radio would do well to think this way, too. Whether it was calculated or not, most radio stations have a done a pretty good job aggregating email databases. Our research has shown that roughly 75% of these consumers are true P1s to your station (while the rest probably signed up just to win something or they’ve moved on to a different station).
So how are you serving your database’s “Core 20?” Are you pelting them with “email blasts” about your weekend programming? Are you bogging down their email boxes with discounts and deals that have no relevance to them? Or have you taken the time and effort to get to know them – their musical tastes, the experiences they desire, their favorite bands, the size of their Facebook communities? Is your database even a marketing priority at your station or is it a channel that is often treated as an afterthought?
Our company regularly conducts web surveys among station email database members, and I can tell you that the very act of asking the “Core 20” for their opinions is a major positive. And some stations have gone that extra mile and reported some of their key research findings back to these VIP listeners. In this way, audience members “own” the results, and the station gets credit for making changes and moves that were driven by this virtual advisory board.
But “The 80:20 Rule” applies to other relationships in radio stations, too. Take an objective look at your sales department(s). Go up and down that conference room table or the cubicles and tell me that roughly 20% of your sellers aren’t accounting for 80% of the revenue. And when you think about who on the staff is capable of marketing your digital assets, the odds are good that it’s only about 20% of your account reps.
And what does that say about the way in which sales departments might be configured moving forward? What role does that other 80% of the sales team play? They certainly are being paid salaries and benefits, but what are they delivering to the bottom line or the station’s sales reputation in the market?
If you study your operation with “The 80:20 Rule” first and foremost in your mind, you’ll see that Mr. Pareto knew what he was talking about. Smart businesses find ways to apply it in a variety of ways.
What about yours?
Fred Jacobs is President of Jacobs Media. The Southfield, Michigan based firm consults many of America’s most successful Classic Rock, Mainstream Rock, and Alternative stations. Fred can be reached at (248) 353-9030 or fredjacobs@jacobsmedia.com
