Sunday, February 25, 2007

Eliminating Pledge Drives

Not long ago, a public radio network executive was telling local station managers that pledge drives would be a thing of the past in about five years. One station received a legitimate offer of more than $50,000 per year over several years to eliminate on-air drives. And at last year’s PRPD conference researcher Paul Jacobs suggested stations should only do on-air drives outside of Arbitron surveys in order to build audience. Most markets are surveyed 48 weeks out of the year, leaving four weeks over the summer and around Christmas for fundraising.

That’s a moot point now because every week will be a survey week when Arbitron’s PPM measurement system is in place. But the severity of these suggestions reaffirm that listeners don’t like pledge drives. We know stations benefit greatly, financially and in audience perceptions, when they act to mitigate the downsides of pledge drives.

Could we eliminate them altogether? Let’s do the math. It’s cocktail napkin math, but the scale is right.

Pledge drives generate about $107 million per year in direct gross income. That’s about 14% of all gross revenues in public radio including all individual giving, underwriting, subsidies, grants and entrepreneurial income.

Pledge drives generate roughly 1.2 million donations per year. Replacing all of those donations completely through off-air means would require a minimum of an additional 24,000,000 appeals -- direct mail letters, email appeals, and telemarketing calls.

That’s assuming an average response rate of 5%, which would be quite good given that about half of all pledge drive donations come from listeners who have given before and not responded to renewal mail, telemarketing, and email appeals. It also assumes that the average gift would be the same as achieved through on-air drives. That’s no sure bet.

The annual value of pledge drives to stations is much higher than the $107 million. Public radio depends on on-air drives to acquire or keep 900,000 names on the annual membership roles. These names are essential to the $148 million per year stations raise through the mail, email, telemarketing, and major donor efforts. This is an essential point. New donors, renewing donors and lapsed donors who give this year create the foundation for next year’s revenue base, both on air and off.

To summarize; the challenge of eliminating pledge drives is not only replacing the $115 million in annual income they generate but also replenishing the donor base so next year’s off-air income can grow.

Next time -- thoughts on how public radio can do that.

Sources: CPB's Public Broadcasting Revenue report for FY 2005, DEI's Benchmarks for FY 2005, JSA calculations.

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Thursday, February 22, 2007

Donors: Keep Them, Get Them Back, Acquire Them

With the last pledge drives of the fiscal year just ahead, stations are starting to calculate how many total donors they are likely to have at year’s end. The number is often smaller than last year’s and so I get calls asking for advice on how to get more new members during the pledge drive.

The problem is that a lack of new givers is often the smallest contributing factor to shrinking donor databases. Most stations are seeing declining retention rates and/or fewer lapsed donors coming back as annual givers. By framing the issue in terms of new givers, stations are setting themselves up for failure.

Growing a donor base works just like growing any customer base. Current customers are the most likely to be next year’s customers and the cheapest to keep. The next most “profitable” segment is previous customers who just don’t do business with us as frequently as we’d like. The most expensive and most difficult customer to get is one who has never done business with us before.

Relying primarily on new givers to grow the donor base is folly. That might have worked when audiences were growing at a double-digit rate, but it won't do as audiences stagnate or shrink. Stations won't grow their donor bases without improving their retention or reacquisition rates because new donors will be harder to come by and they will simply fall through the cracks in the following year.

This, by the way, is the same reason many stations fail to grow their audiences. They think marketing and advertising is the answer to audience growth without fixing the programming that drives current listeners away from the station. In this way, growing the donor base and growing audiences are the same.

We grow audiences by getting current listeners to tune-in more frequently. By giving them lots of good reasons to tune in throughout the week, we keep them in the weekly Cume. The same is true for donors. By giving them lots of good reasons throughout the year to give, we keep them in the annual donor base.

Sometimes listeners tune-in every 8 or 10 days and fall out of the weekly Cume. They are "Lapsed Cumers." Fixing the programming to get them listening every 4 or 5 days gets them back in the Cume. Sometimes donors give every 14 or 20 months and fall out of the annual donor count. They are "Lapsed Donors." Fixing the fundraising program to get them to give every 7 or 10 months gets them back in the annual donor count. And when the program is fixed, any newly acquired listeners or donors are less likely to fall through the cracks. That's the first step to growth.

Waiting until the last pledge drive of the fiscal year to address a shrinking donor base is a bad strategy. More than likely, holes have to be fixed in the overall donor program to grow the database. When it comes to donors, stations need to prioritize by first keeping current donors, getting lapsed donors back, and then acquiring new givers.

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Wednesday, February 21, 2007

The More Things Change

I am frequently asked for my opinion about how public radio will be affected by the growing on-demand media marketplace. Stations managers, in particular, are trying to figure out how to respond. As always, I think people's past behavior is a good place to look for hints about the future.

Ten to fifteen years from now listeners will face the exact same choice they've had for the past several decades: listen to a real-time linear audio service or listen to personally selected content. People have always had the option of playing a CD, cassette, or 8-track tape instead of listening to radio. They chose radio because it was timely, topical, fresh, surprising, relevant, and reliable. It was also easy to use.

None of that changes in the 2010s. True, listeners will have more choices in on-demand programming, particularly in spoken word content, but they will also have many more choices in streaming content. The wireless web will allow listeners to choose from a seemingly infinite number of "radio stations."

What's likely to happen is that consumers will spread out along a "continuum of personal media control." Consumers who want total control will reside at one end. Consumers who don't want any control beyond punching buttons on linear services such as radio or TV will be at the other end. These two groups will represent a minority of consumers.

Most people will fall in the middle. Some will exercise greater control over the video content while others will exercise greater control over their audio. Some will exericse greater control over their music while others will exercise greater control over information content. Listening habits will be adjusted more than they will be changed. We're not going to see consumers abandon the FM dial or streaming content in overwhelming numbers. Not in the next decade.

That makes the number one charge of every radio station to remain timely, topical, fresh, surprising, relevant, and reliable. It's the only way to compete on every available platform. So when asked about the future, I ask in return, "what have you done today to strengthen your station in these areas?"

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Tuesday, February 20, 2007

The Obligatory XM/Sirius Merger Post

So what's going to change for listeners if Sirius and XM merge? There will be a few more viable listening choices for those who already have satellite radio. The aggregation of programming might create a purchase tipping point for some current non-subscribers. Eventually some new programs will emerge as reasons to subscribe.

I don't see any of this as a significant threat to public radio. For the most part, our listeners don't consume media by the pound. They tend to be selective. XM's positioning statement "Everything All the Time" probably has little appeal to the bulk of public radio listeners. In a merged market, "More of Everything All the Time" isn't likely to change that.

The satellite radio business model, selling new radios and charging a subscription for each one, is a barrier to subscribing. A lot of public radio listeners won't go through that barrier just to get the few content options that are truly appealing.

The real threat, in my opinion, is when a single subscription to XM/Sirius will allow you to log on and listen through any Internet-connected device in your home, car, or office. The wireless web will unleash the true marketing power of the satellite content, particularly if listeners can select lower-cost packages to get just the programming they want.

Instead of "Everything All the Time" listeners will get "What I Want, Where I Want It." That day is still down the road apiece, but it will come. Public radio should start preparing for it now.

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Tuesday, February 13, 2007

More Spending, More On-Air Fundraising

It's been a busy few weeks. There are quite a few pledge drives going on already. Most that I'm aware of are meeting goal or at least outperforming last year's Winter drives. It does seem more stations are running at least three drives each year. A surprising number of stations are still running 10-14 day drives just to meet current financial needs.

This doesn't bode well for a public radio station's ability to compete in the future media marketplace. More on-air fundraising risks sending listeners to current and new competitors.
At the same time, the cost of doing business will go up as stations spend more money to provide more local programming, HD channels, and downloadable content. All of these endeavors will deliver less overall audience than stations have today and will be less efficient at turning that audience's listening into revenue.

It would be nice to believe that those new financial needs could be met without having to increase the burden on pledge drives, but that's unlikely to happen. There are indications that direct mail performance is slipping at stations with mature direct mail programs. Telemarketing has limited growth potential where it is already properly implemented. My experience is that stations not using telemarketing now are wary of starting.

On-line giving has tremendous potential but on-line etiquette is much tougher on e-mail appeals than on-air etiquette is on pledge drives. We would never think about sending 2 or 3 daily e-mail fundraising appeals to a listener over 7 to 10 days but we rarely blink at the similar intrusion created by on-air pledge drives. On-line fundraising will never match the shear volume of asks delivered by on-air fundraising. It is no replacement for pledge drives.

Major giving is an underdeveloped revenue stream. One problem I see cropping up with major giving is that stations are using it to cover revenue shortfalls in operating expenses. So those $5,000, $10,000, and $25,000 gifts are not going into an endowment, they're becoming anticipated operating income. It's going to be difficult to sustain new programming initiatives if they require finding a few new $25,000 annual donors in perpetuity.

What's likely to happen is that stations will try to develop alternative forms of income such as car donation programs, on-line shopping affiliate programs, and the direct selling of products to listeners (think NPR shop). Stations will sell more underwriting too. It will appear on-air, on-line, in downloadable content, and in e-mails to listeners and donors.

Even if all this activity yields enough revenue to cover all the new expenses, it is likely to yield a zero sum game with pledge drives. Stations won't be able to reduce the amount of on-air fundraising. If anything, stations will do more because pledge drives are fast money when other forms of revenue generation fail to meet goal.

I don't see less on-air fundraising in public radio's future without a major change in public radio's budgeting model. We spend a lot of time as an industry trying to figure out how to be efficient at raising money and turn a blind eye when asked to look at how efficiently we spend it. That has to change or public radio will find itself traveling the same road as public TV; increasing the disruption of its core service just to stay afloat.

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Monday, February 12, 2007

David Giovannoni: Grammy Winner

David Giovannoni is best known for his groundbreaking audience research in public radio and as creator of the Arbitron analysis tool AudiGraphics. Today, his resume includes 2007 Grammy Winner for best Historical Album: "Lost Sounds: Blacks And The Birth Of The Recording Industry 1891-1922." Giovannoni was one of the mastering engineers.

List of Grammy Winners from the Baltimore Sun (scroll about two-thirds down)
More about Lost Sounds: Blacks And The Birth Of The Recording Industry 1891-1922
More about David Giovannoni's work with sound recordings