I have to confess that I’ve never understood the science (assuming that’s the correct way of looking at it) of managing rates.
On the radio station side, it is an incredible juggling act. When can you raise rates? Is it driven by ratings, results, available inventory, or a combination of all these things? When do you cave and take the buy? When do you hold firm? And like the airlines, how do you manage wildly different rates for different customers?
And rate is at the center of the debate about Netflix and Sirius XM. The former has orchestrated an epic pissing off of its base. By announcing a significant price hike, Netflix has been brutalized in social media, in the traditional media, and has lost a lot of fans.
In addition, Netflix has separated its business, dividing up DVD rentals (now through a creation they call Qwikster), and linking movie downloads with the core brand. In the process, Netflix has seemingly done the impossible – complicated something simple while turning off millions of once-happy customers.
Were they insensitive, did they not get it, and does it matter? Some have reported that despite the cancellations, Netflix will look better on their balance sheets after the price hikes, and perhaps they will. But at what price to brand equity and reputation?
Then there’s Sirius XM. Back in the day, Mel Karmazin might have told you where to stick image, brand equity, and reputation. To him, it was always about ROI and having great proprietary content, whether it was Howard Stern or NFL flagship play-by-play broadcasts.
A look at the Sirius XM price hike reveals a different situation than the one Netflix CEO Reed Hastings is enduring. If your content is unique, compelling, and you can’t get it anywhere else, then a rate hike makes sense.
Unless you’re a trucker or living in a really bad radio market, satellite radio’s music channels may not be worth the added expense. Similar offerings can be found on a myriad of Internet music sites in many cases for free.
But if you’re a Stern P1, love NASCAR, and/or enjoy some of the can’t-get-it-anywhere-else programming on Sirius XM, then perhaps $14.49 a month is a good value proposition, even in this economy.
But then there’s the part I don’t understand, which is why I’m in programming and you pricing geniuses are in sales. Sirius XM fought for these rate increases, and yet, just a few months ago, sent out emails like the ones below:
So satellite radio for $5 a month? Now granted it’s only for five months, but you get the idea. Are we selling it for what it’s worth or are we giving it away in order to retain customers?
The bottom line (a great term to use if you are in sales) is that brands can’t just raise rates – they have to raise their perceived value. The problem most radio sellers have is they focus too much on their numbers – ratings, rates, rankers – at the exclusion of why they should be bought – the value of their connection with listeners, the ability of local personalities to motivate consumers, great production, quality audiences, store traffic, etc. What’s interesting is that metrics like ratings and a competitor’s price are out of the control of a seller, yet this seems to be what they’re fixated on.
Maybe it comes down to this. If you know your customers, you understand their relationship with your brand and your products. If you don’t, you make Netflix level mistakes. Yes, part of it is research-based, but the other part is spending enough qualitative time with core customers to gain an understanding of their emotional bond with your brand.
This is a key reason why Jacobs Media is putting together brand advocates programs with some of our best clients. These small, but passionate and connected groups of listeners are bellwethers for the larger audience. In some ways, they are more knowledgeable about the station than some of the people who work there. And they’re often more passionate.
It is inconceivable that Netflix has this type of program. If they do, then management isn’t listening. Aside from taking a simple product and making it complicated, the price increases and subsequent social media mess are earmarks of a brand that is out of touch with its base and the customer experience.
It can happen to anyone. But when it happens to a big, smart, and well-respected company, it’s a message to all of us working with brands that we need to establish even better connections with our core constituencies.
The customer experience – that’s what we should all be striving to improve.
Jacobs Media has consistently walked the walk in the digital space, providing insights and guidance through its well-read national Techsurveys.
In 2008, jacapps was launched - a mobile apps company that has designed and built more than 1,300 apps for both the Apple and Android platforms. In 2013, the DASH Conference was created - a mashup of radio and automotive, designed to foster better understanding of the "connected car" and its impact.
Along with providing the creative and intellectual direction for the company, Fred consults many of Jacobs Media's commercial and public radio clients, in addition to media brands looking to thrive in the rapidly changing tech environment.
Fred was inducted into the Radio Hall of Fame in 2018.
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This post hit home Fred! I HAD been a Sirius subscriber since Howard went to satellite. He signed a new deal and went to 3 day weeks. Sirius raises my rates. I cancel Sirius. I value Howard but not at $14.99 a month and three shows a week.
Thanks, Danny. Statistics tell the big story but it’s anecdotes like yours that colorize the situation. Appreciate you taking the time.