The “ROI” Tool

From Jim Russell & John Sutton

 LOCAL PRODUCTION

A “RETURN ON INVESTMENT” CALCULATOR

Every business in America has metrics to judge its success and how its performance compares to the “norm” of its business type. If you sell balloons, you know how other balloon sellers are doing, what it is reasonable to spend on advertising, helium, ribbons and labor.

 ENTER A NEW TOOL:

Public broadcasters also need ways to examine and evaluate one of the most expensive and high-profile of their investments – local program production. How do GM’s and PD’s know

  • Whether to invest.
  • How much to invest.
  • Where to invest, and
  • What to expect?

Other than “top-line ratings,” how do the GM and PD know if a local programming effort is “paying off,” especially when that programming is available across broadcast and digital platforms?

The “ROI Calculator” we are developing will provide programmers tools and talking points to assess their current and future local program efforts, and frame the discussion as part of a broader station commitment to local content and program development.

 Our goals are:

  • To offer stations a new tool to measure the effectiveness of station investment in local production.
  • To present a new way of capturing the value of local news and talk programming that is (1) based on research and (2) easy to communicate to stakeholders in and outside of the station.
  • To give General Managers and Program Directors some objective ways of measuring the success of locally-produced programs.

 To develop this landmark tool,

Veteran station performance analyst John Sutton and Jim Russell have been working together, with advice from former station GM Joan Rose. Given the relatively high amount of money and staff time allocated to produce local programs, we’re convinced that General Managers and Program Directors must have objective ways of judging the return on investment.

 WHAT DOES THIS TOOL DO?

We know that public radio stations and public media entities undertake content creation for reasons that go beyond the dollars-and-cents return on their investment. Many PD’s and GM’s will protest that an ROI tool “is not why we produce programs. We do so for community service, to accomplish our mission!” We understand that. All programming is done for a good reason and purpose. But, we also know that there is a cost to delivering community service and mission. With the ROI Calculator Tool, you will be able to see and measure that cost. It is for YOU to determine your commit-ment to community service and mission. Then our tool will let you see what that commitment is costing you in objective, measureable terms.

The ROI Calculator is an analysis tool that organizes standard radio and Internet audience metrics — to show the reach and consumption of your program and its mission. It helps your station develop revenue and expense figures for your program using a standardized model for income and cost allocations. ROI metrics are created by calculating the income, expense, and net revenues per-unit-of-audience-measurement for radio, the Internet, and — where station data is sufficient — both together.

 HOW DOES IT WORK?

Stations will receive a form to use, to provide their basic data. Along with that form will be instructions and worksheets to make compiling the data easier. Send the completed form back, and the data will be analyzed by John Sutton & Associates using programming economics, ROI and benchmarking tools developed specifically for public radio. Your report will help you understand the intersection of audience, expenses, and revenues for your program. The report will include conclusions and recommendations for improving ROI. Of special interest and value will be opportunities to leverage or maximize your investments with strategies provided by Sutton and Russell. Follow-up guidance will be available to turn these newly-discovered conclusions and strategies into action and results.

 COMPARE PROGRAMS:

Applying our “standard model” across stations allows you to do two kinds of benchmarking and comparison: Internal at your station among your programs, as well as External, in comparison with your peer stations. For the first time, you will be able to do a fair comparison of the income, expense, and ROI for programs on your own broadcast schedule.

You’ll also be able to compare your program’s metrics to those of other stations in the system. The resulting information will help you know whether your investments in local programming are appropriate, whether they can or should be changed, and how you can further leverage and maximize the investments you’ve already made.

 WHAT IF:

In addition to providing “top-line” metrics, the ROI Evaluator Tool will include a matrix that will help answer some of the “what-if” questions you might have about your local program. This matrix will show how changes in certain activities – additional broadcast hours, greater exposure on the web, increases in productivity – can improve ROI metrics and deliver more listeners and listening to the program.

 CONCLUSION:

We intend to provide stations with the tool that will change the discussion about the value of locally-produced content. Stations will be able to measure the ROI of local program investments — in financial and performance terms. We will take the naval-gazing and rhetoric out of the equation of whether to invest in local programming and how much. We intend to develop data-based models where stations can plug in their own numbers and get meaningful analysis of how local programs ought to perform if they are successful. And, what you can do to make them perform even better.

Several stations are beta-testing this new tool right now. Contact us to be brought up to speed and participate in future rounds.

 

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