What authority made the 10% Premium Rule…?

ALLEGED RULE: The cost of a station’s contribution incentives must not exceed 10% of the revenue those premiums attract.iStock_000010002281Small

REAL-WORLD QUESTIONS: Does that rule even exist? If so, where did it come from? Is it legit?

SYSTEM QUANDARY: Managing a station is tough enough without being burdened by unnecessary restrictions from anybody – FCC, CPB, your license holder, your landlord, the lady next door or – even worse – unknown parties. 

So, given its lack of precision and THE absence of known origin – how do you interpret the 10% rule.?  Are pre-production costs covered by the 10% mandate? Inbound freight? Or just the cost per unit? Did the 10% include the expense of postage, packaging and other fulfillment costs? Did the 10% apply to each individual premium? Or was it to be calculated for as a ratio of total membership revenue to total premium cost? Is it a mandate? A suggestion? A fantasy?

SEARCH: Our clients were flummoxed about the 10% rule. Many tried to follow it without understanding it. Janice and I set out to find the facts. 

Sensing the 10% Rule was a mandate that had been handed down from Someplace On High REALLY High, we started with Nel Jackson and Nate Shaw. Those revered Gurus founded the Development Exchange, the organization that proudly evolved into today’s Greater Public. Nel and Nate disclaimed authorship. Noting the “rule” was both rigid and ambiguous, they logically suggested it came from the FCC. (Rigid and ambiguous – that means FCC, right?)

amused012We checked with the FCC brass. Nada!

So we asked CPB officials. They, too, denied parenthood. By now the whole issue was beginning to look silly.

We asked NPR executives. They also happily avoided responsibility for the “rule.”

We contacted station executives, seeking early leaders who crafted the origins of public radio – the ones who developed the system’s original fundraising and marketing practices. Every one of the system’s early leaders knew about the 10% “rule.” They agreed its roots were deep in the early history of pubradio. Beyond that – shoulder shrugs all around. 

CONCLUSION: We exhausted all credible sources. Whoever came up with the 10% notion did not know beans about public radio fundraising. But over the years myth became mandate, and an imprecise notion of unknown origin and questionable logic was unwittingly calcified into Manifest Law.

Nothing more to it. The famed 10% rule is baloney – a piece of pubradio folklore that is unattributed, inflexible and unenforceable.

FINAL QUESTION: So, where does that leave you?Confused man with bow tie

Remember that the bogus 10% rule was a clumsy attempt to urge restraint. Ignore it. Substitute the following practices: 

  • Buy premiums cautiously.
  • Never (NEVER!) be seduced by low price. The most expensive way to save money is to put your logo on a product that may disappoint your contributor. Once that product is out of your hands it will affect your brand for good or for evil as long as it endures. 
  • Select premiums that can serve two roles – station-marketing tools and contributor incentives
  • Learn how to use them effectively. The premium is a common, inexpensive product. You create “perceived value” by establishing a solid relationship between the premium, your brand, your mission and your programming. The premium is inert – you provide its energy.

BOTTOM LINE: The 10% Rule is merely an example of fossilized myth. Ignore it. Be guided by your own common sense, your market knowledge and your fundraising instincts. Keep testing and evolving. Join PRADO. Join Greater Public. Rely on these two organizations for solid information.  Never be afraid to check in with colleagues at other stations to benefit from their experience. 


			

6 thoughts on “What authority made the 10% Premium Rule…?

  1. Nathan Shaw and Nel Jackson were my heroes and mentors in the early and mid 1980s when I was Development Director at KUOW-FM in Seattle. I found that the main value of a pledge premium is to provide an excuse to pitch a higher level of giving when you turn on the mic. Our average pledge jumped dramatically (from about $30 to $49) after we started pitching ATC and APHC coffee mugs at $60, instead of mentioning the basic membership of $35. That said, listeners can become addicted to the notion that they must have a prize for pledging and the Dev. office can begin to resemble a mail order biz. We realized that once people had become members we could mention the higher level without the mugs, and they would still pledge. Moral of the story: use pledge premiums sparingly and only when they help move people to a significantly higher level. Your core listeners will pledge without the junk. And forget about the 10 percent rule, wherever it originated.

    • Cliff-
      Great comment. Nel and Nate were favorites of mine, also. In fact, we created the Nel Jackson Award and then the Nat Shaw award for the Development Exchange when each retired. The awards were given for some notable achievement – I have forgotten the criteria since some years later a Development Exchange executive director abandoned the awards that honored Nate and Nel’s service to public radio.

      I am going to use your comment as a springboard to a full blog post in early 2013. Watch for it.

      John.

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  3. “Never (NEVER!) be seduced by low price. The most expensive way to save money is to put your logo on a product that may disappoint your contributor.”

    That goes back to those power packs! A low price point might look good, but it also means a less stringent QC process and less reliable materials.

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