PubRadio Bonus Question: What authority made the 10% Premium Rule…?

Perhaps the better question is: Does that rule even exist?

Answer: The alleged rule is bogus.

We went looking for the 10% Rule.  The results of our search may help public radio executives abandon folklore, embrace independence and be more comfortable in relying on their own professional tools and judgment.

Planning a station’s premium package for each fundraiser is a tough enough task without being burdened by the false restrictions of unknown parties. So….let’s look for the 10% rule.

In 1985 Janice and I founded VisABILITY. For the prior seven years, as a university VP, I held administrative responsibility for KUNC-FM. Janice was a long-time station volunteer. So we were familiar with the world of pubradio management and marketing. Shortly after we launched the company we were surprised to learn the following mandate had been handed down  to the pubradio system from someplace On High:

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

The imprecision of this “rule” was troubling. Were 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?

Our quandary: We wanted VisABILITY to become an informed resource and trusted advisor to the system. How could we advise stations when their fundraising programs were burdened by an alleged mandate that neither our clients nor our staff could decipher – a rule that did not identify a source or authority to whom we could turn for interpretation and guidance?  Our search began. For the subsequent 25 years we made countless inquiries of system leaders in an attempt to nail down the truth behind the mandate.

We naturally started by discussing the 10% rule  with Nel Jackson and Nate Shaw. Those two revered system leaders founded the Development Exchange, which ultimately became one of the system’s most critical resources. Because the “rule” was rigid, but ambiguous, Nate and Nel logically suggested it came from the FCC. We checked there. Nada!

Then we sought information about the 10% Rule from CPB officials. They, too, were aware of it – but disclaimed parenthood. We asked for information from NPR executives. They had the same assessment as their CPB colleagues. We contacted station executives, seeking out those early leaders who crafted the origins of public radio – and who first developed today’s fundraising and marketing practices.

Everyone we asked knew about the 10% rule.

No one could cite its origins. No one could validate its authority!

The most consistent explanation we received is that the alleged “rule” might have originated as the unguarded musing of an early system leader in a conversation or a memorandum. (Remember, this was prior to the era of email.)  If that occurred, it happened long before any of us – including whoever came up with the 10% notion – knew beans about public radio fundraising.  (Unless you have been part of public radio for more than a couple decades, you have NO idea how primitive the system’s understanding of market dynamics and constituent relations was back then. We learned so much in the last 25 years, often by trial and error.)

Our conclusion: myth became mandate. Over the years an imprecise notion of unknown origin and questionable logic was unwittingly calcified into Manifest Law. How? Through repetition by public radio leaders and practitioners. Nothing more to it.

Even after 25 years we’re still curious about the alleged 10% rule and would happily receive additional information if anybody has it. But, until we learn otherwise – we maintain that the famed 10% Rule is baloney – a piece of pubradio folklore that is unattributed, inflexible and unenforceable.

So, where does that leave you, the stations that should relieve themselves of this burden? We urge you to consider these two points:

• Following the “rule” can be counter-productive.

Too many stations get locked in. Some think they MUST find a premium that costs 10% of a contribution level when there are less expensive options that would  save money and raise more revenue. Here is an example:

A great color-saturated EyeMax Mug, imprinted with photos of local landmarks or with a painting by a local artist, might cost about $6. So why get locked into the 10% thinking? Don’t pitch that mug at the $60 or $75 level. Despite the 10% rule, it could be a great premium for a $100 or $150 membership.

Getting locked in to that nonexistent rule can lead to the reverse failure. Here is an example:

Even though its cost will exceed 10%, the NPR internet radio or a good HD radio may be the  premium that can effectively move a contributor from the $500 level to the $750 or the $1,000 level.

So forget the 10% rule. Be guided by your own common sense, your market knowledge and your fundraising instincts.

• When you forget the rule, do remember the principle it represents.

The “rule” may have neither authorship nor legitimacy. But it is a clumsy attempt to underscore an important precept. As you follow this blog you will find plenty of argument and technical advice for buying premiums cautiously  AND for using premiums effectively. An arbitrary cost/revenue ratio helps you do neither.

BOTTOM LINE: Cost is an ineffective basis for measuring a premium’s relationship to your fundraising practices and goals.  There are two proper ways to evaluate a premium. The first is the “perceived value” that can be created by establishing a solid relationship between the premium and your brand and your programming. The second measure is your ability to communicate that relationship to your audience. The premium is just a product. You provide the energy that turns it into a contribution incentive.