Every TV station wants to maximize revenue on its linear spots. Achieving this can be challenging because once the inventory is gone, it’s gone. There’s also a finite number of spots available. So, what’s the “secret” to getting more dollars with the same spots and salespeople? Dynamic pricing for TV advertising offers a new strategy to increase top-line revenue.
Advertising’s Competitive Landscape
Advertisers have more channels than ever to connect with their audiences — TV, radio, display ads, social media marketing, SEM (search engine marketing), OTT and more.
You may find that more of your customers are shifting budgets to digital. In fact, 60% of advertisers said they were moving dollars from linear TV to CTV (connected TV) in 2021. Ideally, you want to capture that entire share. However, it does highlight a potential drop in linear spot revenue.
So, how can you stay competitive in pricing TV spots while also optimizing revenue opportunities? Dynamic pricing can help you do just that.
How Does Dynamic Pricing for TV Advertising Work?
Dynamic pricing, also called yield management, is a proven strategy that balances supply and demand to define pricing. The hotel and airline industries are users of the approach. They factor in all types of data to price the seat on a flight or a hotel room based on demand. These industries have inventory that’s finite and time-based, too.
The same principle applies to TV spots. In using it, you’ll combine data, decisions and deal-making to optimize how you price for your commercial airtime inventory.
Managing rates for your spots without tools is a never-ending cycle of assumptions and intuition. Many of you, as a result, may miss revenue opportunities, spend too much time pricing, and oversell or overdiscount. Nobody wants to leave money on the table, especially in a mid-term election year where experts project record-breaking revenues. Dynamic pricing makes it easier to avoid this.
Rate Curves, Floors and Ceiling Rates
So, what does dynamic pricing look like in action? Rate curves are the critical piece. In a yield management tool, you’ll find prebuilt ones that can fit almost any situation, including:
Overnight dayparting, which would use a flat line
Price dropping before the spot airs to ensure you sell it versus letting it go
Increasing rates steadily with no ceiling for high-demand events
Testing rate curves for new programming
You can set floors and ceilings within the platform you use for dynamic pricing, so individual salespeople cannot price above or below those numbers.
What Are the Expected Results in Using Dynamic Pricing for TV Ads?
Based on internal and external data, you are likely to see a minimum of a 5% increase in revenue without increasing overhead. A midsize organization with six to 25 sellers, 295 average monthly orders and total annual revenue of $2,025,000 can earn an additional $101,250 per year.
More Benefits of Dynamic Pricing for TV Advertising
Looking for more reasons why dynamic pricing can lift revenue? Consider these points.
- It allows you to cover the costs of and maximize your inventory.
- Price-conscious advertisers can still buy spots when you offer them lower-demand times.
- The addition to the revenue line is top-line, which denotes an increase in gross sales.
- Your negotiations with advertisers can be more beneficial because you have more options in pricing and inventory.
- Using this method can also support more accurate forecasting that’s data-backed.
Get the Most Out of Your Inventory with Dynamic Pricing
Dynamic pricing may be a new term to you, but you experience it all the time as a consumer. Now it’s time to apply it to your career. To get started, view our on-demand webinar, Yield Management in Broadcast Sales: Why It’s a Powerful Dynamic Pricing Tool.
You’ll find insights, real-world examples and more in this engaging conversation with featured guest and expert Adam Lang.