The power of dynamic pricing in the broadcast industry is just beginning to materialize. While airlines, hotels and even retailers have been optimizing revenue with the concept for some time, media companies are adopting it more and more. That’s because it works. It’s a data-driven way to increase top-line revenue without adding more inventory.
With anything new come questions, so we tapped our expert partner Adam Lang to answer broadcasters’ burning questions about dynamic pricing.
How does dynamic pricing work to ensure my station meets budget?
This is a great question and a good place to start. A dynamic pricing or yield management platform, like REV, tracks all booking data including the fill levels of your inventory and the revenue achieved so far. It also has the analytics tools to then look ahead at the remaining available inventory and calculate the pricing required to hit the rest of your budget.
You can calculate this as frequently as you wish and preferably well before each relevant period. Doing so ensures your sales team remains well informed of the minimum prices. And you’re doing it with data, not assumptions.
Can a system like REV handle contracted rates with agencies or advertisers?
In short, yes! This is incredibly important for managing the bookings of special agencies and clients that negotiated a rate position with your company. You can enter contracted rates, so it’s always the appropriate rate whenever they buy.
Is it possible to exclude a program or daypart in yield management?
Yes, your yield management platform should be highly customizable to your pricing parameters. You can apply fixed or dynamic pricing to any daypart of your programming schedule.
You could have one program with dynamic pricing, one program without dynamic pricing or any range of options. By using a tool like REV, you can implement the best pricing strategy for your organization.
How does dynamic pricing help stations that rarely have sellouts?
In the webinar I hosted, I mentioned airlines and hotels as industries that have pioneered dynamic pricing to their benefit for decades. Even when the plane is not full, dynamic pricing still helps them earn more revenue.
Dynamic pricing is about meeting the market and selling to the right client, at the right price, at the right time. While it is ideal to sell 100% of spots, that won’t always happen. Dynamic pricing still enables you to maximize revenue client by client.
What are the tangible results of using yield management outside of increased revenue?
Apart from the obvious advantage of making more money, I’ve seen some interesting and sometimes unexpected changes. One of them is the consistency of pricing across different clients.
To explain that a little more, I’ve observed client rate positions that are quite different. Sometimes it’s due to an extensive history of working together. Other reasons include different buying patterns or that they seem to be better negotiators!
Great dynamic pricing results from a much deeper understanding of the data across all clients. In turn, it can often provoke questions around inconsistencies, like advertisers that seem to be paying more or less than others. That leads to further questioning of the reasons why. There are always valuable things to learn to see what improvements you can make for the whole sales team.
For example, sometimes that heavily discounted spot seeking to get on air next week won’t make sense against the prevailing market. But if you have an available one tomorrow, that may work well for everyone.
Have you observed differences in how different mediums trade, such as TV and radio? Can you give us any tips?
Yes, there seem to be significant differences, and the digital market influences buying and selling.
TV still seems to have a large amount of revenue committed via annual contract arrangements. This leaves a smaller balance of remaining inventory for dynamic pricing. Radio has fewer contracted revenue arrangements, leaving a larger proportion of trading for the open market. Digital is a good mix of both.
Each has slightly different buying cycles, and they are shorter in some uncertain markets. I think it’s especially the case now with variable economic forces worldwide because of the pandemic.
Despite these differences, the disciplines of great dynamic pricing strategy are consistent. The data will still guide your pricing recommendations and decisions: how much inventory you have left, the revenue targets that remain, and the sales team telling you about the current market and their forecast results.
All these sets of information are vital in making the best dynamic pricing decisions for your company.
Media trading can vary from market to market and country to country. What trends have you seen, and how can we work with them?
There are some key differences, but I have not seen any that are barriers. For example, some media markets have a strong disposition to sell with audience guarantees, while others don’t. Either way, there tends to be an understanding that media companies will deliver the audiences that they pitch. This can lead to some countries and markets managing their client campaigns to meet this delivery.
This is no barrier to dynamic pricing but will have a dynamic impact on the inventory available. In these instances, audience over-delivery will enable short-term inventory availability. Audience under-delivery will require more inventory to make good on the audience. The more dynamic the inventory movement, the more REV can help you optimize your pricing recommendations.
What are the biggest challenges to implementing yield management?
Like any change management process, everyone deals with change a little differently. I would reference the Juan Manuel Fangio quote, “You drive as slowly as possible to win the race.”
You must have the buy-in and support of your senior management. Your CEO should be behind it. Sales leaders and managers must support the change to execute dynamic pricing successfully.
There must be ownership of the data analysis and pricing recommendations. That involves planning for the change. Begin with the end in mind, and work backward to decide the milestones.
For example, if you’re installing a new dynamic rate card, you have to answer these questions: When will it launch to clients? When will you present it to the sales team? What will training look like? Should you consider incentives to inspire change?
Consider the changes from the client’s perspective. What do they need to know and when? Clients will have opportunities to mitigate price increases via buying early and looking for new lower price opportunities.
Communication is vital. Focus on being a partner to your sales team and clients to ensure success from the start.
Is it a problem if a competitor introduces yield management first?
No! The advantage for them is that they take the leading opportunity first and may make more money earlier. For you, it’s that you can treat their actions as market intelligence. There are learnings for you around client responses. There can be valuable data to incorporate into your dynamic pricing and to make the transition.
Adam has a career spanning three decades in media, from the music industry to TV and radio. Most recently, Adam was the CEO of Macquarie Media (now Nine Radio). He served on the Board of Commercial Radio Australia from 2012 to 2019 and was chair from 2015 to 2018.
He is the co-founder of the daily business news podcast “Fear and Greed” and the independent chair of the Outdoor Media Association’s MOVE 2.0 Delivery Group. He consults with many businesses, as well, through his company Relativity Consulting.
He has extensive experience using yield management in media, helping increase margins by 15%. Adam holds a Bachelor of Economics from the University of Western Australia and is a graduate of the Australian Institute of Company Directors – Company Directors Course.
Learn More About Dynamic Pricing with Adam
Adam’s provided a lot of great insights. You can learn more from him by watching our on-demand webinar, Yield Management in Broadcast Sales: Why It’s a Powerful Dynamic Pricing Tool.