Part Two – One Size Fits all Pricing Has a Cost
Updated: Jan 19
We should not avoid a more complex pricing process if we sacrifice revenues based on a "simple" approach with one rate card.
In our previous blog post, "One Size Pricing Has a Cost," we promoted the idea of multiple rate cards to customize choices for customers and maximize revenue for stations.
We looked at the airline industry and its segmentation and pricing strategies for clues. There are choices in seating, like first-class, business class, or coach, that determine ticket prices. These pricing positions operate in tandem with their standard terms and conditions, like refundable or nonrefundable, advance purchase, or within 24 hours.
How can we transplant these airline examples to broadcast properties' for multiple pricing and segmentation strategies?
Four Segmented Rate Card Opportunities in Media
First Class = Live Endorsements: This rate card idea should already be in place with your stations. If not, let's reinforce why. The ability for talent or influencers to promote, support, and tell a brand's story, are a first-class asset. Differentiation builds value, and with endorsements, we have a very differentiated inventory unit with the maximum value. Endorsements require their own set of pricing parameters and additional terms and conditions of sale.
How you manage your endorsement terms and conditions speaks to the value they represent. Thirteen-week minimum campaigns, product or category exclusivity, and "live" delivery" of ads support different treatment over standard schedules. At a minimum, you should have a separate endorsement rate card for sellers and your first-class buyers with terms and conditions attached. Endorsements also interplay with digital platforms, which adds another consideration when planning a rate structure.
Business Class = Direct: The amount of direct business on any given station or from market-to-market can vary widely. However, there are common characteristics to consider when building a pricing structure for this category. Therefore, the value and pricing are driven by a total commitment from your sales department to deliver marketing solutions, copywriting and creative support, production of ads, promotional opportunities, and target research.
This strong relationship and results-based business is a cornerstone of many revenue budgets. How you price the value you deliver is vital for both the client and your stations. Use your terms and conditions to show appreciation where needed and, when possible, add impact to campaigns with cross-promotional branding interactions.
Coach = Agencies: The "Coach or Agencies" category of clients could potentially include sub-level structures for price tied to all the metrics pushed by buyers, your definition of what constitutes an agency, and how value survives in a transactional environment. The "agency discount" already puts this group in a different pricing category when stations invoice at net instead of gross rates. I still believe that the discount so often described is a commission paid to the agency for bringing business in volume and/or clients that have not been prospected by the sales team.
Local, regional, and national agency businesses also vary in what they pay based on a myriad of terms and the more complex buying process. One suggestion may be to build pricing tied to two or three demographic definitions or local versus regional/national revenue sources.
Destination Bundles = Digital Add-On Pricing: One airline strategy based on the destination is bundling "add-ons" such as car rentals, lodging, and destination activities. Is there a pricing structure that considers clients who use traditional media and digital sales services? This idea can fluctuate in potential based on your process to bring digital solutions to the market. If you have an internal "digital agency" embedded in the organization, there could be a bundle option for pricing with a 360-degree client relationship over an ala carte model.
If digital sales are white-labeled services with high margin costs adding downward pressure on bottom lines, then any consideration on price may be counterproductive. Digital is a highly competitive revenue source filled with many players willing to work with clients. As digital continues to represent a more significant percentage of revenues for broadcast properties, how you price traditional inventory and options to bundle digital should be a discussion among sales managers for future pricing structures.
At the core, segmentation strategies for pricing tied to different customers is beneficial in protecting the price and value balance for inventory. We should not avoid a more complex pricing process if we sacrifice revenues based on a "simple" approach with one rate card.
Well-designed pricing structures to benefit the customer and your stations offer transparent discussions for order placement and agreement on terms and conditions. A rational multi-card rate structure gives sellers confidence in pricing proposals and provides a roadmap for various customers.
Managers will be better grounded in the decisions on order approval with a solid platform to support the pricing process.
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About The Author:
Alec Drake openly shares revenue management strategies and sales improvement ideas in the "Sales Success Library" at Alecdrake.com. He is a regular contributor to Radio Ink Magazine, where he leverages four decades of experience to write about sales and management. Alec is the founder of The Radio Invigoration Project (T.R.I.P.), a support initiative for local radio sales and promotion staff.
Drake Media Group, LLC retains exclusive rights to any original content in articles written by Alec Drake or published on any third-party platforms and featured in any podcast.