The Power of Pending Over Discount Pricing

What are you counting and why?

Remember the rental car scene on "Seinfeld" where Jerry shows up to claim his car? The desk clerk politely tells him they are out of vehicles. Jerry promotes the purpose behind making a reservation and then attempts to educate the clerk on the meaning of a reservation, the holding part being the most important. Managing reservations is key to supply and, more importantly, how you price the remaining inventory.

In media, we reference reservations as pending business. Sales work hard to fill the pipeline with pending activity. They do revenue forecasts using pending dollars to define the month's or quarter's end.

Do We Understand the Purpose of the Reservation?

In a 1988 HBR.org article by Peter Drucker, we find this quote; "Information is data endowed with relevance and purpose. Converting data into information thus requires knowledge. And knowledge, by definition, is specialized." How should we apply our pending knowledge for a more specialized direction on our pricing decisions?

The pending evaluation has two steps: the reliability of the data source and the impact on yield with any pricing adjustments.

The Data Source

Collecting pending data from your sales team is not a new concept. Several third-party software platforms capture and aggregate the dollars and close percentages to determine a total number. Managers can now see the gap from existing bookings, consider the pending impact, and where they are tracking towards the budget.

While the math is simple, the difficult part is sorting out facts from blue-sky projections. Only by staying close to your team with one-on-one meetings and tracking trends will you determine accurate pending numbers. Getting to a more precise number is essential when converting the pending dollars to inventory pressures, and the conversion enables proactive forecasting to adjust pricing.

The Supply Chain Lessons

We all remember the headlines regarding supply chains. The bottleneck caused inflation, deferred demand to a later date, delayed product delivery, and changed the sales process. The auto industry was affected by chip shortages and shifted to pre-orders (reservations) as empty car lots pushed a new approach to sales and managing demand.

In media, we must be mindful of perishable OTA inventory and how our supply chain works. Where is the demand as it relates to pricing? In 2023 we may see more supply than demand, and the attention to the impact of pending on inventory can help manage your discounting strategy.

How Do You Convert Pending Dollars into Demand?

Many stations may have a robust platform for pending business management to offer feedback on inventory pressure. If so, make sure this capability is in full use and track available reports for proactive rate changes. If you do not have a process to track pending inventory impact, here is a primary starting point for measurement. I have kept the calculations limited to avoid any aggressive moves. The benefit comes from the incremental adjustment of rates faster in the sales cycle, improving yield performance.

Seven Steps to Calculate Pending Pressure

1. Review historic revenue contributions for high-demand areas. This review could include prime time dayparts only or program blocks of time.

2. Capture the total minutes sold for the same dayparts and periods.

3. Divide your revenue number by the minutes sold to create a benchmark rate.

4. Collect any pending dollars for the upcoming month at 80% or higher-close probability. Using a high percentage close, we also temper big rate moves that may be premature.

5. Divide your net pending amount by the benchmark rate from step 3.

6. Take the "pending minutes" you calculated from step 5 and add those to your sellout report.

7. Adjust rates to reflect the new forecasted sellout.

Takeaway:

Comprehensive management of pending activity requires analysis of dollars and the inventory impact for pricing adjustments. In addition, better-pending management shifts inventory management to the sales department (proactive) rather than reports and oversight by the traffic department (reactive).

Take the extra step and hold the "reservation" (consider inventory) for a better outcome in the customer experience (less disruption to schedules), and your station's revenue performance will improve.

Send an email to adrake@drakemediagroup.com and request your free spreadsheet template on the "Seven Steps To Calculate Pending" for your radio stations.

Alec Drake writes on revenue management and sales improvement strategies. He recently founded “The Radio Invigoration Project” (T.R.I.P.), a new LinkedIn group supporting local radio sales; email him at contact@alecdrake.com. Read his previous columns at Radioink.com/author/adrake.