Unlocking Higher Rates For Radio O.T.A. Inventory
Updated: Apr 3
At the core, segmentation strategies for pricing tied to different customers are beneficial in protecting the price and value of inventory.
OTA (Over The Air) inventory represents a significant share of revenues for most radio groups; how you price and sell this traditional inventory significantly impacts top-line and bottom-line results. In a previous post, "What Nine Factors Determine Price Sensitivity?" we promoted differentiation and substitution as just two factors that play a pivotal role in sales negotiations and pricing decisions.
Manage Discounts Front to Back
To increase OTA revenues, you must understand how the station rate curves can segment selling opportunities and work with your terms and conditions. Unnecessary discounts on the front will cause revenue shortfalls, and early sellouts will cause you to miss premium pricing as demand peaks.
Why You Need Multiple Rate Cards
Terms and conditions can help filter customers and what they pay based on purchase patterns, timing, and demand for inventory (see our previous post, "What Terms and Conditions Support Yield Management"). Terms and conditions are advantageous when using multiple rate cards. Think about live endorsements as an asset class that should have dedicated rates.
Endorsements are "beachfront property" and command higher rates than normally recorded ads. Many sales managers are leveraging the value of endorsements and pricing them at the top of their rate structure. Let's look at four examples of rate card segmentation with different terms and conditions.
Live Endorsements: The ability of talent or influencers to promote, support, and tell a brand's story, are a premium asset. 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 treatments over standard schedules and terms. Endorsements also interplay with digital as an extension strategy, which adds another consideration for bundling strategies.
Direct: Direct business on any station or market-to-market can vary widely. However, there are characteristics to consider when building a rate structure. The value and pricing are driven by your sales department delivering marketing solutions, copywriting and creative support, production of ads, promotional opportunities, and target research. How you price higher for the value you provide should be in balance. Use your terms and conditions to show appreciation where needed and add impact to campaigns with cross-promotional branding interactions to support higher prices.
Agencies: This category could include sub-levels for price tied to metrics used by buyers, your definition of what constitutes an agency, and how your value survives in a purely transactional environment. The "agency discount" already puts this group in a different category. Local, regional, and national agency businesses vary in what they pay based on many terms and the complex buying process.
Options to build pricing can be tied to two or three widely used demographic definitions, volume deals, corporate arrangements, or local agency versus regional/national. We all know accounts move from agency to agency and local to national, so be clear with your terms in how you price each account.
Digital Add-On Pricing:
Is there a pricing structure for clients using traditional and digital media? This idea depends on your process of delivering digital solutions to the market. If an internal "digital agency" is embedded in the organization, there could be a bundle option for pricing with a 360-degree client relationship.
If digital sales are white-labeled services with high margin costs adding downward pressure on bottom lines, then price consideration may be counterproductive. As digital continues to represent a more significant percentage of revenues, how you price traditional inventory and options to bundle digital should be a management discussion for future pricing structures.
At the core, segmentation strategies for pricing tied to different customers are beneficial in protecting the price and value of inventory. We should not avoid a more complex pricing process to sacrifice revenues based on a "simple" approach.
Well-designed pricing structures to benefit the customer and your stations offer transparent discussions for order placement and related agreements on terms and conditions. A rational multi-card rate structure gives sellers confidence in pricing proposals and provides a roadmap for various customers to fit into a thoughtful pricing process.
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.