What Seven Demand Factors Drive Price?
Updated: Jan 19
Pricing should consider all demand factors to optimize yield.
Miller Kaplan measures demand in dollars spent on local media. The "traditional dollars" have dropped dramatically from five or ten years ago and continue to erode.
To consider market demand, we must look at several factors: the size of the local economy and its trend line, the available pool of business prospects as customers, market size in media planning goals from agencies, and the population profile. Therefore, pricing levels from market to market are quite different.
Demand fluctuates across the year, and Seasonality must be considered, especially in pricing early demand on inventory. Your first price point on a yield curve in January will look vastly different from the same unit of inventory in May, and Seasonality should form a baseline of pricing on stations at least by month. These shifts in macro demand tied to the calendar should be monitored, and adjust your initial starting points on rate curves.
3. Sales Department
The sales department is a core demand driver as they acquire new customers, renew existing customers, and promote your stations/products to the marketplace. How the sales team is directed in the quality of their prospecting, how terms and conditions are applied to discounts, and the team's value perceptions all impact demand. Training the sales team on your process for pricing strategies, methods to measure demand relating to price, and negotiation options in the field are key to optimal performance.
Some believe that ratings drive the price as a standalone function. There may be credence for this in a purely transactional sales environment. In broadcast, CPP (Cost Per Point) has been widely used to tie price to ratings.
Ratings are only one demand element that should be married to a broader view in building value-to-price relationships. Any level of negotiation is an opening for a price to be unbound by ratings.
Station promotions and marketing work hand in hand to support and lift perceived value. Building brand value with lifestyle events, community outreach, and supporting client initiatives contribute to demand. Local promotions continue to be critical to protecting the value of radio to listeners and your customers.
Every opportunity should be taken to drive value perceptions. For example, a picture or social post from a promotion can be used in a presentation to shape value perceptions and incrementally change price sensitivity
A news-talk format will have vastly different demand patterns than a CHR music-driven format. News-talk patterns are more pronounced with political advertising and specific product categories targeting older demographics. Program-driven blocks of time contribute to the format difference and how yield management is applied to grow revenues. Sports formats have unique demand patterns tied to play-by-play programming and what sports season might be active during the year.
Just think if you were the only game in town. What could you charge? Having an exclusive is rare these days, and in a fragmented media environment, the competition is more prevalent than ever. Rather than competing for ears or eyeballs, we are all competing for attention.
The increased competition creates more commoditization. Quality content can offset the downdraft in demand and lower outside pricing pressures. Differentiation builds value, and you must stand out any way you can to support value and, therefore, price.
In closing, you may have other demand-driving elements on your list that I have not covered in this post. We should agree that the price is driven by demand from several directions and must reflect internal and external circumstances.
Thank you for reading this article, and please pass it along to your colleagues.
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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.