Why One-Size Pricing Has A Cost
Updated: Jan 19
One price for all sizes may work in the shoe store, but it is a missed opportunity for your stations to grow revenues.
Could you think of the last time you went to a shoe store? You look around the shelves and displays, searching for a predetermined choice you made online, and now you want to try the shoes for fit and comfort. The sales clerk approaches and helps you find the shoes you saw on their website, and only one question is posed, what size do you need? They know you like the shoes and have the intent to purchase them. One variable not connected to your decision is price by size. There are countless shoes in the store, with a wide variety of prices, so the odds are still in your favor you will find the right balance in fit, comfort, and price. Shoe stores do not charge different prices by size; it is the same for every footprint measured.
Let Us Try on Some Media Ads
In traditional media sales, we must consider this shoe-shopping experience and how we price all the different assets on our shelves. Do you have one price for all your sizes? Are you working with one rate card for all your customers? You may have pricing by daypart, day, or even week. That is not customizing the price to the customer; that is a pricing process that finds itself in the middle of many negotiations. Multiple established rate cards focused on the customer, and their needs or choices would give you a better focus in the pricing discussion, specific to assets and terms of sale.
Why do you want more than one rate card?
Could you take a minute to consider the price differences on your orders from one primary rate card and one set of rate curves? Do you feel comfortable that all your customers are getting an equal opportunity to fair pricing practices? We are not discussing different rate cards for every term and condition that might arise for a customer to place an order.
We are talking about a structure to maintain consistency in how you price and minimize the ad hoc negotiations in the sales department. Even if you are limited to using a spreadsheet as your pricing tool, you should think about multiple rate cards published simultaneously. With more effort to manage the critical price decision daily, a single station can gain hundreds of thousands of dollars a year with just one rate card being distributed.
What Are the Building Blocks for Multiple Rate Cards?
Terms and conditions can help filter customers and what they pay based on purchase patterns, timing, and demand levels for your inventory. We explored that topic in the blog “What Terms and Conditions Support Yield Management." It is helpful to review your terms regularly to keep them relevant. Terms and conditions are especially useful in helping support multiple rate cards. Is there room to add another pricing capability to improve our yield management platforms beyond terms and conditions? Yes, look at the airlines.
Give some thought to one layer of their pricing strategies related to seating, first-class, business class, and coach passengers. This pricing layer of differentiation is above any terms and conditions like refundable or nonrefundable, advance purchase, or last-minute tickets within 24 hours. The similarities of yield and inventory management between the airlines and broadcast suggest we can manage our interaction with customers to have more rate cards.
How should multiple rate cards work?
Live endorsements are an asset class that requires its own set of rates. We agree that endorsements are “beachfront property” and should command higher rates than standard, recorded ads. How are you pricing endorsements today? Do you have a distinct rate card with its terms and conditions? My guess is many sales managers are leveraging the value of endorsements and hopefully pricing them at the top of their rate structure.
What is important in premium pricing is consistency in how you price an asset class. This limited endorsement inventory should be on specialized rate curves and always higher than your standard curves. The limits on availability in your traffic system for “live” ads should also protect the value of this influencer approach in advertising.
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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.