Building the TV Rate Card of the Future: Part 1

Posted by Ashley Swartz on Jul 23, 2019 1:00:00 PM

rate-card-part-1

image credit: chainarong06/shutterstock.com

There are two levers you can pull to affect TV media yield: price and inventory allocation. Here, we’re going to focus on price. When working with clients who sell linear television on a spot basis, the most significant form of revenue leakage that we see is due to price variability—which itself is a symptom of pricing inefficiency. In other words, fixing your pricing optimization is the most meaningful, fastest way to make a significant impact to yield. And yes, if we’re talking about pricing efficiency, we’re going to be talking about TV rate cards.

Unfortunately, in many organizations, rate cards are static, based on gut instinct (instead of data) and ultimately not used anyway (our client sales data proves that). It’s a sales tool that exists because it has to, and because TV can’t move any faster. Or at least, it can’t move faster if you’re attempting to drive the F1 with a Datsun— or its equivalent, trying to run a TV business with only Excel in your pricing and planning arsenal.

When data and data science inform rate cards, they transform into tools that instill confidence in sales teams that they are extracting the most (fair) value they can from the market at any point in time. Oh, yeah! Note: This confidence requires that rate cards are actually used and adhered to by sales organization (insert ball-and-chain emoji here). When data, accurate forecasts and data science power rate cards, particularly as they get more granular and frequent, significant upside to revenue and yield is inevitable. These foundations, coupled with adherence, introduce uniformity and efficiency into price and sales.

Data-driven rate cards are here, now—today. Our clients are seeing up to 10% revenue improvement year-over-year, with rate card automation. Yes, it requires some changes; but never fear. When we see panic in the eyes of our clients, we remind them of the maxim, “crawl, walk, then run.” (Ok, maybe we need to do a few tummy rolls first…) There are numerous, immediately actionable steps you can take that do not require you to “blow stuff up” or re-engineer your sales systems, workflows or organization.

Here are a few steps–in increasing complexity–that any media sales organization can take, today (preferably with Furious as your partner ☺)

1. Use advanced data science to understand the parameters that affect your business the most.

This includes the following:

  • Programming
  • Day-part
  • Week-part
  • Geography
  • Political/non-political
  • High value programming, and more.

Are we talking about preemptible inventory, or broad rotators? And, we need a spot, CPP and CPM equivalent! Which are the largest determinants of pricing for your business? Ensure those parameters are built into the calculation of your rate card. (Important disclaimer: Advanced data science does not mean taking travel-specific yield optimization algorithms and applying them to your media business. Your business problems are not unique, but your business is. You need a partner that is purpose-built for media.)

2. MRCM (Make Rate Cards Matter). Use the rate card!!!

Implement a rate change control workflow or approval process to shift increasingly towards applying and adhering to your rate card. If you create it but don’t ever use it, don’t go through the effort. (Totally worth it though, when you see your revenue increase… just sayin’). More on this to come in a future post.

3. Continue to use data science to improve your rate card.

Stay with the cadence you’re using today, whether that be annually, quarterly or whatever works best. Now look ahead, instead of just relying on historical data. Use forward-looking demand and supply forecasting to inform the prices that you establish today. (See the purpose built-for-your-business and for media disclaimer from Step 1.)

4. For more advanced organizations: Start to change the way you do business by allowing prices to be updated on a more frequent basis.

Challenge yourself to move from annual, to quarterly, to monthly rate changes; or go from monthly to weekly. No need to push this to the extreme—the jury is out on whether daily rates are required. And eventually, as part of your yield transformation journey, you WILL get closer to the goal of pricing everything at the right time, at the right price, for the right amount, to the right buyer.

A note on frequency

The perishability of TV inventory creates a unique yield optimization challenge. The inventory type and prioritization it has in your trafficking systems are two parameters that greatly impact price and value. By not considering these as part of your rate card, or refreshing your rate cards so as to enable this consideration, you may be missing an opportunity to increase price—or an opportunity to increase sell-out by dropping price. Only you know the frequency that is both optimal for your business and that your team can handle.

Also, we can’t talk about frequency without talking about the big gorilla in the room: There is no such thing as real-time in TV! The operational systems simply don’t allow it. The “right time and right place” for pricing in TV is actually closer to 24 or 36 hours—in other words, the amount of time it takes to traffic an ad. What’s more, sales data often can’t be accessed fast enough to inform real-time decisioning, even if the systems could react in time. So, we need to build yield management solutions somewhere in the middle, so that in the end, all of your sales systems and workflows are better, faster and stronger.

And again, even if real-time was feasible, it may not necessarily improve business outcomes. The relationship between pricing and lead time is not a straightforward one. Take airlines, for example. Months ahead of time, chances are your ticket price will be reasonable— but not so much for three weeks out. But then again, prices may dip unexpectedly within 24 hours of departure. This non-linear relationship holds in TV as well.

Stay tuned for next week’s post with more detail on how to make organizational changes to be sure your new-and-improved rate cards are adopted across the organization. Download the Superior Video Yield White Paper!

Topics: Yield Optimization, TV Advertising, Rate Cards