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How Pricing Controls Can Prevent Revenue Leakage

Posted by Ashley J. Swartz on May 19, 2020 1:00:00 PM

How Pricing Controls Can Prevent Revenue Leakage in the Era of COVID-19

I’d like to begin with a bold statement. If you haven’t redone your rate card across your entire portfolio of linear, spot-sold inventory during this lockdown period, you’re missing revenue opportunities.

Let me backup to offer some context. Live sports, tentpole events and audience favorites on primetime typically contribute 80% to 90% of a TV seller’s total revenue while accounting for only 10% to 20% of volume. As of March, a huge percentage of this high-value programming has been wiped out, and the prospects for the fall aren’t promising because of production stoppages that will delay the release of new content.

If you consider these points in a vacuum, the financial outlook for sellers looks grim. But what’s sometimes missed is the impact of these disruptions on remaining inventory, which may become significantly more valuable now that supply is constrained and competition for TV viewers is less intense.

Why This Isn’t All Bad News

I’m not suggesting that the price of every program will automatically go up. But value and price should increase in cases where programming can suddenly command a larger audience of engaged viewers. For example, the NFL draft became more valuable as a result of the upcoming season’s uncertain future and the novelty of holding the draft remotely. And food, cooking and DIY-related programming have also increased in value because of their heightened relevance to millions of people who are stuck at home.

The fact that large swaths of inventory are inherently more valuable doesn’t mean that securing higher rates is easy or straightforward. Erratic and inconsistent pricing can be a stubborn impediment within seller organizations.

The Importance of Pricing Controls

In the absence of pricing controls and workflows to govern the use of pricing exceptions, salespeople will frequently deviate from rate cards and offer discounts to get a signature on the dotted line. It’s a natural inclination, but one that can result in substantial revenue leakage (i.e., revenue left on the table.) In an analysis of the transaction-level data of seven different linear TV sellers, Furious found that pricing variability was the primary source of lost revenue opportunity.

Out-of-date rate cards are another culprit. Some organizations update rate cards only quarterly or annually, which means they don’t account for frequent but subtle movements in supply and demand, let alone the sweeping changes occurring right now.

The downsides of ineffective and inconsistent pricing practices are generally known and understood, but they’re greatly amplified in the current moment. At Furious, we’re helping TV advertising sellers to develop data-driven rate cards that are frequently updated to ensure that current market conditions are accurately reflected. We’re also working with customers to implement pricing controls to help sales teams sell inventory for its correct value. These controls will result in certain transactions being declined for failing to meet financial thresholds but will increase the yield of TV and video advertising portfolios overall.

These principles go hand-in-hand with data-driven inventory management and packaging practices. As I discussed last week, sellers need to identify the programming that stands to benefit from the absence of live sports and other HVP and then build packages around it with a focus on maximizing sellout.

If you act decisively in these areas, your business’s road to recovery from COVID-19 may be shorter than you think.

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