Everyone who sells or buys radio advertising knows today's pricing, at least if they are active in the DACH region:
The seconds for radio commercials on FM and DAB+ stations are priced differently for each hour, depending on the reach behind them – meaning the number of listeners. The basis for this pricing is the results from various market-relevant studies such as the MA Audio or the Radio Analysis.
However, the hourly price varies for many channels depending on the day of the week, for example, because people get up earlier on Mondays to Fridays than on Saturdays or Sundays, and therefore listen to the radio too. But the factor Demandis only taken into account to a certain extent by some broadcasters, in that months with higher demand are typically subject to a surcharge, or conversely, months with lower demand are subject to a discount. But basically, one works with quite rigid price lists, and all market partners already know today what a 20-second radio spot on station X or Y will cost on December 15th or any other day of the year.
From the perspective of advertisers and their agencies, this facilitates a spread of the budget throughout the year.
From the publishers' perspective, this is no longer the best way to bring their inventory to market. Instead, modern methods for supply and demand-based pricing should be used for optimisation.
Yield management is a method of revenue management that companies use to optimise the price of a product or service in order to maximise profit. Yield management is particularly widespread in the hotel and airline industries, as well as in event management and retail.
The aim is to optimally utilise the capacity of a product or service by adjusting the price. This means that companies adjust their prices in real-time to maximise their capacity while simultaneously increasing their profit margins. Factors such as demand, seasonal fluctuations, competitor prices, and internal costs play a role in this process.
A well-known example of yield management is the pricing of airline tickets, where prices vary depending on demand and the time of purchase. This means that tickets for the same flight can have different prices on different days or at different times.
Overall, Yield Management helps companies to maximise their revenue and profits by dynamically adjusting prices to optimally utilise their capacity while enabling demand management.
Yield management is used on radio in many countries worldwide, particularly in the USA and Canada, where it is established practice. However, it is also being increasingly applied to radio in other countries.
Many radio stations use advanced technologies and data analysis tools to optimise their advertising slots and offer dynamic pricing structures to their advertising clients. Some of the largest radio stations in the USA, such as iHeartMedia, Entercom, and Cumulus Media, use yield management strategies to maximise their advertising revenue.
Yield management is also widespread in radio in Canada. Canadian Broadcast Sales (CBS), the leading sales organisation for radio advertising in Canada, offers advertisers a variety of pricing options for their radio spots, including package deals and pricing based on time of day and demand.
Although yield management is not yet as widely used in radio in Europe as it is in North America, some radio stations in the UK have begun to employ these strategies to better utilise their advertising capacity and maximise their revenue.
Overall, this type of pricing is increasingly becoming the standard in radio worldwide, as it helps radio stations market their advertising slots more efficiently and maximise their revenue by dynamically adjusting prices and optimising the utilisation of their advertising capacity.
Radio publishers in Germany, Austria, and Switzerland should also adopt exactly this dynamic pricing method. The famous Black Friday week is not the only period known for generating high demand. For each individual publisher, there are extensive factors that define the supply and demand for their respective products: the competitive situation, reach, availability, the general economic situation, and specifically in the broadcast area. Local events, regional holidays, particular programme environments, and promotions, and even the weather are sometimes relevant. The strength of their own sales team, their consulting expertise, and thus the quality of the solutions for advertising clients can also play a role.
The range of factors that must be considered for optimal pricing clearly shows that suitable digital tools should be used for ongoing data analysis. People can no longer manage this constant optimisation of prices „by hand“. Radio marketers in other countries have long been using technologies to support them in this. This also includes the special possibilities of artificial intelligence, such as machine learning.
It is now also time for radio marketers in Germany, Austria and Switzerland to address this topic and to bring their inventories to market in the most profit-maximising way possible.
What should be taken into account during implementation?
- Understanding and agreement with the strategy
„Dynamic Pricing“ will radically change the way you've sold up to now. Therefore, as a first step, all your stakeholders, from shareholders to the advisory team, must truly understand the value and impact of dynamic pricing on revenues. Concrete examples will help convey this new sales strategy. - Suitable technical solution
Carefully select a suitable technology platform that can interact with your advertising management system. The current utilisation of your advertising inventory plays a significant role in this. Excel spreadsheets are no longer viable in this area; they hinder scalability and efficiency. - Data, data, data
Clean data from the past is needed to „feed“ the technology, so that it can suggest well-founded recommendations for tomorrow's prices. Furthermore, a learning phase should be scheduled for your team to familiarise themselves with how such technologies work, to correct any misdevelopments, and to learn to trust the price recommendations in the long term. - Specifications for the system
Price fluctuations upwards (capping) or downwards (minimum floor price) can be limited. The intervals at which prices change can also be defined. - Product launch
An argumentative line for advertisers and their media agencies must be developed, trained and applied early on. Long-term customers have specific price expectations and pricing experiences. What changes does dynamic pricing entail for them and how can it be explained why the demand factor must be taken into account by you in spot prices for the long-term preservation of the business relationship in the future?
There should also be a suitable line of argument for new customers. And last but not least, the formal purchasing process (request for quotation, order placement, order confirmation, price changes for delays, cancellations, etc.) should be as simple and automated as possible for advertisers and their agencies. After all, if an agency has to postpone an advertising campaign for the launch of a product that might come onto the market four weeks later than planned, for example, it can no longer assume that the price for the campaign will remain the same. Furthermore, a multi-month budget plan for an advertising customer can no longer be handled simply using a fixed price list found online.
A common approach in the market would be the introduction of dynamic pricing in the FM marketpotentially favour, but rather prevent rapid implementation for one's own broadcast group.
Yours, Andrea Anders
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