Media

Pricing Challenges and Opportunities

The Media (television, radio, print, outdoor, internet) obtain a significant part of their revenues from the sale of advertising space. Optimally pricing this space becomes more and more strategic because :

• they operate in highly competitive markets
• airtime and commercial breaks are perishable assets
• supply is often limited by regulatory and programming constraints
• they manage complex pricing structures with an increasing differentiation of their offerings (break offers, environment offers and performance offers)
• they can take advantage of the different price sensitivities and buying patterns of different market segments (cars, distribution, cosmetics)
• the development of on-line bookings necessitates formalized and automated pricing and availability

In this complex and changing environment, media can optimize the sale of their advertising space through five profit levers :

• Global contracts The media must discount, often deeply; from the rate card depending on the advertiser's and the agency's buying power. New levers of negotiation include customer opportunity costs such as displacement of revenue (dependent on prime-time versus off-prime time pattern) and preference rules (exclusivity, positioning, negotiated availability.  
• Rate cards Rate cards (published prices) are becoming more and more dynamic with quarterly, monthly, weekly or even daily updates. These rates are no more exclusively defined based on the forecast of audience (gross rating points). They take into account the demand forecast which reflects the preferences and perceived value of the customers.  
• Complex offerings Some media , particularly television, design complex sales proposals, hence creating a variety of products with differential prices. For example, an order with more than 50 % of its spots in off-prime time may receive a 20% discount...  
• Availability management As differential discounts are applied depending on the advertisers' buying power and the type of offers (break offers, environment offers, and performance offers), an adequate allocation of space based on the opportunity cost will allow for an optimizing of the revenue extracted from each commercial break. However, availability management may be consistent with availability standards defined for global contracts.  
• Targeted Promotions Media planning can be extended to incorporate decision rules based on the opportunity cost of each commercial break to propose special price incentives geared towards key customers.

Benefits of Open Pricer technology

Open Pricer Intelligent Pricing solutions may be integrated to the media planning and sales management systems. The following are some of the advantages provided to the media industry :

• optimize the management of contracts : gain new customers, minimize churn and optimize profitability in accordance with long term customer relationship management
• evaluate the price sensitivity of different customer segments
• estimate the perceived value of different levels of service (exclusivity , availability standards)
• evaluate precisely the cost of a contract based on the displacement of demand and the impact of exclusivity agreements
• optimally allocate limited capacity to contracts which have the highest expected profitability
• build optimal offers to match customer expectations at minimum opportunity cost