LET'S GET REAL
We clear up some misconceptions about
Revenue Management.
Myth
“The major weakness with revenue management systems for broadcasting is that they don’t incorporate ratings.”
Reality
Ratings are only a rough guide to the demand for a programme. If there was only one buying demographic it would be different, but media buyers look at tens or hundreds of different demographics, timezones, environmental considerations and other variables, all of which affect demand. By scientifically forecasting demand and using proven techniques to set the ‘turn away’ point for each programme, we can prove that a broadcaster will achieve higher revenues overall than those achieved by rating/CPM pricing alone.
Myth
“I’m not comfortable making changes to discounts on programmes without knowing the effect it has on my ability to reach budget.”
Reality
In a volatile market, too much emphasis on meeting budget when making pricing decisions will limit your revenue achievement. We can show that placing the emphasis on demand based pricing will secure you the highest possible revenue from the marketplace.
Myth
“It would be stupid to turn away any bookings when I’m struggling to make budget.”
Reality
Focus constantly updates the opportunity cost of selling a spot in a given programme. For example, you might be considering taking $6,500 for a spot, but would this make sense if it meant you were turning away $7,350? ($7,350 being the expected future value of the same spot).
If you multiply the difference ($850 or 13%) over every spot you sell, you can see how Focus increases your revenue by a few percent here and a few percent there, ultimately adding millions in additional profit every year.
Myth
“Our sales managers are happiest when we make budget at least a month out. We can always get last minute bookings away in some of our unsold inventory.”
Reality
Your sales managers wouldn’t be quite so happy if they actually knew how much revenue you had turned away by selling out too early. The advanced quantification methods of Focus allow you to place a value on the turned away inventory and help you optimise every programme for maximum yield.
Myth
“We have 6 to 10 programmes every week which sell out months in advance. We don't want to do anything that might change that.”
Reality
This scenario presents the possibility for the greatest return on investment with Focus. Technically this situation is known as 'high yield spill’ - where early sellout leads to the turning away of higher value, late bookings. We can show that you’ll actually make the most money out of these programmes if they carry a sufficiently high price so that occasionally they don’t sell out.
Myth
"Once we make budget we are happy to let the sales staff get whatever revenue they can from the remaining inventory, and that's always worked fine for us."
Reality
While this might appear logical and in line with meeting the budget requirements, this does not maximise overall revenue. If demand is soft then maintaining normal discount levels might mean turning away business which should have been accepted and not making budget, even though the inventory was there to allow the budget to be met.
If demand is strong then maintaining normal discount levels prior to the budget being met could mean selling too cheaply and using more inventory than was needed to meet the budget. Once the budget has been met the sales team should not be encouraged to offer greater discounts as this dilutes the revenue value of the remaining inventory which is being sold. Pricing should react to market demand, not to an internal budget
Myth
“We want to wait until our business is making more profit before we invest in 'nice to have' tools such as revenue management software.”
Reality
That's like saying an athlete should wait until they can run really fast before they buy good running shoes. It is the revenue management system that will enable you to maximise your yield and create the bigger profits.
Myth
“Since we can't change the ratecard throughout the year, we won't benefit from using revenue management.”
Reality
Markets which do not support dynamic ratecards can’t react to changes in demand by changing the price, but they can use revenue management software to manage and control discount levels. In this situation, revenue management and discount controls actually allow the broadcaster to respond to and gain from changes in demand, improving revenues along the way