Background
Media operators face a changing volume of demand with advertisers and agencies. At the same time, they have to deal with a rather fixed stock of seconds, millimeters, spots, range, etc. The result: Prices are raised (or lowered) throughout the year on the basis of various indices in order to better match supply and demand. We call this flexible pricing. The price can often still be negotiated, but in principle the price at which the stock will be sold is determined once a year. Compare it with NS, which tries to lure more travelers to the less busy times of the day through off-peak hours.
From flexible pricing to dynamic pricing; Yield Management
Determine the price once a year. That can be more dynamic. Yield Management is used with great success in many sectors. We all know the examples in the hotel sector. By applying Yield Management, the price for the same room in the same hotel for the same night differs depending on when the room is booked. The price point is determined every time a potential visitor makes a price quote. Yield Management determines the price depending on the expected demand, the already realized occupancy of the hotel for that night, prices of competing hotels, events in the area etc. Variables that change continuously and that therefore also result in a frequently changing price.
Media operators have the same dynamics of expected demand, realized fill rate, competition and events. However, the step from flexible pricing to Yield Management is rarely taken by media operators. And that is striking The development towards Yield Management in media is not very easy but should certainly be considered because it leads to a very significant growth in turnover.
From Yield management to Revenue Management
Hotels don’t just look at the revenue of a room. They also generate revenue from the restaurant, bar, excursion sales, etc. Where Yield Management is concerned with the price optimization of the room, with Revenue Management the other revenue potential of the visitor is also included in the pricing of the room. Good segmentation into customer groups is of great importance here. The chance of a good bar turnover is probably greater for a group of students than for an elderly couple.
Yield Management is thus a tactical part of a Revenue Management strategy. The total Revenue Management strategy has a much broader scope, for example from long-term asset management issues on the one hand to giving direction to operational marketing campaigns and sales calls on the other.
Yield Management in media
The stock that media companies sell is almost endless. The stock that media companies sell is almost endless. For example, consider digital outdoor companies that sell 6-second spots. With 200 screens that are on for 20 hours a day, it is about 2.4 million. price points per day. Because the human brain cannot handle this, the pricing structure that is used is greatly simplified. As a result, a considerable turnover potential is not materialised.
Part of good Yield Management is a link with an intelligent stock optimization system that – in addition to an optimal price – also ensures an optimal supply from the stock. Optimal for the customer because it fits his wishes. Optimal for the media operator because it prevents the stock still to be sold from fragmenting too much and thus becoming unsaleable.
In this way Yield Management not only provides the optimal quotation to the customer. Good Yield Management also ensures that unsold stock remains salable.
Conclusion
Yield Management and Revenue Management have become commonplace in an increasing number of major industries. Within the media, most companies do not get further than flexible pricing and as a result they miss out on a lot of turnover. It has now been proven that Revenue Management can also work well for media operators. We are happy to tell you more about it. Want to read more yourself? Then take a look at these insights about Yield Management or this article about Dynamic Price Optimization.
RevenueMindz focuses on the development of commercial business by applying Revenue Management principles, processes and tooling.
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