Upload
leap-media-solutions-llc
View
941
Download
1
Tags:
Embed Size (px)
DESCRIPTION
Wayne Parrish's presentation on ad pricing optimization at The 2014 ROUNDTABLE in Vail, CO.
Citation preview
Advertising Pricing…
a better way
Wayne Parrish, COO
August 21, 2014
Background
Postmedia is comprised of 10 titles, including leading broadsheet titles in five of the
top six Canadian markets
Experienced steady revenue growth through 2008, declines analogous to U.S.
market from 2008 through 2011, more precipitous than U.S. 2011 through 2014
Major cost reduction transformation programs began in 2010, at accelerated rate
2012-2015
Key element shift to functional structure in 2013, collaborative environment
The real challenge: How to add value on the revenue side?
2
So What Started This Process?
As a pilot we assessed
Calgary Herald’s pricing
discipline, sales
organization, processes &
procedures to identify
opportunities to improve
performance – revenue.
FTI recommended various
solutions which include:
– Organizational
recommendations
– Workflow
optimization
– Web-based pricing
tool,
– Revised
compensation plan.
3
y = -0.521ln(x) + 8.115R² = 0.143
0
2
4
6
8
10
12
14
16
0 100 200 300 400 500 600 700
Rate
Per
Lin
eag
Lineage Thousands
Lineage vs Rate
Declining Market Share and Rate | Inconsistent
Pricing vs. Annual Spend
Retail Channel Org No
Longer Working
Food
Entertainment
Travel
Energy
Government
Finance
Education
Administrative Assistant
Executive Assistant
11
2
3
4
5
6
2
3
4
5
6
7
7
Calgary Account Executives
Tiered Comp Plan
Not Fully Effective
Today Let’s Talk About Pricing
…pilot of a broader Sales Effectiveness Engagement
The objective was to analyze Calgary Herald’s sales organization, processes &
procedures and pricing to identify opportunities to improve performance – revenue.
One of the key recommendations was to abandon traditional and ineffective rate cards
and to develop a pricing tool with FTI Consulting.
4
Declining Market Share and Rate
We Found Randomness in Pricing
…first we looked at all local retail together
The rate card has become irrelevant – we actually were raising it while yield was
falling
The R2 value indicated that there was 14% correlation between annual lineage by
a customer and the rate they paid.
5
y = -0.52ln(x) + 8.1062R² = 0.1432
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
0 100 200 300 400 500 600 700
Rate
per Lin
age
Annual Linage per Customer
Linage vs. Rate
Rate Log. (Rate)
Yield Varied Significantly vs. Annual Volume
The Correlation Must be Better by Category
…well not really
6
Automobile Entertainment
Finance Food & Drug
So We Agreed with the Recommendation
…discard rate cards and use a pricing curve
FTI developed a “Log Curve” model that incorporates a specific company’s historical
relationship between customer budget spend and effective line rate.
The logarithm regression model – best fit pricing - was used to determine pricing by
category based on the advertiser’s commitment to us.
7
y = -0.667ln(x) + 9.8013R² = 0.9948
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$0 $100 $200 $300 $400 $500 $600
ELR
Annual Customer Spend ($000s)
Revenue vs. Expected RateProposed Log Curve
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$0 $50 $100 $150 $200 $250
ELR
Annual Customer Spend ($000's)
Employment Revenue vs. ELR
Current 2:1 Log Curve Adj.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$0 $100 $200 $300 $400 $500
ELR
Annual Customer Spend ($000's)
Automotive Revenue vs. ELR
Current 2:1 Log Curve Adj.
Our Pricing Curve vs. Historic Yield
…for advertisers above the curve, you leave them there
8
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$0 $50 $100 $150 $200 $250 $300
ELR
Annual Customer Spend ($000's)
Retail Revenue vs. ELR
Current 2:1 Log Curve Adj.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$0 $50 $100 $150 $200 $250 $300 $350
ELR
Annual Customer Spend ($000's)
Real Estate Revenue vs. ELR
Current 2:1 Log Curve Adj.
The Revenue Leakage Below the Curve is 18% - 35%
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
0 200 400 600 800 1000 1200
Rate
Per
Lin
eage
Annual Revenue Per Customer Thousands
Current Rate Card vs. Pricing Model
FTI Mon-Wed Thur Fri Sat
So How Far Off Was the Rate Card
…compare to be fit market pricing
The best-fit rate curve that was developed while identifying millions in added revenue
is compared to our rate card
Not only was the rate card far from what the market would pay, it did not reward
commitment from our advertisers
9
The Rate Card Was Ineffective
What The Pricing Tool Enables
Begins with Yield Analysis of All Accounts
10
Key Attributes of the Pricing Tool
Replace static rate cards with a dynamic web-
based rate card that prices along the median
product yield adjusted by advertiser volume
for each unique market.
Incorporate audience data for each product so
the tool displays audience reach and profile
for each product with campaign CPM and
eCPM calculated.
The tool calculates continued lower rates as
the advertiser commits to higher spend
moving from a transactional dominated sales
process to longer, higher spend commitments.
It can take a sales rep hours to prepare multi-
product quotes with audience detail; with the
pricing tool it only takes minutes to prepare.
Improve
Yield
Sell
Audience
Advertiser
Commit-
ment
Improve
Sales Rep
Proposal
Process
Steps in FTI Using Pricing Tool
Confidential & Proprietary Tool
Step 1: Enter the total
budget the client expects to
spend and the percentages
to be allocated to each
product.
Step 2: For the Print (ROP)
Pricing Tool, choose the
category of the client.
11
Step 3: Choose the position surcharge based on the
criteria and enter the number of modules the client wishes
to purchase for Monday – Wednesday and Thursday-
Saturday.
Step 4: For Digital
Pricing, enter the
number of impressions
the client proposes for
each respective
section/channel.
Step 5: For Mobile
Pricing, enter the
number of impressions
the client proposes for
each respective
section/channel.
Step 6: For Insert
Pricing, choose
the surcharge
based on the
criteria and enter
the number of
pieces the client
proposes.
Campaign
Model
What are the preliminary results…
Implementation this Spring
In Montreal for example, 9 out of 12 Account Reps have an increase in yield -
AVG yield increase of these 9 Account Reps is 9%
How are the Accounts Reps using – our annual contract renewal period is
coming up so we did not have the pricing tool for last year’s planning
For existing clients - using the tool to compare the rate by category and
then they may not use for every order once they set rates – will adjust as
we roll-out to use for all sales
Most beneficial for new business - used to determine where pricing should
be for both outside and inside sales and have been very effective
Seeing pick-up from dormant accounts – check why they were dormant and
found rates were actually too high – now pricing at the curve and going out
with “here is what I can do for you now” and gaining business
If advertiser rates are above the curve we have retained them at those
rates
12
Additional Comments…
What Reps are now doing differently
First of all, the Reps like the pricing tool - it provides clarity and a guideline with
which to base rates
Now more conversations on working on increasing rates than before – the
change in commission plan has helped too
Always had volume based contracts – more “commitment” conversations are
occurring - needs more focus – working best for inside sales
We are using the pricing tool as we plan contracts that are upcoming next
month
We’re also getting a good ‘bang for the buck’ out of the increased visibility and
incentive this initiative has brought us
We need to use the audience information more – a few discussions now -
reach is generally better than advertisers understand and we just need more
training
13
Thank you
Wayne Parrish / COO
[email protected] | 416.386.2810
Ken Harding / FTI – our partner
[email protected] | 303.689.8875
14