The Case for Yield Management

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It’s shocking to me that some stations in the 21st century aren’t taking advantage of yield management strategies. In lean economic times, pricing your inventory based on supply and demand makes more sense than ever before.

The best argument for utilizing yield management comes from reviewing an unsold inventory report (assuming your traffic system can supply such a report). For stations without yield management, it’s typical for 30 to 50% of each month’s inventory to produce zero revenue.

Question: is it better to have something or nothing for each available unit? Unfortunately, it’s not possible to sell a 30 or 60-second ad from last Monday. Once that time has passed, it is gone forever. And so, too, the opportunity to elicit revenue for it.

Here’s a thought experiment. Let’s assume you have one station that sells 60% of its available time each month. At a very conservative 9 units per hour, 24 hours a day, that’s 2,592 units that produce zero revenue. By utilizing yield management, your station could sell a minimum of half of those units at an average rate of $5. This would generate an additional $6,480 per month. That’s an extra $77,760 per year. Multiply that by four or five stations in a cluster, and you’re talking about some decent revenue.

At one cluster we know where aggressive yield management strategies were put in place, it made the difference between just breaking even and turning a substantial profit. With the power of modern traffic systems available at a keypress, adding yield management to a station’s arsenal is easier than ever.

2009 will be a real revenue challenge for stations across the country. Yield management is certainly a tool you’ll want to consider to help offset the revenue challenges of the days ahead.