Dynamic Pricing and Economic Uncertainty

Economic uncertainty may be the only certainty for what’s ahead in 2023. There are positive and concerning factors that have broadcast TV sellers feeling apprehensive about spot revenue. After a substantial boost in 2022 from political advertising, 2023 will most likely be flat or see a decrease in OTA (over-the-air) revenue. The economy and how advertisers perceive it impacts what they spend. Regardless of the environment you’re selling in, you’ll find that dynamic pricing always works.

In this post, we’ll review some of the economic headwinds and how dynamic pricing can help you grow spot revenue no matter the conditions.

The 2023 Overview: Will the U.S. Economy Remain Resilient or Stall?

So many components affect the U.S. economy, and which way it heads will contribute to what advertisers are willing to spend. Companies were once fine to cut ad dollars when things became a little uncertain, but today’s business leaders realize there are opportunities during these times. They understand that staying visible to consumers is critical and can even help them gain market share if their competitors pull back on advertising.

In discussing the future with your customers, you’ll likely find that they have apprehensions. There’s both good and not-so-good news.

Positive Economic Signs

The U.S. job creation remains strong while unemployment stays low.
Corporate profits are up, as are wages.
GDP grew 5% in Q3 2022.
Inflation is cooling, and the dollar is up 15%, a 20-year high.
Holiday shopping numbers bested those of 2021 by 6%.
Legislation like the CHIPS and Science Act and the Infrastructure Bill are creating more jobs and opportunities for the American economy.
Consumer confidence remains steady.

Concerning Economic Signs

Interest rates have risen, making it more costly for borrowers.
Supply chains are still recovering for the auto industry.
Costs of materials and raw goods remain high.
Some economic experts are predicting a mild recession.
Consumers are depleting their pandemic savings.
Credit card balances are rising, with a 15% year-over-year increase in Q3 2022.
The housing market is cooling as mortgage rates stay high while inventory remains flat.

It’s a complicated story on the economy, and its growth or retraction may vary based on what’s happening in the local market. You’ll have to address it with advertisers, but without a crystal ball, you can only present data, stats and any assumptions you have due to knowledge of your local market.

In addition to your advertisers’ worries, you have some of your own about how you’ll move inventory and improve spot revenue.

The best way to maximize the value of each spot is with dynamic pricing, and that’s true in any economy.

Dynamic Pricing Is a Revenue Optimizer

The concept of dynamic pricing for TV spots is growing in adoption. However, not all tools provide the same options. Dynamic pricing is the real-time segment of yield management. In short, yield management uses avails and other data to price a spot based on supply and demand. A spot receives its price based on the market, not assumptions or flat pricing. The essential factor in such a tool is that avails data must be in real time, and you only get this with dynamic pricing.

Other tools only update avails once or twice per week. In such a fast-paced industry, yesterday’s data has no value. It doesn’t present the true story of demand and availability. Thus, dynamic pricing only works as a revenue optimizer if it’s based on real-time data.

So, how does this tool help you in an uncertain economy? Your pricing is data-driven and reflects the current fill rates, timelines and other key factors. You’ll be able to sell inventory at the best possible price point. It’s all automated, but you can put in parameters, including floors, ceilings and discount tolerances.

Dynamic pricing removes all the unknowns and deals with the facts of what people are buying. You could see considerable rate increases among your most in-demand inventory, like news and live sports. You’ll also be able to offer not-as-popular spots at cost-effective rates. Your advertisers may want a balance of these, and dynamic pricing lets you plan this out for them faster and more accurately.