Inventory Management for Radio: Rate Integrity or Fire Sale?

May 10, 2013 11:24:04 AM / by David Einstein

media sales inventory management How do you avoid inventory spoilage?
Young boy tending fruit and vegetable stand at Center Market, 1915. The U.S. National Archives.

Radio sales managers are always faced with difficult decisions about where to set their rates and how to manage their inventory so that they can reach and exceed budgets. That’s the name of the game, right?

The burning question is, what inventory strategy do you employ in order to reach your budgets, yet still remain competitive? It’s not easy to accomplish that, and many sales managers use a lot of gut feel but don’t have much formal training or knowledge about how to implement a successful rate and inventory strategy.

Personal and business philosophies regarding inventory management are about as varied as station formats. Everyone acknowledges that you need to get to budget, but too many sales managers are missing budgets because they aren't able to sufficiently manage their inventory from the time the first spot is sold to the last.

Oftentimes, a company’s rate/inventory strategy may include hurdles to getting to budget. When does rate integrity take precedence over rate discounting and packaging to move inventory?

Here’s a scenario: you’re almost halfway through the month and you’re almost sold out of drive time. You have tons of midday and plenty of fringe and weekends left. You've not yet made your budget for the month, though you’re pretty close and your sales team has a little pending left in their sales funnels.

So, what do you do? Do you get aggressive and dump your rates on what you have left and create a “fire sale” in order to get to budget, or do you take the business you can and hold your rates to preserve rate integrity?

A number of companies would stand firm with a rate integrity position. Of course they want managers to make budgets, but not at any cost. The philosophy is that if you don’t sell out, then perhaps you have too much inventory and spot levels might be reduced, which may then lead to increased ratings. This will then create demand on your inventory in the future, which will result in higher rates at that time.

Other companies faced with this situation would espouse a philosophy that encourages stations to get to budget and eliminate inventory spoilage. Managers would be expected to get the high rate where they could, but missing budgets with inventory left over would be frowned upon. Inventory spoilage is to be avoided, and having unsold spots creates an opportunity to drive new business with fire sale packages. Some media sales organizations would even approach carefully selected advertisers and even agencies (yes, agencies) and offer these discounted rates as a heavy-up opportunity and/or a “thank you for your business.”

But let’s face it: our mid-month scenario is a symptom of something bigger and more complex. Effectively managing inventory is the key to avoiding this problem, which puts you halfway into any month with unsold or oversold inventory while you are not at or above your goal.

The real issue is, how do you manage your inventory and avoid a situation that leaves you undersold or oversold, and not making budget either way? Many managers are working inventory for numerous stations and it’s really difficult to keep up and properly massage and manage the inventory and rates every day, but that is a huge part of the job.

Some media sellers are lucky enough to have a great spreadsheet system or a formal media sales yield management system, such as Efficio’s Yield Management Solution, or Share Builders , or an in-house/company-provided application. Still, there are lots and lots of you who have no access to great yield management tools that can help you setup an effective rate strategy to make budget, adjust your rates as you sell, and help you stay on track so that you don’t oversell or undersell. These systems ensure that you get the most out of every spot! They help you juggle all your stations’ inventory with much greater efficiency, and provide you with solid decision-making tools.

So, if you are stuck managing your media inventory the old-fashioned way (with guess and gut), follow the inventory strategies that will make you successful at your company, which will likely include a delicate balance of selling the value of your stations with rate integrity, maybe coupled with the occasional sale.

What do you think are some best practices for inventory and yield management for media stations? We all want to know!

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David Einstein

Written by David Einstein