As we shared in last month’s blog, when prices fall, demand generally increases. When a station uses the strategy of “pricing for share” it involves lowering the price in an effort to make the station’s inventory more attractive to buyers, thus encouraging them to buy more. Having one advertiser “buy more inventory” might be good in a specific instance, but if this strategy is utilized universally with every advertiser, it can lead to problems. Here are a few points to consider:

A healthy or robust market.

When business is strong in a particular market, that usually translates to larger budgets, but oftentimes relates to a larger number of available advertisers. Logic dictates that if there are ample buyers, we must auction our inventory to the highest bidders. Multiple advertisers bring higher demand to our inventory. By selling too much inventory at a lower rate to gain a higher share, we possibly won’t have inventory available to sell to buyers who would pay more.

A ratings leader.

If you are one of the top-rated stations in the market, there are multiple buyers who almost have to buy your station. In certain situations, the demand is now more inelastic. Buyers want access to your top-rated shows, but they also have to be willing to pay for it as there are multiple buyers vying for that same inventory. Lowering prices to get a higher share of business in this instance sells out our inventory too early and too cheaply.

Every situation is different. Make sure if you utilize a “pricing for share” strategy that you are doing it with the right buyers in the right situations.