(By Alec Drake) The holy grail of inventory and yield management is to reach sellout at preferred prices when demand is extinguished. This pursuit of maximum revenues is a core responsibility for sales managers everywhere. We should also recognize an opportunity cost when less focus is on unsold inventory (Spoilage).
It’s valuable to look at both ends of the demand spectrum and see what can minimize spoilage. Each demand condition has different characteristics and subsequent strategies which can contribute additional revenue and work in unison to support reaching or exceeding a budget.
What Creates Spoilage?
We would all love to sell the total available weekly inventory on our stations. The hurdles to reaching stronger sellouts are primarily a combination of three elements that depress demand and result in lost revenue.
The Pricing Is Too High: Prices are high if pricing decisions are too optimistic or are budget-driven rather than actual demand. If you are subject to vanity rates in your mind without the value to support them, you can be priced high. If there is neglect in responding with timely price adjustments to lower demand patterns, you will price high. These factors all create inventory spoilage and lost revenue.
Buyer Demand Drives Attention: The path of least resistance means proposals serve up prime inventory with more natural demand or higher ratings. Even if the price is higher in prime based on the demand, the perceived value matches, and buyers often place orders. Managers should explore added options for sellers to smartly leverage the low-demand areas on stations and narrate their value to the buyers.
Poor Utilization in Proposals: At best, sales teams may package low-demand inventory if it lowers an average rate or adds frequency to boost the odds for a close. The caution flag on packaging should undoubtedly be raised when no-charge units are bundled to make the sale. A more proactive view of what is not sold each week leads to the better utility of all inventory. In other words, track your spoilage as well as your sellout levels.
What Does a Proactive Strategy Look Like?
Alternative Prime: This term is one way to promote less demanded inventory to sales teams. Perception internally and in the market is managed by building respect and value for all areas.
For example, in a meeting with an auto dealer, I asked, “Would you rather sell a car with a $10 or $300 ad?” My comparison was tied to pricing for the morning drive (6 am to 10 am) on the station compared to overnights (Midnight to 6 am). The auto dealer answered that they would rather sell a car with a $10 ad. The anticipated response led me to a conversation about the value of the overnight audience of first responders, shift workers, and sleepless listeners who could be available to hear the message. It worked!
Using the existing advertising budget, we took one dealer ad running at $300 and used the dollars to buy thirty ads overnight. The frequency and creative message crafted for this daypart took us over the finish line for results. Customers surveyed by the dealer mentioned hearing the overnight ads when asked, which validated the strategy. This new focus on spoilage in one daypart with a proactive strategy added $150,000 of annual revenue, helping the sales manager hit their budget for the year.
The Takeaway: There are no magic paths to reducing Spoilage or unsold inventory on your stations. The effort is continuous improvement with proper sales training, tracking pricing changes based on demand patterns, managing perceptions, and building the value narrative. Incremental revenues from lower-priced unsold inventory can help reach or exceed budgets. In my example of “Alternative Prime,” the station ignited a fresh look at overnights by the sellers and advertisers alike.
Alec Drake advises and writes on revenue management. He founded T.R.I.P. “The Radio Invigoration Project” group and publishes a monthly newsletter, The Sales T.R.I.P. both on LinkedIn. Alec can be reached at [email protected]. His previous Radio Ink posts are at Radioink.com/author/adrake.
