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Business case studies No 222 - 08.06.2018

Ster’s bold new pricing strategy

This week’s egtabite puts the spotlight on Ster, the sales house of the Dutch public broadcaster, and how they radically changed their pricing system this year with the adoption of a unique price for all advertisers. The goal? To answer the client’s need for simplification and greater transparency with an emphasis on quality.

The new strategy was recently presented at egta's CEOs & Top Executives Summit in Madrid.

The reasons behind this strategic decision

Ster felt that the many changes the TV and radio industry has undergone over the past decade made the trading process complex and less transparent than it used to be. As advertisers thrive for transparency and simplicity in transactions, Ster decided to implement a new innovative pricing strategy.

The exact reasons behind this choice are threefold: firstly, the fact that big advertisers are moving away from linear television but keeping a high discount rate. Secondly, the noticeable trend on the market that a growing number of smaller and mid-size companies are increasing the volume of their advertising spend and lastly – the distinctive difference between small and big advertisers when it comes to the percentage of received discount and the volume of ad spend.

On top of that, as the difference in discount was solely due to negotiations with agencies, and not related to the entailed workload, Ster decided to implement one price for all advertisers.

Whereas before big advertisers had a price of approximately €450 per GRP and small/midsize advertisers roughly €700 per GRP, the sales house implemented one unique price of €470 per GRP for all their clients as of January 2018.

A five-step plan to changing a pricing strategy

The Dutch sales house implemented five distinct steps to achieve these fundamental changes in their strategy.

To start with, Ster focusses on increasing the number of smaller and new clients. The next step was to sell fewer target groups. A closer look at the 100+ target groups previously sold revealed that the only real differentiators when it came down to it were gender, age, education or a combination of those three. Ster simplified the process and reduced the number of available target groups to less than 10, all sold at the same price.

Thirdly, the sales house decided to have no annual contracts, no negotiations with clients and agencies but to work on a ‘contract per deal’ basis. Negotiations were deemed very time-consuming and often contracts would be subject to re-negotiations during the same year. Switching to a contract per deal allowed the team to invest more time in finding new advertisers and having quality discussions with them, i.e. focusing more on quality. The best proof for that is that Ster did not decrease the number of people in its sales team. They simply spend more time now talking about strategy than about prices.

Another clear step was stopping the payment of kickbacks to agencies, in whatever form or fee this might take. The final piece of Ster’s shift in strategy was a technical one: implementing an easy to use, transparent booking system, allowing for an easy buying process for clients.

First reactions from the market

While after only one quarter it is still too early to expect definitive results, a few observations can already be made: the total turnover of the spot market has grown in the Netherlands by 6,8% and while the growth of Ster was less than that, it seems that the launch of the new pricing system has had an influential impact on the total market. The pricing strategy has also grown the market as shown by a 12% increase in new advertisers to TV and Radio.

While Ster remains realistic in its expectations, the goal remains clear: provide an unmatched efficiency in the booking process, by spending more time talking to the client about their campaign, rather than about pricing. Simplicity and transparency are indeed two major priorities for marketers in 2018. Ster understood this and applied it radically.

COMPANIES

 

RESOURCES

»Ster website - click here.
»PDF presentation - click here.
»Video presentation - click here.

 

egta EVENTS

» MarCom Boot Camp (TV) 25 - 27.06.2018, Brussels
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» Marketing & Sales Meeting (TV & Radio) 04.10.2018, Bucharest Register now

 

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