As I buy advertising for several Encore clients, I review many proposals from media companies which sell online advertising. I see a lot of excellent proposals but also see many which are not competitive, and others that are simply mind-boggling and not anchored in any type of value equation. A lot of sales reps believe their digital media products are more different than they really are and sell and price based on this belief. This creates a disconnect with experienced media buyers who know the inventory available, and this certainly does not benefit the sales process. It may even result in a lost sale.

When pricing your digital media, factor in both macro and micro variables. On the macro side, understand the supply and demand situation in your space, and where you fit in. For example, there has been an explosion of online display ad inventory flooding certain markets with more ad space than can be sold which has driven CPMs (cost-per-thousand impressions) down very low. On the other hand, sites which can deliver high-demand audience niches can fetch 10-times or higher CPMs than the bottom tier of inventory and sell out at these rates. Online advertising markets are more fluid than traditional media markets so you will also need to pursue a more dynamic pricing strategy. 

On the micro side, understand the value drivers that matter to your advertisers, such as targeting, placement, rich media, etc. If you can add more value with these, you can price your ad inventory higher. For example, I ran a campaign for an Encore client where the click-through rate (CTR) on a rich media ad product was more than 10 times higher than the average for the rest of the buy. Do you think we would be willing to pay a bit more for this product? 

You should also explore different pricing models to accommodate different advertiser needs and buying preferences, including sponsorship, CPM, cost-per-click (CPC), cost-per-action (CPA), cost-per-lead (CPL), hybrid, cross media bundles, and remnant.  

The more you know about the economics of your marketplace and the needs of your customers and prospects, the better you will be able to maximize digital media revenue, by not under-pricing your ad inventory and leaving money on the table, and not over-charging and losing the sale.