The 4 pillars of digital pricing and packaging: Selling in blocks
An excellent Digital Ad Pricing and Packaging webinar shared by Kenny Katzgrau, publisher and of Broadstreet’s Ad manager, gives critical insights into the age-old problem: What should we charge for digital ad and sponsored content packages?
Katzgrau says niche media should avoid CPM-based pricing at all costs and has created a formula to develop packages and pricing that works for the client – and the media company. You can watch the full webinar here.
To boil it down, his approach is based on “Four Pillars of Pricing and Packaging” and requires a shift in thinking about pricing. Publishers can do a “sanity check” against CPM ranges (listed below) but start from a completely different place.
Here are the fundamentals to understand:
1. Price based on total revenue needs
The jumping-off point is the revenue number needed for the business’s strategic growth.
“How much does running that next level of your business and carrying out your mission cost?” Then add a 20% profit.
“Any less than what you need is irresponsible,” he said. “It is not based on what other people are doing but what is aligned with your goals.”
Once publishers know the number needed, he recommends building out pricing in blocks that add up to the amount of the revenue goal first. Here is an example he gives of block pricing- 10 small, five medium, and five higher price ad packages – that leads to a $20k a month in this digital revenue plan.
He then breaks the block down vertically; how long will it take your team to sell a block of small/medium and high priced ad packages?
Depending on the size and maturity of the team, if you can sell a block of 3 to 5 packages in 90 days, the model becomes viable.
Note that his webinar assumed a model to cover online media companies. However, for companies with print magazines, the same concepts hold. In fact, once digital covers the total expenses of the company plus 20%, net revenues from print revenues and subscription is all profit.
2. Create unique solutions
The second go-to recommendation is to create unique packages that are “something different that nobody else is doing.”
Katzkrau created Broadstreet’s software to help the former owner of RedBankGreen save an advertising account, and he still focuses on creating eye-popping ad units. RedbankGreen, which he took over ownership of, now showcases these oversized commercial ads and premium units throughout the online magazine’s website.
The list of products can include interstitial oversized ad blocks with different kinds of premium functionality, exclusive positions, sponsored content, ads that stream social posts, section sponsorships, interstitial pop-ups, and newsletter placements. Consider the competition, but rather than focus on pricing, consider what your media can offer that is special and unique.
Premium ads such as billboards can yield .75 to 1%, and adding on unique items can help “build a moat around your business” since no one else can offer the same things.
3. Deliver great value
“What you don’t have in traffic, add in value and performance,” Katzgrau recommends. He suggests reviewing the packages to see if “there is enough to justify the price.”
Be determined to create real value by asking questions that serve as an “acid test.”
“Will it set me up for a renewal? Would a client be crazy not to consider it? Are you excited and confident?” he asked.
Here is a list of all possible products that create value:
He noted the highest value contracts – ones that sell for $2500 to $5000 a month – are about partnerships. The client will pay more to know “that the person running the campaign for me will ensure this is all working.”
“The higher priced packages are not about stuff, but that you can assure then they will be successful.” He recommends over-delivering on performance for top customers.
4. Simplicity
“We want the package to be simple to execute. We can’t be spending too much time on it,” he said.
Broadstreet is not the only tech out there, he noted. However, ads need to be easy to create from templates. The cube has six images and six captions. The social media ads can be run from a link. The sole rep at Montclair Local, another online-only publication, told us that creating multiple options for a client in minutes instead of going back and forth with a graphic designer has made her twice as effective – in addition to showing the ads in live preview mode.
Then, there is the process to launch the ads on the website and email.
“Can you write a Google doc so that an intern can do it?” he said. A publisher cut the time spent on ad sales, creation, and delivery to about 2 hours.
“You want the maximum impact for not as much effort. It has to work for both of us,” he said.
He puts these four criteria: Price for need, unique approach, great value, and simple to execute on each package worksheet to reinforce that every package has to meet these goals.
Below is his worksheet for each package or block. We’ve recreated this model in Google Sheets in tabs that link to a single list of blocks adding up to the revenue goal.
“Keep it simple and over-deliver for your best customers.”
His CPM/flat fee chart below also has some rough ranges, but only as a “sanity check.” The high-end CPM is more typical for B2B categories in which the audience has high dollar purchasing power. The highest price point ad units are Billboard ads and sponsored content.
Scarcity is part of the unique value. One of Broadstreet’s clients caps their top price point at four partnerships that require a 90-day notice for clients who do not renew, so they do not want to give up their positions.
Digital also has unique audiences and advantages to point out. Sponsored content fits both print and digital, often with unique audiences, and is a way to sell to a larger audience. Digital can also deploy immediately for time-sensitive campaigns.
Another piece of advice is for niche publishers to deprioritize ad networks to improve performance for higher-paying advertisers. Either let them go or backfill around the direct business, Katzgrau said.
To access the Google spreadsheets and start to build your packages into a revenue model, start here.
Many thanks to Kenny Katzgrau for sharing. Katzgrau is the founder of Broadstreet, publisher of RedBankGreen, and champion of underdogs. “We’re a small, fun, and dedicated team of thinkers, dreamers, engineers, and misfits that cares deeply about what we do. ” He lives in Redbank, New Jersey. You can reach him at Kenny@Broadstreetads.com.
