Latest / The Yield Doctor with James Deaker / The Hidden Cost of Custom Rate Cards

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The Hidden Cost of Custom Rate Cards · The Yield Doctor with James Deaker

• 0:01
  Custom rate cards feel like a great way
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  to win deals. A big client asks you for
• 0:07
  special pricing, you say yes, you close
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  the deal, and everybody is happy. But in
• 0:13
  most big organizations, custom rate
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  cards destroy pricing power. They
• 0:19
  increase operational complexity and they
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  make it harder to grow over time. And
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  the problem is you don't see the damage
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  immediately. Today I'm going to talk
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  through why custom rate cards are so
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  dangerous and what to do instead. So
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  even if you're a relatively small
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  publisher, as soon as you start to
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  introduce standard pricing, you're going
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  to get push back. Clients will ask you
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  for discounts. Repeat customers will ask
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  for those discounts to get locked in
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  over time. And your biggest customers
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  are going to start to ask for most
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  favored nation pricing, meaning that
• 1:00
  they're guaranteed the best pricing. And
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  this is something you should avoid at
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  all cost. If you only have a handful of
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  customers, you might be able to manage
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  bespoke pricing, but in reality, most
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  publishers have dozens or hundreds or
• 1:17
  thousands of different clients. And at
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  that point, managing custom rate cards
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  starts to become almost impossible.
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  So let's go through the challenges one
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  by one with custom rate cards. Firstly,
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  they destroy your pricing integrity.
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  Once you introduce custom rate cards,
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  the original base rate card stops being
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  real. It starts becoming a negotiate the
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  point for negotiations to start. clients
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  start comparing notes, they start to see
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  inconsistencies
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  and even if those differences are
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  justified, it doesn't matter over time,
• 1:58
  the clients will all use those
• 2:00
  differences against you. The second
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  major challenge is that custom rate
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  cards create operational complexity.
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  They can create a huge amount of
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  overhead. Every exception needs to be
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  tracked. billing becomes more complex.
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  Ad operations needs to remember which
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  client gets which custom rate card. And
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  over time, things get worse, not better.
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  What starts out as a few exceptions
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  becomes a system that's very hard to
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  manage. Number three, they start to lock
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  you out of having product flexibility.
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  And this is one of the most important
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  and sometimes most overlooked issues. If
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  you have one rate card, you can launch a
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  new product, update the pricing, or
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  remove something, and it's all
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  relatively straightforward.
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  But with custom rate cards, now you have
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  to think about every change that impacts
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  every custom agreement, and suddenly
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  your road map can be constrained by past
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  deals.
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  The fourth thing is you start to lose
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  market signal. And again, this one's
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  subtle and often overlooked, but can be
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  really important. When you have a clean
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  rate card, you can see how the market
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  responds to any changes that you make.
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  If you increase prices by 10%, it
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  doesn't mean that your customers are
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  going to all change their pricing
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  realization by 10%. You're going to lose
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  some of that demand, but at least you
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  have a clean signal. But when you start
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  to use custom rate cards, that signal
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  becomes much messier, becomes distorted.
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  You can't tell what is working and
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  what's not when you make those pricing
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  changes. All right, so those are the
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  problems with custom rate cards. What do
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  you do instead?
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  The first thing is to try to anchor
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  everything to a single rate card. If you
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  can, ideally, you use structured
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  discounts. Maybe it's 5% off the base
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  rate card or 10%. Or maybe you create
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  tiers within that rate card for
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  different customer groups, but all of
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  them always anchor back to your standard
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  base rate card. And in that way, you
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  preserve pricing integrity.
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  The second thing is you try not to
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  discount. Instead, you add value. The
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  goal is not to lower the price. The goal
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  is to increase the value of the deal
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  both for you and for the client. So
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  instead of finding ways to discount the
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  rate card, instead try to find ways to
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  increase value for the client. For
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  example, you might want to add in bonus
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  impressions that are tied to every spend
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  level. You might want to look at giving
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  early access to newly launched products.
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  Or maybe you give higher service levels
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  for your managed clients to higher
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  spending customers. All of these
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  approaches are preferable to lowering
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  the price because once you lower the
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  price, it's really hard to get it back.
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  But value, you can keep building value
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  considerably over time. The third thing
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  that you may end up doing is creating
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  tiers instead of custom deals. So
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  instead of bespoke pricing for every
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  customer, you create tiers. You might
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  have a standard tier, a growth tier, a
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  premium tier. And if clients qualify for
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  that tier, they get that pricing, not
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  something custom. This gives sales some
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  flexibility without creating chaos. So
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  what happens if a client still pushes
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  back? If none of these options feel like
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  enough at that point, you may still need
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  to create a different rate structure.
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  But the key is it should not be unique.
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  Instead of creating a one-off custom
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  rate card, defi create a defined tier.
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  Maybe it's the very premium partner.
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  It's standardized. It has clear
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  qualification criteria to be in that
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  group. And it's something that you can
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  defend both internally and externally.
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  And again, this is very different from
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  something that you create bespoke for
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  every deal.
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  So, custom rate cards often feel like a
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  win in the short term, but over time
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  they erode pricing discipline. They
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  create operational drag and they limit
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  your ability to evolve. So, if you find
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  yourself using custom rate cards, it's
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  not usually a sales problem. It's a
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  pricing systems problem. And if you
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  don't fix the system, the problem
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  compounds.
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  These are exactly the type of problems I
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  like to work with with my clients in my
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  consulting practice. I am James Deika. I
• 6:57
  am the yield doctor. Thanks for
• 6:59
  watching.