Media Agencies: A penny saved is three pennies earned through corporate trade

Posted by Tanja Bessey on Mar 14, 2013 9:32:00 AM

 

I’ve been working in the Corporate Trade industry for about 6 years, and consider myself somewhat of an expert.  I’m fortunate enough to have a 360 degree view of the industry and all of the different ways Barter is used by businesses and agencies,  but it wasn’t always that way.

Before Active, I worked for years at a media agency, and had a completely different perspective on Corporate Trade (aka Media Barter, Corporate Barter).   To be honest, I didn’t understand it but I was intrigued. 

In the changing global economy, Clients budgets were gradually shrinking.  Here was a business model that, essentially, enabled us to keep those media budgets intact, while keeping the client happy.  I didn’t understand how it worked, but I wanted to.

After a lot of research among companies that used Corporate Trade, asking a lot of questions, I joined Active International after finally understanding how all the moving pieces came together. I know that Corporate Trade isn’t the most intuitive business model to comprehend, so I thought I would kick off my first blog by showing an example of how Corporate Trade could be viewed through the media agency perspective.

The old saying goes “a penny saved is a penny earned.” Media bartering through a Corporate Trade organization allows you to triple that penny for you and your client. Here's how:

First penny: Let’s say your client has $100,000 worth of last year’s clothing line (excessPenny Saved Penny Earned inventory) sitting in an expensive warehouse collecting dust.  They aren’t moving fast enough in store and they certainly don’t want to sell the slow moving inventory at $30,000 to a liquidator.  Who wants to take a 70% loss?  So, the excess inventory sits there taking up costly warehouse space, while the client breaks news to you that their media budgets will be slashed once again.

This is a great time to consider Corporate Trade.   

Similar to liquidation, a Corporate Trade company buys the excess inventory hangover from your client, but at full wholesale value.  They eventually re-sell it through after-market channels that meet all of client’s re-sale restrictions and are approved entirely by them.  The client recovers that massive hit, but instead of cash they are paid in Trade Credits.


Second penny
:  Now, your client has a bank of $100,000 in Trade Credits ready to be spent on their next advertising campaign.  For each media buy placed through a Corporate Trade, a portion is paid for in cash, and a portion in Trade Credits – usually at an 85% / 15% ratio.   The Corporate Trade Company can’t do this alone, however.   They rely on a collaborative relationship with you, the agency of record.  You're still doing a ton of work in the process, including creating the media strategy and plan, involvement in the pre and post buy reports, and executing some of the media… so your relationship with the client and agency fees are not affected. 

 

Third penny:  Imagine delivering your client the ability to top up your television campaign by 15% without any additional cost?  If you, the agency, have proactively presented Corporate Trade as a solution to your client, you’ve delivered tremendous value to the client beyond your core competencies.    You’re being a true partner in their business. Think of it from a CFO’s point of view:  the excess inventory has gone from a 70% loss, to a positive. The numbers stay in the black and yet your media campaign became stronger without the extra spend.  In times where agencies are being marginalized by clients every day, and retention is top priority – this level of partnership can certainly pay off in dividends.

By Tanja Bessey, Director Business Development

 

 

Topics: Cost Management, EBIT, Media & Marketing, Agency Perspective, Corporate Trade 101, Marketing on a Budget, Media Costs & Trends

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