Media Is A "Major Currency" In The Barter MarketPlace\
Welcome to our Media Section...Media is a huge $300+ billion industry in the world today. Regardless of the type of media, electronic or print, media is a "major currency" in the barter marketplace because of its perishableness. One must use it, move it, or lose it. The second hand on the clock never stops. In this media section we look at many forms of media. (The back issues of BarterNews have additional in-depth articles on the media sector.)
(From time to time, the Tuesday Report reprints an interesting article from the archives of BarterNews. One of the more passionate barter devotees of the past two decades was the former Advertising Director of Chicago Barter, Scott Thomas. His experience through 15 years in the advertising industry included broadcast management, advertising agency management, audio/video production, and media buying. The following article was written by Thomas for BarterNews.)
No business attracts new customers without some form of advertising. From the yellow pages, to TV commercials, to cards on the church bulletin board, to "word of mouth" referrals, to the sign on your door, no customer comes to your business without first noticing you are there. Building a better mousetrap does not cause people to line up at your door...advertising the mousetrap does.
Through effective barter advertising, you can trade excess inventory for advertising that will attract new cash customers. You can trade $2,000 worth of tires from your inventory for billboard exposure on the expressway that could generate thousands of dollars in new truck tire cash sales.
You can trade $3,000 worth of fax machines from your inventory for newscast radio advertising that could generate thousands of dollars in new fax machine sales.
You can trade $300 worth of pizzas for a mailing of 10,000 special offer coupons to homes in your area for generating the cash sales of hundreds of pizzas.
Can you trade for all of your advertising? Almost certainly not. However, let's take a look at the cash you would save by trading for only 20% of your total ad budget.
Figure that at least 20% of your ad budget is variable. You try this...you impulse buy that. If you normally buy advertising on four local radio stations, how crucial is the 4th station? It may be essential to continue to buy the top two or three stations on a cash basis. But, it's likely you could trade for advertising on a different radio station which would be at least as effective as the fourth station on your list.
Let's say you spend 50% of your budget in the newspaper, 25% on television, and 25% on radio. Do you think it would hurt your overall advertising effectiveness to take just 4-5% away from each of these media?
Now, let's take that 12-15% and purchase billboard exposure through barter to give you a daily reinforcement of your other advertising. The result is, for the same budget, you are reaching the same people you always reach, plus new people through a new advertising source, and you were able to save money and cash flow by trading for a portion of your total program.
On a smaller scale, if you buy a 10" display ad in your strong local paper, you probably won't hurt effectiveness by cutting it down to an 8" ad. The same readers will see you week after week. Now, take that 20% and buy advertising in a strong local coupon mailer, multiplying your advertising's reach without increasing your budget...and barter for the coupon mailer. Don't be afraid to "play" with the variable portion of your ad budget.
You can almost always increase your reach without increasing your budget, and you can almost always replace at least 20% of your cash budget through barter. Many times you can even do more.
If you handle your own advertising, your trade exchange should have a qualified advertising representative who can help work barter into your advertising plan. If you work with an advertising agency you should put them in touch with your trade exchange. But, is your agency willing to listen?
Chances are your agency sees barter as a threat to its commissions, and when you bring up bartering, they give you lame excuses like, "Your barter radio schedules will always get preempted," or "You always pay three times too much on barter," or "No really good media is available on barter."
What your rep is really saying is, "Don't bother me with barter. I really don't understand anything but cash, you shouldn't be bartering anyway, and WHAT ABOUT MY COMMISSIONS?"
It happens countless times...an uninformed advertising agency costs their clients money by ignoring barter opportunities. Shame on them? No. Shame on you. You are the client. Since you pay their commissions, tell them to use barter, and take barter opportunities seriously.
Explain to them that you'd rather buy advertising with inventory than with cash, because that makes better economic sense.
One of the strongest attractions to bartering your product or service is that by doing so, you will increase your market share. When you sell on barter to a new customer, you increase your client base and you take away that client from the competition. That increases your share of the market.
By using the barter credit to advertise your company to the cash buying public, you will continue to bring in new customers through that advertising, again increasing your market share.
By using the trade credit you earn from new customers to buy advertising that will reach new cash customers, you are effectively turning that trade credit into cash dollars. But, that's only one way advertising turns trade into cash. Just think of what you could do with available manufacturer's co-op money.
Many retail businesses have access to "co-op" advertising funds. These funds are provided by the manufacturers of the products you represent at the retail level. (At last check there were over 3,000 sources for co-op advertising funds in the United States.)
When your advertising represents a specific manufacturer's product, that manufacturer may be willing to reimburse you for all or part of that advertising. Some manufacturers reimburse at a rate of 25% of the total cost, some as much as 100%. The most common form of reimbursement is 50%.
For example, your furniture store advertises Acme dining room suites in a $1,000 newspaper ad. Acme reimburses you with $500 from their co-op advertising program. The ad really cost you $500 out of your own pocket.
Now, let's say you purchased that ad with $1,000 in barter credit. To earn that barter credit, you traded $1,000 in furniture which cost you $500 to buy at wholesale. So, from a cash flow standpoint you really bought $1,000 in advertising for $500. You then are reimbursed $500 from Acme furniture.
By trading for advertising which earned co-op reimbursement your final cost for the advertising is $0. The first customer that walks in the door as a result of that advertising represents a net profit. If your co-op reimbursement is 75% or 100% you're making money before the first customer walks in the door.
You can turn your barter credit into cash through co-op advertising. You can also turn your barter credit into cash through non co-op advertising. Trade exchanges which understand your ability to cash-convert through advertising, can make a huge contribution to the positive cash flow of your business.