The Benefits of Incorporating Trade/Barter in a Media RFP (Part 1)

At Active the largest independent barter company we recently won a piece of business following an extensive RFP One element that helped tip the scales in our favor was the procurement lead39s understanding of corporate trade She not only communicated our value to her marketing organization but to the rest of the company stakeholders as wellUnfortunately that39s not always the caseEarly in my career while on the agency side of the business I was introduced to corporate trade by one such person whose resistance stemmed from a lack of exposure and understanding Now at Active one of my favorite responsibilities is that of educator working with brands and their agencies to help them discover unrealized value in their assets and their marketingSo how does barter work Why do so many companies quietly use itIt may come as some surprise that well over half 65 of companies listed on the New York Stock Exchange and nearly onethird of small businesses incorporate bartering of some sort in their business dealings Strictly defined barter is the oneforone trade of goods or services without currency That concept has evolved today into corporate trade also called corporate barter and yes just barter a process whereby a company can turn underperforming assets product real estate equipment etc into amplified buying power typically in the area of advertising media spend Cash is still the dominant currency but a portion of the expense typically anywhere from 10 to 25 is paid for with the compromised asset via trade creditsSo why is it that media providers across the advertising spectrum are willing to accept trade creditsMedia providers work with corporate trade companies like Active because we39re making capital investments with them in the form of commitments to buy media infrastructure investments and anything else they need to increase profitability In return they accept trade credits as partial payment on media we place for our clients the same media that would have been placed by the agency at the same cost with the same valueadded components The media companies then use those trade credits to offset the cost of services they purchase from ActiveTo sum up the forward investments in media and other services allow a corporate trade company to pay more than current market value for a distressed asset Once this program is set up it delivers meaningful value to the company39s bottom line year to yearWhy are more companies including corporate trade in their agency searchesProcurement executives tasked with driving savings are typically intrigued by corporate trade More and more are RFPing barter companies either while they are conducting an Agency of Record AOR RFP or immediately after They are also finding that receptivity can be mixed both internally and externally WhyA corporate trade initiative requires consensus among sales supply chain finance procurement and marketing In particular marketing typically the end user of the trade credit must be comfortable with the guarantee that there will be no unauthorized change to their advertisingmedia plansAd agencies accustomed to driving the lowest media pricing via their considerable leverage are sometimes uncertain or skeptical about a corporate trade company39s ability to create a lower cash requirement And they are concerned that their stewardship of a client39s media spend their primary responsibility will be compromised by the involvement of a third partyUltimately the challenges to implementing a corporate trade program are overcome with education transparency and patience All constituents need to be given an opportunity to ask questions and get comfortable with the corporate trade model Give us a call and we can help you lay out a planThis article as written by Bob Pankuck Executive Vice President Client Management Active InternationalPhoto courtesy of Active InternationalClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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The Benefits of Incorporating Trade/Barter in a Media RFP (Part 1)

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