The corporate trade business is somewhat counter-intuitive and even confusing to many people. The reason for this blog and the volume of videos and other material created by us is to bring clarity to this powerful yet often misunderstood tool.
Recently, our Senior Vice President, Tom Cotner, brought to my attention a recent conversation he had with a senior person at a leading fast food company. Tom received an uncharacteristically candid and honest expression of a common misconception about Corporate Trade most people lack the willingness or courage to state. Even better, he asked Tom for an answer. He was genuinely interested in Tom's response.
The gentleman said to Tom that in his experience, it seems that all trading companies are alike, so therefore, it doesn't really matter with whom you do business.
Most people look at the mechanics of trade and see all trading companies offering pretty much the same thing. We all buy excess inventory or surplus real estate at a value greater than the market will bear, and in exchange, we all place a portion of our client's advertising. But that is where the similarity ends.
In a corporate trade transaction, you are being paid with advertising.The value you receive for your excess inventory or surplus real estate lies in the quality of the advertising you acquire from the trading company. In the advertising placed by the trading company, if the spots run in the middle of the night, or the dayparts don't reach your audience, or the programming is wrong, or if you don't get the merchandising you would normally receive, then the payment for your inventory or real estate is worth much less. Again, you are not being paid with dollars. Unlike a payment in media, cash is easy to define and measure.
We've written a great deal of material on the subject of evaluating the quality of media that can be acquired from a trading company. We recently published a paper entitled Your Marketing Advantage that goes into detail on the differences between trading companies.
Say you are evaluating two trading companies, each wanting to buy your excess inventory or surplus real estate. The transaction, the mechanics, and the amount each of them is offering to pay is very similar. Is there a difference between the two that will materially effect the outcome for you? Yes – the quality of advertising you receive from them.
Here are four important media criteria to consider as you evaluate those two trading companies:
- What media can they provide you? Most established trading companies can provide a variety of media, however, confirm that they are not limited to a single media provider such as a particular outdoor vendor or magazine publisher unless you are executing a small well-defined trade.
- What volume of media do they place? The size of the trading company effects the ultimate value you will receive from them. For a further explanation of this, see our paper entitled, Your Marketing Advantage.
- What is their operational and financial connection to your advertising agency? Objectivity is critical in keeping trade media values aligned with your cash rates. A small deviation in media rates may translate into a significant reduction in the ultimate value for your excess inventory or other asset. For a more detailed explanation of this, see our blog post, Is there a problem with your agency also being your trading company?
- What position in the media market enables them to deliver the greatest incremental value? How do they understand cash market quality and the value that’s feasible in the cash market and therefore represents real value in the trade market. Where do they get their perspective on cash quality media? And what is the benchmark price that is the basis for the media investments?
You may be surprised at the range of answers you will get to these questions, but those answers will not only help you uncover the significant differences between trading companies, but ultimately provided you with the greatest value for your excess inventory, surplus real estate, or other asset you wish to trade.