I Like Barter

I really like barter.  I think it’s cool.  I think it works.

OK, so how does it work?  Cliffs Notes version: A client trades unwanted goods, say, 750,000 pairs of last-season’s sea foam green pumps with the orange heels that never did quite catch on, for barter credits which are equal to the full value of those pumps (better than writing them off at 10 cents on the dollar).  These barter credits are like a coupon, say “20% off all Media.”  The client then buys media (typically TV) through the barter company, and pay 80% of that bill with cash, the remainder of the bill they pay via their barter credits.  Client does better on the sales of the pumps, and saves money on their media buy.  What happened to the pumps?  The barter company and the client agreed up front as to what venues the barter company can sell them to (e.g., “Any retailer outside of the U.S.”).

Folks barter all sorts of things: Jets.  Beer.  Honey-glazed hams.  Mini-vans.  Buildings.  You name it.   And as a result, they get rid of unwanted goods…and save money on their media buys in the process.

So if all this is true, then why does barter still own a reputation that falls somewhere between a cheap used car salesman in a polyester suit and a snake oil salesman?  I think most of it is due to the purveyors of barter in years past who, on occasion, were known to sometimes gild the lily a bit…and that’s a nice way of putting it, since “barter deals gone wild” could typically cause fear and loathing among those connected to the deal (not for the barter companies themselves of course, they made out just fine, but the agencies and clients were left to pull their hair out).

What’s a barter deal gone wild?  A marketing client who never informed their financial folks what they were up to, the sea-foam green pumps have been undervalued by the barter agency and the deal seems wrong, the media agency never ensured the barter agency was on the hook to deliver a specific media buy, so now the client’s ads are running in overnights, the barter agency is not clearing the desired weight, the CMO is screaming and the finger-pointing is rampant. Oh, and the pumps just showed up for sale in a big box store – degrading that designer’s brand value and by the way, he is on line four and wants to talk.  Oh yeah….

That fictional nightmare aside, I believe that barter can be a very effective tool for not only reducing media costs for clients but also in terms of aiding top-line areas where assets are on the verge of being liquidated at cut rates.  Pay less for your media + get more for goods you needed to get rid of anyway.  What’s not to like?

The key is to have the right people involved in the deal from the beginning, and to ensure that the parameters of the deal are clearly stated – ambiguity in barter deals, as in life, can be the root of many problems.

The right people – Means client finance people to evaluate the financial side of things.  This also means client marketing people, their media team and the agency media folks as well.  And depending on the situation, even more people may be required to participate in the discussion.  Each situation is different, but be sure to err on the side of keeping more people than less “in the loop.”  A good barter agency can help here.

Deal parameters – The barter company and the media agency should work closely together so that the barter agency knows very clearly what they are expected to deliver in terms of media inventory – they should be fully briefed as to the specific details on everything so that there are no issues with “burning credits” or poor inventory.  FYI – A good barter agency will simply walk away from a deal they cannot deliver on for the client.

I work at UM in New York and I’ve done several deals with our sister barter shop–Orion Trading.  Those deals have been simple, straightforward and resulted in significant benefits to the clients.  “You do barter the way it should be done,” I like to tell Orion’s President and CEO, Brian McMahon.  Now, I should tell you that Brian is partial to plaid sport coats… but they are not polyester…

Barter.  It’s not a scary thing anymore.  Know the deal.  Communicate fully.  Then go for it.