Small Business: Don’t Overpay for Advertising

Cynthia Rojas

March 15, 2014

(DALLAS-FT. WORTH)  Consumer advocate Pete Thomson recently wrote that small business owners need to be very careful about overpaying for advertising.   Thomson’s full Op-Ed, which appeared on the website for McQ Media, details circumstances where small business can pay up to 30 and even 50 per cent too much for marketing campaigns.   Thomson, host of the weekly Consumer Team talk radio program, worked in radio and television spot sales for over 20 years.

A major obstacle facing business owners, according to Thomson, is time.  Thomson wrote, “Every day, small business owners juggle a number of  important priorities.  From HR to customer relations to paying taxes, their plate is full.  Because they often approach advertising and marketing on a very part-time basis, business owners ultimately pay way too much for their advertising.”

Pete Thomson - McQ Media

Pete Thomson – McQ Media

“Media Pricing 101”

Advertising is a commodity.   According to Thomson, “Like other supply-driven commodities, media inventory pricing is based on available inventory.  Just as seats on a plane flight are sold for a wide range of prices, media inventory is sold in a similar fashion.   Still, many business owners that buy media are not aware of price fluctuations that exist because of seasonal conditions or other factors that can impact inventory pricing.   These factors can include length of advertising campaign, pricing dictates from inside a media company, the experience of your media rep and even the advertiser category that is assigned to a client by the media company.   As an example, the rates charged to local businesses can often be vastly different than those charged to regional and national advertisers.   Because they’ll pay it, small business often pays a premium rate.   This pricing nuance has always seemed strange to me.   Small businesses, with limited resources, can often pay more than brand advertisers with much more robust budgets.”

Getting More For The Advertising Dollar

Thomson details several strategies for small business owners wanting to maximize their advertising investment.

Set an Expectation with Media:   Thomson says, “I encourage business owners to set ground rules from the beginning of a discussion with any media seller.  Start with notifying your rep (or manager) that you’re expecting competitive rates and that you’ll be vetting their presentation and pricing.”

Get Multiple “Bids”:   Like getting a second opinion on a major transaction, Thomson says that getting multiple ‘bids’ is very prudent.   “It’s amazing how competitive media companies will become when they know you’re also engaging the competition.”

Demand an Experienced Rep:   According to Thomson, about 30% of media sales people turn over every year.   He recommends, “Successful business owners don’t have time to help a media company provide ‘on the job training’ for a seller.   If you’re contacted by a media rep, insist on learning about their background before you agree to meet with them.  If they’re new to the business, either ask management for another rep or make sure a manager is closely involved on your account.”

Get “Real” Advertiser References:   Thomson recommends going deeper when asking for advertising references from a sales rep.  Thomson said, “The question goes something like ‘Give me the names 3 businesses that you’ve helped in the last 120 days.’  Then, ask for 2-3 businesses that advertised but didn’t renew.   What happened?   What did the rep learn from the experience?”

Negotiate For the Long-term:   “Media companies love long-term, annual deals,” Thomson says, “By negotiating on an annual basis, you’ll get the best rates and most generous added value.  Just make sure to include a 30 day cancellation clause in the terms.”

Timing is Everything:   Thomson says that booking at the right time can save yield big savings.  “Buying media at strategic times of the year can yield significant savings.   The period of Dec 15 to Feb 15 is generally a ‘buyers market’.    Media companies have just released new annual budgets and managers and sellers alike are under-the-gun to get the new year kick-started.   The ‘dog days of summer’ (July 15-September 15) can also be good.   Because of vacations, buying generally slows down during this period.  Times to Avoid:  October 1-Dec 1 and 60 days prior to any election.  Christmas and the political campaign season are difficult times to clear spot, let alone get a good deal.”

Get Help From a Specialist:   When selected properly, a competent advertising agency can more than justify their expense, according to Thomson.  “The pricing issue is one of several important variables that need to be addressed when buying media inventory.  Other items on the success check-list include creative, cost-per-point and cost-per-thousand measurement and negotiation for added value.  A competent agency can deliver a valuable and essential service to the advertiser.   Agencies can be hired on both a commission (percentage of the buy) or retainer basis.  Regardless of the arrangement, an effective agency will deliver significant efficiencies to a small business owner.”

Editor’s Note:   Pete Thomson is a 30 year broadcasting and marketing veteran.   He’s held positions in programming, sales, sales management and general management.   Thomson is now President/CEO of McQ Media, a Dallas-based advertising and marketing firm.   Thomson and McQ Media are activity in consumer and small business advocacy.  McQ Media produces the weekly radio program, The Consumer Team.