The Agency Discount Myth
Media firms used to offer agencies a 15% discount. But was that a sales trick? Or did it enable agencies to provide better service to their clients?
In the good old days, newspapers, radio stations, TV networks, etc. offered advertising agencies a 15% discount. Because the agencies were able to pool their clients’ budgets, the media outlet’s cost of acquisition was greatly reduced and a volume discount was in order. In turn, the agencies were able to plan the buy, negotiate the buy, reconcile the buy, etc. without impacting the client’s bottom line cost.
These days, in many cases, the media outlets offer everyone the “agency discount.” But in reality, they’ve eliminated the discount, and anyone who is willing to spend hours and hours negotiating will get the best rate. The so-called discount is just a fiction offered to close a sale. So is the existence of an agency discount the “myth” to which my title refers? Nope. In fact, the myth is that the agency discount was ever of much value in the first place. Think about it: in the old days, people got the same rate from an agency as they would get themselves. So why did they bother? The answer is: they wanted an expert’s advice and an expert’s results-driven process.
ROI Is Everything
Of course, that used to be free and now you have to pay for it. Or do you? Consider this: when we began buying the media for our oldest client we increased their print circulation by 15%, while decreasing their cost per point by 10%. Plus, we doubled the number of paid publications in their mix (dramatically increasing the effectiveness of their placements). And we found so many holes in a $600k cable contract that they realized they had to re-allocate those funds. When we looked at the value of their new buy, we’d earned our 15% commission more than three times over.
Agency Discount vs. Agency Value
Long story short, we encourage folks to focus a lot less on the agency discount and a lot more on agency value. Because 15% is just the tip of the iceberg if your agency knows their stuff.
And since we’ve been planning and designing marketing campaigns for over 10 years for some of the leading names in technology, retail, and pharmaceuticals, we know a thing or two. Contact us if you’d like to find out more.
