Week 6 - Media Negotiation
- 1. Hello & welcome. We will be starting the session at 12:30 EST There is no sound at the moment All participants will be muted throughout the session, so please use the chat function in the bottom of the screen to communicate – private and public messaging is available We will do our best to respond to questions in the session, but please feel free to email onestepahead@cheproximity.com.au for any additional information afterwards ONE STEP AHEAD
- 2. A P R I L 2 0 2 0C H E P R O X I M I T Y M E D I A P R O D UC T F U N D A M E N T A L S
- 3. Media Product Fundamentals Week 6 – Negotiation May - 2020
- 4. A little about me …
- 6. Each morning I wake up around 7:15am
- 7. I get a coffee in the morning and if I get a small it’s $4.50, a medium is $5.00
- 8. I park downstairs and it’s $12 for the day.
- 9. On the way from carpark to the office get another coffee – a small ($4.50) and sometimes toast ($5)
- 10. Maybe once a year they change the price. Maybe.
- 11. I enjoy the concept of consistent pricing.
- 12. For jeans. $280 For shoes. $200 For bread. $5.00
- 14. At 9am I enter the office.
- 16. For the next 9 hours I am in the world of “media pricing”
- 17. Where what was $18 last week is suddenly $27 this week.
- 18. Where 89% off ratecard is spoken commonly.
- 19. Where “It’s too expensive” is said with no concept for rationalising why.
- 20. Where a $50,000 magazine buy can have $2.97m in ”premium bonus activity” attached.
- 21. Inefficient. Old. Massive waste of time.
- 22. The trilogy of time wasting. Upfront interrogation of problem. Ineffective briefs. Negotiation back and forth.
- 23. Here you go – it costs $x That’s too much, client needs it to be .9 of $x Hrm – not sure I can do it, I did throw in $100x of bonus across our very popular website. Yes, that is great, and that 10,000% value stretch is impressive. Can you move on the price of $x though. I’ll speak to Willbo our Sales Director, he is SUPER KEEN to work with you and considers Agencyname a VERY close partner, and come back to you …
- 24. Repeat x5-6
- 25. 17 years and this hasn’t changed.
- 26. Here you go – it costs $x That’s too much, client needs it to be .9 of $x Hrm – not sure I can do it, I did throw in $100x of bonus across our very popular website. Yes, that is great, and that 10,000% value stretch is impressive. Can you move on the price of $x though. I’ll speak to Willbo our Sales Director, he is SUPER KEEN to work with you and considers Agencyname a VERY close partner, and come back to you …
- 28. Media negotiations have some systematic flaws:
- 29. 1. Relationships are too influential in evaluation. 2. Vanity metrics can cloud real value. 3. The ‘Above your head’ lever seeks to exert undue pressure to force a result.
- 30. There is a better way. 1. Interrogate the problem upfront so you are clear on what you’re solving; and explore a wide variety of hypothetical solutions as a result. 2. Spend adequate time on briefs and ensure they are detailed and directive 3. Avoid the negotiation waltz and follow these basic rules.
- 31. The solution could be accelerated by Covid compression™
- 32. And Ben’s rules to concise and fulfilling negotiations.
- 34. #1: Have a reasonable idea of component value when you dispatch the brief.
- 35. Real world example It’s pretty rare we personally look to buy a product with zero idea of what we believe a fair cost to be. If we are researching a $200 pair of jeans in depth, we need to do much more for a $2m client brief.
- 36. Establish a value early Let the partner know what you’re seeking and what parameters you have established around price and what is achieveable. They can let you know early if it’s off and it also provides them with a realistic idea of what you’re after.
- 37. #2: Be clear on the requirement to quantify value at a granular level
- 38. Real world example Your mechanic will provide a pretty clear granular idea of parts/labour/other costs when fixing your car for $500. We need to do the same with that $115,000 production fee line with zero rationale behind it.
- 39. Request unit costs Ask the partner to not roll all elements up into a single price, and to provide you with rationale behind each cost. Then you can look closely at unit price, labour cost, production, non-working and establish how comfortable you are and/or what needs to change.
- 40. #3: Establish a common currency to evaluate options.
- 41. Real world example If we are looking to buy a pair of jeans at outlets that are in the UK, US and AU – we will work back the cost to AUD so we can compare them like for like. Media is charged in AUD but that is where pricing consistency ends.
- 42. Establish a common currency Partner Cost Audience reach - campaign CPM - AP Effective TA CPM Impact – size of unit relative to screen Dwell Partner 1 $200,000 900,000 $25 $49 HIGH 15s Partner 2 $85,500 110,000 $150 $410 HIGH 5s Partner 3 $115,000 2,000,000 $6 $13.50 MODERATE 3s
- 43. #4: Value is only value if you would have paid money for it.
- 44. Real world example Imagine you walk into shop x and there’s a pair of jeans you really like. You have $200 – they are $220.00 – and there’s other options you can get that are $200.00 and excellent - but these are the best. You ask whether they can sell them for $200 – they say No, but they offer you 15x tshirts in XS even though you’re a L – “valued at $900.00” That’s $1,120 of value for $220.00 – 500%+ value!
- 45. Don’t fall into the bonus trap Bonus is only valuable if it prevents you paying money for something you were going to buy. If you’re the sort of person who needs bonus to feel like you’ve ‘won’ … at least make it something the client wanted, not something that is retrospectively sold in after the fact.
- 46. #5: Shortlist options and quantify the gap between asking price and what you believe it is worth.
- 47. Real world example You couldn’t just say to someone (mechanic, fast food, clothes store) “it’s too expensive” or “I need more bonus” without some sort of explanation as to why these were reasonable words to say.
- 48. Partner Cost Analysed cash value Key inputs Gap Options to close gap Partner 1 $2,100,000 $2,300,000 Audience, context, competitive, stores -200,000 N/A Partner 2 $1,010,000 $920,000 Reach, spots, timing, impact $190,000 Require $100,000 reduction in prod, additional $90,000 in spots Partner 3 640,000 $340,000 Reach $300,000 CPM is 50% more than comparable options
- 49. #6: Understand that buyer and seller aren’t really that aligned, and that’s okay.
- 50. Real world example No business is that altruistic that the customer need completely usurps their own. Apple is customer first – but if you don’t have $399 for an Apple Watch 3 then you’re not getting one … even if that makes you sad.
- 51. Partner/supplier/customer – it’s semantics A media company goal is to ultimately serve the needs of their shareholders – generate the maximum revenue in a sustainable way and operate at a cost base that allows them to make a profit.
- 52. #7: Leverage your strongest factor - money
- 53. Real world example A business operates to generate revenue, and the most valuable commodity any customer possesses is cash. Cash is finite and scarce – companies make a decision whether they want/need the cash, or whether they’re prepared for a competitor to have it.
- 54. You don’t have to get to a deal. My view is never pay $1 more than you have valued something at. If a partner doesn’t agree on the value, it’s okay to walk away and try again with the next brief. Just like it is in the real world when you think something is overpriced.
- 55. #7b: Walk away if the end point isn’t a win for both parties.
- 56. Real world example Assume a coffee costs $3.50 to make, but you love a deal and you’ve ‘crunched’ the café to charge $2 as you wanted to say you got 40% off ratecard. Do you think this is a win/win? Do you think the café will give you the full value or cut some corners to even up the deal?
- 57. If it’s not a win/win you will lose. Let’s say a sponsorship for x show is $2m, you feel it’s worth $2m but you want to be a hero and get it for $1.3m. You have created risk – corners could be cut in servicing, production, priority, quality, motivation. This might be okay once, but if it becomes consistent it will come back to bite.
- 58. If it’s not a win/win you will lose. Let’s say a sponsorship for x show is $2m, you feel it’s worth $2m but the sales person is nervous and drops the price to $1.3m just to cut a deal. Think about what could be at stake – what could be the implications of this sort of hasty rush to get some money booked?
- 59. #8 (free bonus rule): Never disclose share.
- 60. Real world example Imagine you went to buy a coffee, and the café owner said ‘Hi mate … now before I price this, can you tell me my share of your soy caps for this week. My Sales Director has told me we deserve a 30% share in soy caps and the market needs to shift to this mindset’ …
- 61. Share is another media relic ‘Share’ is a relic from 4 decades ago when there were 3-4 channels and 1-3 operators in each. No one has any right to know anything aside you and the client (who is the one paying)
- 62. 2020: Let’s ban ‘share’
- 63. Negotiations are all about getting the right outcome for the client. Don’t make them about you.
- 65. Materials PDF will be sent to you Webex recording will be available to view via link Dispatch 24-48 hours post session
- 66. See you next Wednesday 12:30pm AEST
- 67. Thank you.
- 68. Please join us next Wednesday 3 June for Maximising Working Media and getting rid of things that don’t add value.