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Barter is Better

Heidi Lamar March 2009 issue of Skin Inc. magazine
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One of the biggest challenges facing most business owners is getting the most bang for their marketing buck. Remember when you first opened your business? You spent months choosing the perfect lines and linens. You sorted through countless paint samples searching for just the right colors and spared no expense in purchasing the best equipment. You jumped through every hoop the bank set in front of you, determined to find a way to make your dream a reality. After countless sleepless nights, you finally opened your doors and hoped that people would show up, and they did.

All of your friends and some of your friends’ friends came through your door, admired your beautiful business, and some of them even spent money. Your phone rang off the hook. Unfortunately half of the calls were from advertising reps that heard about your new business and asked if they could stop by to share their incredible opportunities with you. You assured them that you had more business than you knew what to do with already.

Beginner’s mistakes

By the second month, when everyone you knew had already come and gone, and the phone had grown quiet, you started to worry. Maybe you should call some of those ad reps back. That’s when you found out how expensive advertising can be. The radio rep said he could put you on your favorite station for just $800, which didn’t sound that bad, until you realized that was $800 per week. He insisted that “Advertising doesn’t cost, it pays,” so you took out your credit card and made an investment. You imagined hearing your favorite disc jockey talk about your business while you drove to the bank to deposit all the money you were going to make.

The rep from the travel magazine that would be placed in every local hotel room said she could give you a full-page ad for $5,000, which she said was a steal compared to the regular rate of $15,000. Of course, to get that rate, you would have to commit to advertising in 12 issues. She pointed out your competitor’s gorgeous glossy ad, and you realized that if you were going to compete for the business of all those wealthy vacationers, you were just going to have to make another investment.

The direct mail rep had the best pitch of all. He would make sure that your postcard went to every house with an income of more than $100,000 in the zip codes of your choice and would send out 40,000 postcards for you. You pictured all of those wealthy people who would rush into your business with your postcard in their hands. Even if you only got 10% of them to respond, you would get 400 new clients. Of course they would come back and bring 400 of their friends. The $4,000 per month cost didn’t sound so bad. In fact, at 10 cents per person, you wondered if you should add more zip codes. Before you realized it, you had committed to nearly $150,000 in advertising for the year. Now the phone was ringing all the time. Unfortunately most of the calls started with “I saw/heard/got your ad and I wanted to tell you that you have a beautiful business. I wondered if I could sit down with you for a few minutes to share an opportunity I think you might be interested in.”

Barter is budget-friendly

Let’s assume that all of the marketing opportunities mentioned were perfect for your business. How would that $150,000 budget look if you had used barter? Barter is great because it provides huge mainstream brand exposure for pennies on the dollar. Simply put, this method consists of paying your advertising suppliers, such as newspapers and radio stations, with gift cards instead of cash. This makes them partners in promoting you, not only with their ads, but through the distribution of your gift cards. Your cost is limited to the gift card redemption, which is typically 50–70%, and often takes up to a year for the redemption to occur. Profit margins with this method are typically 50%. Using barter instead of cash can easily save 75% and result in the exact same ads.

This is a little-known secret: Many advertisers are happy to barter. When you get advertising sales calls, say—and train your staff to say—“All of our marketing and advertising is done on a 100% trade basis. Is that something your company would be interested in?” Knowing and using this one simple phrase will save you thousands of dollars and hundreds of wasted hours. Most reps will say that they have to check with their supervisor, which will get them off the phone quickly, saving your valuable time. The persistent ones will try to set up an appointment anyway, assuming that once their oh-so-friendly rep is in front of you with his incredible opportunity, you will be seduced away from your barter principle. Don’t fall for it. Here is another very effective phrase: “I know how valuable your time is, so once you can confirm that you are able to take 100% trade, we can take the next step.”

The results

For the following examples, let’s pretend that every $50 gift card costs you $25 in labor and overhead. If you are doing the services yourself, your margins will be better. Also consider you probably will experience a 50% redemption rate because you know that many of the gift cards will be lost, stolen or forgotten.

Radio. Have you ever wondered where radio stations get the prizes they give away to their callers? Many of them come from advertisers who know the barter secret: If you paid for your radio ads with $800 in gift cards per week, you would save approximately 75% or $33,600. Your cost would be just $200 per week.

Travel magazines. Gift cards make great perks for advertisers, concierges and incentive prizes for ad reps, so travel magazines love to hand them out. In fact, they are giving your gift cards to business owners, concierges and all of the people you want to know about you. Your savings reduces your cost to approximately $1,250 per month and saves you $45,000.

Direct mail. When you get a packet of postcards in the mail, there is usually some incentive to open it, such as cash or a prize hidden inside—just like a spa gift card. Owners also like to reward sales reps and advertisers, and their markup is similar to yours, so barter is great for them, too. Using barter, your cost is reduced to $1,000 and your annual savings would be approximately $36,000.

A competitive solution

Using barter instead of cash in the examples above, would save you more than $114,000. You would get the same marketing products as your cash-paying competitors, and your clients won’t be able to see the difference. You could pass the savings along to your customers, making you even more competitive, or just take all of the money you save to the bank and during the trip, you can count on hearing your ad on the radio.

 

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Growing Your Career

Advertising Options

Cost without Barter

Cost with Barter

Savings

Radio

$44,800/year

$11,200/year

$33,600/year

Travel magazine

$60,000/year

$15,000/year

$45,000/year

Direct mail

$48,000/year

$12,000/year

$36,000/year

Total savings

   

$114,600/year

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