For the barter relationship to work smoothly, it is important that the client, the agency and the barter company work closely together as a team.

CLIENT
Needs Advertising to Increase Sales		 AGENCY
Designs and Budgets the Campaign		 TAHO
Unique Media Buying Capabilities

Agency Designs & Budgets the Campaign The agency is responsible for designing and budgeting the campaign. The campaign parameters are turned over to TAHO who acts as the media buying service. The agency also provides TAHO with the budget for each market. It is TAHO's responsibility to deliver the advertising as ordered and at the prices predetermined by the agency. To assure that each station or magazine realizes the campaign is being purchased on a trade basis, TAHO should make the initial contact. If the media thinks they are getting a cash buy, they will not negotiate a trade for the time or space.

Percentage of Cash Required

A few days after TAHO receives the parameters, TAHO informs the client of the percentage of cash required for the campaign. For example, a $2,000,000 spot radio campaign ($1,700,000 net) might require $1,200,000 in cash. The balance of the net cost ($500,000) is paid for with excess merchandise valued at the full wholesale price.

In this hypothetical example, the percentage of cash required was 60% of the gross budget. The actual percentage of cash is determined by type of media, market conditions, time of year, station availabilities, and other variables. The client approves the Cash/Trade ratio prior to airing.

TAHO as Media Buying Service

TAHO performs the following functions as part of every media buy:

  • Any deviations from the original plan are only made after authorization by the agency.
  • TAHO traffics the buy, contacting station personnel on a regular basis to make sure the advertising runs as ordered.
  • Makegoods are run according to agency specifications.
  • Shortages are credited as they would be with any other media buying service.
  • TAHO collects tear sheets and station affidavits and forwards them, together with invoices, to the agency for review and approval.

    The invoices represent the only deviation from the way the client's agency ordinarily buys media. TAHO will send two invoices: One represents the Cash Portion; and a second invoice represents the Trade Credit Portion. In the above example for the $2,000,000 spot radio campaign, the Cash Portion invoice would be $1,200,000. The Trade Credit Portion invoice would be $500,000 which is the difference between the net amount of the buy ($1,700,000) and the Cash Portion ($1,200,000).


      NORMAL BUYING METHODS BUYING MEDIA WITH BARTER CASH FLOW SAVINGS USING BARTER
    Gross Cost of Ad Campaign $2,000,000 $2,000,000  
    Net Cost of Ad Campaign $1,700,000 $1,700,000  
    Cash Portion $1,700,000 $1,200,000 $500,000
    Trade Portion $0 $500,000  
    Total Cost $1,700,000 $1,700,000  
    Table 1. Cost comparison of normal methods
    vs. buying media with barter

    The total amount invoiced by TAHO equals the NET amount of the campaign. By billing the net amount, TAHO does NOT INTERFERE with the relationship between the agency and the client. The agency continues to be compensated in its normal manner (fee or commission) as if TAHO was not involved.

    The agency reviews the buy and forwards the invoices to the client. The client pays the Cash Portion to the agency and the agency forwards the cash to TAHO. The Trade Credit Portion is deducted from the client's Trade Credit balance.

    Why TAHO Can Deliver Quality Advertising for Less Cash

    Many agencies wonder how TAHO is able to deliver the same advertising that the agency has designed, but at a lower cash cost then the agency would have paid. TAHO does not purchase media at a lower price than any good agency. TAHO does, however, pay for the media differently.

    An agency (or media buying service) works hard to negotiate the lowest possible price. TAHO works with the same low rates, but has the advantage of paying for some of the media with products and services from our inventory. The stations and magazines need these products and services for their own promotions and internal needs. Since TAHO has a lower cost for the traded products and services, TAHO's cost for the campaign is less than if the campaign was purchased for cash only. TAHO's clients can then use excess merchandise to pay for the trade portion of this advertising.

    Since TAHO usually includes some cash in addition to products and services to pay for the advertising, the campaign is not preempted or subject to cancellation. TAHO enjoys the same delivery rate as any other good media buying service.

    Summary

    This three-way partnership between a client, the agency and TAHO can provide the client with a profitable way to dispose of a significant excess inventory and can also give a client much needed additional advertising dollars. Since TAHO DELIVERS ACCORDING TO AGENCY SPECIFICATIONS, and AT THE SAME RATES THE AGENCY WOULD HAVE PAID, there is no compromising of the advertising goal.

    In light of this delivery of media, it makes sense for a company to use this method to recover the value of excess inventories. In the example above, the client realized a value of $500,00 at full wholesale for excess inventory perhaps only worth $100,000. Therefore, barter would have earned the client $400,000 in increased profits!


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    An International Trading Company Established in 1954

    1330 Centre Street, Box 69, Newton Centre, Massachusetts 02159
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