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When marketing managers are
under pressure to justify budgets, payment by results on media spending becomes
an extremely attractive option.
Accountable marketing, with
a highly visible correlation between expenditure and results is much more defensible
than, for example, 'image' or brand advertising. However, not all media are willing,
or able, to operate on a payment by results basis.
Let's consider the point.
In order to offer payment by results, any media owner must have confidence in
the product. Why? Because working on such a basis means taking all the financial
risk upfront as advertisers pay purely for the responses received.
So, in order to assess the
feasibility and level of risk, the media owner must be able to predict accurately,
the level of response for each type of advertiser. This is no easy task. Unfortunately,
there is no fixed rate card that can be used, as the formula is different in each
case. In order to offer a competitive cost per response, past experience and a
degree of judgment is needed.
Without a doubt, the offer
of a travel brochure will generate more response than a major home improvement
product. And the response to a fashion catalogue will be greater than that of
a cosmetic surgery company.
Another variable to consider
is that the value of leads to the advertiser will also vary. High ticket items
such as a driveway or conservatory can absorb a higher cost per lead than, for
example, a charity Christmas card catalogue.
In many instances, payment
by results is simply not feasible. Take direct response TV advertising - an interesting
case in point. One-stage shopping commercials have been around for many years
now, but the channels are increasingly reluctant to take on new purely 'payment
by results' spots,' as the response levels have generally drifted downwards, despite
exceptions and highlights.
Who is going to decide what
the most effective advertisement on TV next week will be, and judge the number
and value of those responses? And to then negotiate a rate per response or sale
with the advertisers is an immensely challenging and complex task. Different advertisers
will get different levels of response in the same media, and it requires a huge
knowledge bank and experience on the part of the media owner.
So, I am not suggesting
that the days of the rate card are numbered and that in future we will be paying
for results on all media because owners are not all going to roll over and offer
pay per response.
At the end of the day, the
risk is already there for publishers. Whether magazines, TV or direct mail, the
production costs are committed up front and, if advertisers are not happy with
their results, they don't come back. But for some media owners it is a feasible
option and they are able to tell advertisers what to expect for their money and
so they can then plan their supply of leads accordingly.
You would be forgiven for
thinking that I have my own axe to grind, but, actually, I don't. RDP's consumer
card decks operate on a cost per thousand basis. It works for us, and it works
for our clients. On the other hand, RDP also publishes a range of response catalogues,
targeted to various groups of consumers at home where clients are charged on a
cost per response basis. That, too, works for us and the participants. It's horses
for courses and we're backing both.
Whatever the payment terms,
media owners are acutely aware that their success rests on the results they deliver
to their advertisers as well as their readers and viewers. They provide the vehicle,
it's up to brand owners how they drive it.
About the Author
Peter Webb is Executive Creative and Marketing Director at Response Direct Publishing.
He can be contacted by email via info@rdp.info or on 020 7351 3535.
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