Negotiated Pricing: Right or Wrong?

The online advertising industry has been plagued with frivolous spending. Because online ad space is a relatively easy sale these days, buyers have the ability to spend rather easily. And perhaps, as a result, this has all gone to some people’s heads.

As online media planners, we are often subjected to salespeople unwilling to accommodate a smaller budget. One of the factors that BAM Solutions prides itself on is that we work with a variety of clients with different advertising goals and budgets. In most cases, the only thing our clients have in common is that they all want the best results for their spent ad dollars. After all, isn’t this the primary reason for an advertiser hiring an agency?

When working with a large budget, it is easy for vendors to settle for lower negotiated prices. In these cases, commission rates may be lower, but there is still a large commission earned on the sale. On the other hand, when the budget is smaller, it is harder to negotiate a lower price since the vendor has less incentive to make the sale. Sounds like simple business economics, right? Wrong!

From time to time, when the stakes are high, vendors are seen as being very accomodating, yet completely unwilling to accommodate smaller orders. There are times when our clients provide us with smaller budgets, and vendors refuse to deal on the same terms as usual, or in some cases not at all. This is not the way to build a long-term, lasting sales relationship. Whether a given deal is for $4,000 or $100,000, vendors should stay consistent with established prices and be willing to accommodate most sales to their buyers, especially when they buy regularly in large volumes.

The idea is to build and maintain a long lasting understanding between the site (or ad network) representative and its repeat customers (agencies). Our present pricing practices are not conducive to building buyer-seller relationships that will last over the long run. The fact is that once pricing and buying terms become consistent, it is far more beneficial for both parties to stick with what works. First, media buyers come to know exactly what to expect when they approach vendors and can make the correct assumptions when planning campaigns. Second, media buyers are far more inclined to purchase regularly from contacts that are accommodating under all circumstances.

Vendors who take this approach to servicing their buyers are those who will surpass their colleagues’ sales in the long run. Those in it for the hard sell might succeed early on, but their repeat sales will likely stagger.

For this reason, it is in both parties’ best interest for the vendor to stay consistent regardless of the dollar value at hand. If one thing is for certain, the vendor always earns a commission on each sale!