Dealing with agencies

    • 7 posts
    May 23, 2013 7:24 AM PDT

    Quick question, interested to see what people say. First off, let me say as a small, independent station we really struggle to get business from agencies. I just had a conversation with an agency representing a local company, and the agency rep basically complained that our station penalizes the agencies by making them charge higher rates for our station. All our rates are net, so any time an agency makes a buy, they tack an extra 15% on to their customer's bill. The agency rep told me that most stations cut him a 15% discount (since he's doing the work) so he can charge the regular rates off our rate card.

    So what does your station do with agencies?

    • 993 posts
    May 24, 2013 12:17 PM PDT

    Stations across the US and Canada are divided on this issue.  I don't know if it's 50-50 or 60-40 or whatever, but we do not have an industry standard in this regard.

    Our stations have for decades had two rate cards: 

    1) LOCAL (net to station) - for all advertisers placing their own advertising, regardless of who originates the creative

    2) AGENCY (15% commission added) - for agencies who place advertising in behalf of clients

    The argument here is that the client, not the station, hired the agency to do the work; therefore the client should pay for their services. The station isn't penalizing anybody.  Rather, the client is simply expected to pay his vendors for services rendered.

    The agency rep's contention that they deserve a discount off the net price because of the work they save you from performing often gets turned on its head when it comes time to collect on a delinquent account.  More effort is expended by station reps to collect from agencies than from local/direct clients.  Add your rep firm into the mix and it's an awful stew.

     


    This post was edited by Rebecca Hunt at February 17, 2024 12:51 PM PST
    • 1373 posts
    May 30, 2013 11:18 PM PDT

    Matt, great topic for discussion!  We've turned your question into this week's Friday poll, so you follow the responses here.

    • 58 posts
    May 31, 2013 12:54 AM PDT

    I agree completely with Rod and that is how we do things at our station.  Part of why we add on 15% to the agencies is because they really don't make things easier for us and they usually take 90 days to pay.  The sales person still has to do the same work as they did when they didn't deal with an agency, the agency takes longer to pay and sometimes the creative is so bad or distorted that our production department has to spend hours to fix it.

     I work for a small market station too and I have never had an agency bring me business that I couldn't get on my own.  I put together a media kit and send it to every agency that we have ever dealt with and everyone in the State of Alaska and Washington that I could get a contact and address for.  That has brought us way more business than any one agency.  Quite frankly, you don't have to justify your rates to anyone nor do you have to bow to value added.  As a small market station, we simply do not have very much extra air time to give away to an agency.  By sticking to our policies and rates, I have developed relationships with agency reps and they appreciate my honesty and having the same rate to every agency and local direct client.  Even when dealing with an agency...it is still about personal integrity, honesty and likeability. 

    Best wishes to you.

     

    Julie Lekwauawa

    • 19 posts
    May 31, 2013 6:07 AM PDT

    I have been in radio for 39 years and we have always had gross and net rates. When I deal with an agency I ask them if they want gross or net rates, I have yet to have an issue with a credible agency. Most of the problems come from small shops that don't understand the advertising business. I have been asked by clients why we charge them more for using an agency, I explain that they expect a fee of 15% and since the client hired them it is the clients responsibility to cover their costs. Basically I tell clients that the cost of our air time is X and that is what the station receives.

     

    The new wrinkle is all of the value added that clients expect (a tax for doing business with you). I don't know about other stations but in our market we have a difficult time getting any kind of rate increase with all the demands being made to do business. It is for this reason that I am not willing to absorb the agency commission, we need the revenue!

     

    By the way to increase rates to gross you add 17.65% to the net rate so that when you deduct 15% you end up with the correct net rate.

     

    Good Luck!

    • 170 posts
    May 31, 2013 6:29 AM PDT

    Ah, you ran into KDF?  I am in West Michigan, too.... we do not take business from this agency nor do most of the radio stations we have talked with up and down 27/127 and the 131 corridor. I have twice attempted to talk with the owner/buyer for this agency about this concept of punishing the advertiser, that what she is essentially asking is that I pay her 15% for buying my station. She seemed fine with that, would not commit to a budget amount nor a long term contract. We do operate with local and agency rates so I offered to bill the client direct at net rates. No go. Have since been told this rate negotiation is only the beginning with her: 120-180 days, sometimes sends scripts with some of the voice work for the station to assemble the rest and you are off the buy if you EVER call on the client direct - even just to thank them for the business. The position of this or any other agency that approaches media buying this way is that they end up working only with those outlets that are willing to work with them. Those being relatively few, it really is the client who is punished. This eventually filters back to the client. High turnover in clients. Have patience.  

    Working with agencies like DeFalco (auto dealerships) or clients like Menards is a grinding experience but they avoid the above situation of not having outlets to buy by signing annuals, providing all production on time and with co-op scripts, adding buys and paying within 15-20 days.

    More recently have run into 2 national agencies demanding 50% value added. One of those requires 50-50 cash and trade - trade being a credit at an online store with overpriced merchandise - plus 50% value added. We went ahead with these because of the size and duration of the buy and they are not super picky about the value added. It runs Mon-Sun 6a-12m. Sometimes its all about what they look like to the client.

    I would note one interesting thing that has happened more and more often with the regional or statewide agencies... there is more interaction between the buyer and us about our market. The buyer responds to package or other promotions sent, even calls and asks what is going on in the market with employment, the business climate, etc. My take is they want to be knowledgeable in front of the client about the specifics in individual markets and make suggestions to the client about participating in community-based things like sports or fireworks. The motive may reasonably be budget add-ons.  

    • 455 posts
    May 31, 2013 7:00 AM PDT

    We have both a net and gross card. Every station I worked at this was the case.  Have only had pushback from one, small company. They are no longer in biz. 

    I've never lost a buy because I could not comply with the added value request. And, please don't giveaway prime time inventory, space on your website, or remotes. 

    Agencies are typically slow to pay.

    • 12 posts
    May 31, 2013 12:05 PM PDT

    Being in Radio for over 40 years, I've seen this handled many ways, on a case by case basis.

    • Discount Rates 15% and the station pays Agency
    • Add 15% to Rates and the client pays the Agency
    • Have 2 Rate Cards - one Net and one Gross (15% higher) for Agencies

    Bottom line, "It's all about the money."  What answer will get the $ale?

    Ed Brady, KAUS AM-FM Radio, Austin, MN

    PS: I don't like to admit this, but this is one area where the Manager's "integrity" seems to go by the wayside and "Special Deals" get done to get the money.  Primarily, I believe, that the Agency knows how to make a station sell based on another station's willingness to "drop" the rates to get the buy.  It's a dirty shame, but it happens.

     


    This post was edited by Rebecca Hunt at February 19, 2024 2:23 PM PST
    • 14 posts
    May 31, 2013 1:09 PM PDT

    We have both Gross and Net rate cards and agencies never see our Local or Net rate cards. We don't have many agency clients, but overall they are problematic in their habit of "slow pay". One of my agency accounts is regularly 120 days out, owing us money from January's invoice - and every month in between. Back when I sold print advertising for a daily paper, this "slow pay" situation was bad there as well. Often big agencies refused to pay our finance fee, paid after 120 days and used the excuse, "We can't pay you until we get paid." All of our terms were clearly stated in our three page 8-font contract, yet management chose to put up with it so we wouldn't loose the revenue. It's bullying tactics, plain and simple. They need you just as much as you need them, remember that!

    • 170 posts
    May 31, 2013 4:29 PM PDT

    90-120 days is standard with agencies, Lisa. I used to work agency side. Clients generally do not pay slow but agencies pay themselves first, like most businesses. This lagtime creates cash flow and this is virtual standard practice in the agency and media buying industry.  They don't pay late fees because they don't see it as late pay, honestly.

    Ironically, some agencies then negotiate mean rates with high volume annuals with the guarantee of paying within 20 days - which your sales manager takes for the cash flow. This is not a matter of your manager not having rate integrity (see Ed Brady above) or of bullying by the agency. If you don't want to take the volume-quick pay offer from these agencies, they move on to the next station and they very often will not ever ask you twice. The lesson with these deals is to take the money and run.

    • 993 posts
    May 31, 2013 4:36 PM PDT

    More recently have run into 2 national agencies demanding 50% value added. One of those requires 50-50 cash and trade - trade being a credit at an online store with overpriced merchandise - plus 50% value added. We went ahead with these because of the size and duration of the buy...

    Diane, do you offer similar concessions to local advertisers who are on similar sized annual contracts with you?

    • 170 posts
    May 31, 2013 5:14 PM PDT

    As a sales manager and owner, Ed, I will take issue with the idea of management not holding rate as a lack of b----s. Perhaps you can afford to take the high ground with direct agencies and clients, and may even turn business down on your own authority in the field because they do not want to pay rate card or what you feel they can afford or should pay.  Your sales manager may want to know you're doing that instead of coming to him or her looking for ideas to keep the account on-air.  It's great you're watching your own bottom line and trying to hold rate for the station.  Your manager or owner has a payroll and a bank payment or two so they look at it a little differently. 

    The object is to make money. And after 40 years of calling on businesses direct, you must have heard plenty of stories from clients on what they had to do to get a high volume sale here or get in with a potentially big client there. Taking the high road is the fastest way to bankruptcy most businesses take.

    We do not publish a rate card. I think it is not a good idea to do so and an especially bad idea to post it on a website or hand it out as a flyer to clients and potential clients. The worst case scenario - the published rate care will not hold rates but instead hold down rates, i.e., you will have clients who would have paid more than your rate card. It does happen.  An internal rate card that can be changed with time of year or due to other circumstances is another thing and functions well for salespeople in the field to answer the question "so what does it cost to go on your station anyway?" We quote rates based on how many stations in the group are up, the duration of the buy, the frequency and, often, the existing on-air activity on the account.  We offer annuals, weekend and overnite pkgs, holiday pkgs, special events and other promotional opportunities for clients targeting specific audiences.

    We have a competitor that sells for half the rates we regularly get. We sell targeted audiences via format and promotion and easily argue to a client who points out the rate difference that in media, you do get what you pay for. With our competitor they get a much smaller audience and a non-targeted one. We have the dominant formats in the market and get little argument.   

    • 12 posts
    May 31, 2013 5:53 PM PDT

    Diane,

    I didn't say that I was doing this.  What my post said is: "this is one area where the Manager's "integrity" seems to go by the wayside" - and I'm not talking about my current employer.  I'm reflecting on a number of stations where I worked before in Minneapolis, in Denver (and elsewhere) and some clients and some agencies had their "Don't tell anybody about this - Special Deals."

    You seem upset and offended with what I said, but I didn't say that you lacked integrity.  I personally believe that truth and integrity are essential to Sales and our reputation as professionals.

    Blessings, Ed

    • 170 posts
    May 31, 2013 6:16 PM PDT

    I appreciate that you want things to be fair or have some semblance of rate equality among clients, Ed. But you continue to suggest that managers trying to meet larger issues to the future of the business demonstrate a lack of integrity in what they negotiate.  I am neither offended nor upset. I do think you do not appreciate the demands in management.  We can agree that honesty and integrity in the broadcasing business is primary!

    • 14 posts
    June 6, 2013 4:33 PM PDT

    Diane, from your responses on this discussion, it appears that your agency experience was a positive one for you. Do realize that in any business, there are organizations that use "bullying tactics" to increase their bottom line. I am working with one now. Not to bore everyone with the particulars in this case, but there was no quick pay option. Our rates are already low compared to comparable stations and this is a very high maintenance account: Missing creative, multiple departments requesting the same information, the account representative requesting (several times) information already sent to him, etc. The local store owners strongly believe in radio and have to go through their corporate office to get radio spots (the agency in question is a sub-contractor of the main agency). In order for us be able to work with our local owner, we are forced to work with the agency in question.

    The lesson here is not taking the money and running but deciding if it's worth the trouble! There is a silver lining here, a great relationship with a new local client and since we did not have an advertiser in this product category before, their presence on our station enhances our desirability to potential clients in the same product category, which will help us to gain more new clients.

    • 170 posts
    June 7, 2013 7:56 AM PDT

    I agree, Lisa. There has to be some trade off for the demands put on by some agencies or in-house buyers. Big budget. Long term. Quick pay. Something.   In the case of the agency that Matt ran into that talked about net to agency and punishing the client with higher rates, we did not take that business. We discovered in calling around to other stations that the agency pays really slow, won't pay for production, et al. The agency gave us no reason to take the business.

    I guess I still don't see what some agencies do as bullying -  more as they have sold themselves to the client as tough rate negotiators and so have to demonstrate that to the client. They have chosen to position themselves that way. It's how they do business. It's not ever personal. They just move on if you don't take their offer. In a way all businesses deal with this -  a retail customer who looks at a product on the floor and tells the owner he will pay cash right now but he wants it for $____ instead of full price or he will walk. The owner has to choose if it's worth it to move the merchandise for that price or say 'no' and hold out for full price from someone else later.

    • 170 posts
    June 7, 2013 8:09 AM PDT

    We don't have a local advertiser who spends this kind of budget.

    With consistent and long time local advertisers we offer value added not available to agencies:  do lunches, NC on-air giveaways, promotional tie-ins, do pizza parties for staff, anniversary cakes for their sale-a-brations, give them tickets and other prizes for their in-store promotions, donate prizes and promotional airtime for their pet non-profit events and organizations, provide sound equipment for their events, design assistance for website, direct mail, et al   -  we try to create a friends with benefits thing.

    That would be a good Cafe question, tho, Rod. What do stations do for local advertisers? And what do they charge and not charge for?

    • 41 posts
    June 7, 2013 2:17 PM PDT

    Excellent points for sure. Waiting 90 days for our money, putting up with their crazy schedule requirements just doesn't seem to justify the hassle sometimes.  We've had the best luck with an Agency Rate Card that is grossed up and they can discount or add anything they want to their clients. We do our work, we get our money.

    • 24 posts
    September 30, 2013 8:14 PM PDT

    Stations I've worked for have always provided a 15% agency discount.  Then the rep gets 8% of what's left over.ugh!

    Providing net rates across the board is a smart way to go.

    Good for you for making the agency gross it up on their end..that's the way it should be, in my opinion.  Radio reps to a lot of work, agencies play on their clients money, are slow pay and who ever came up with 15% in the first place?  Every other business has has to make concessions and modify rates & payment.  Reps get tired of jumping thru hoops to get 8% of net.

    I work hard and give agency clients the same top notch service that I give my direct clients and deserve to be paid the same  commission.

    An agency could also take their 15% right off the top of the budget then book what's left over as direct, so the rep gets the higher percentage, too. If agencies did that for me, I'd give the client 15% back in on-air value....for being a good partner.  That's a win-win.