Radio Sales Café

Happy Friday, everyone!

This week's poll question was sparked by a discussion started by Matt Tjapkes of Grand Haven, MI, who had a question about Dealing with Agencies.

Advertising agencies expect to receive a 15% commission (or discount) on their radio buys.  There is no established industry-wide practice on this issue.  Some stations discount their local rates by 15%; others add the 15% to their net rates.

What is the practice at your station?  What is the rationale behind it?

Looking forward to reading your replies!

 

The competation is tight. So nowadays radio stations offer "packages" i.e  Agency provides a budget and radio stations provide a medial plan which may include airing ads, news coverage and interviews with clients and roadshows as well, So the issue of agency commission does not arise. But in the early ninties  Agenices could get 18 % commision . In addition radio stations work closely with local dailies and tv station and activation campanies to offer a 360 media approach, Finally, clients prefer to work with ths stations direct, agencies provide the concepts, stations execute them, and  stations  have in house studios and creatives too.

There is an established agency wide standard. It is 15% Commission to the agency. The way it should be handled is all of your rates should be high enough to compensate for an agency piece of business whether it's placed directly or through the agency. The agency is getting the privilege of placing the business with you and for their client. That 15 percent is ridiculous when you think about it, because they are in essence taking money from the radio station for placement of the business. However, if you have low direct rates and higher agency rates you risk losing that business if the local client tells the agency what they spent direct. It's like any negotiation you need to give the sense that they have got a deal but you also need to make sure that you're not selling your product for a loss. Unless you work for a company like Clear Channel, you have a set amount of inventory. Your management should know what rate you need to achieve your budgets for the year. You should start higher then that and work your way back to it

NEVER discount your  rates!  Discount them once and you'll have to discount them forever.  I have always INCREASED agency rates by the normal 15% and have found it was not only expected by accepted.  We all know agencies will then ask for the famous "value added" and then want bonus spots of some kind of sponsorship so if you discount your rates you can expect the same request .. "what kind of value added can you offer me"?

We add 15% to our net rates. Our rates are low enough - we don't need to discount them further.

It never makes sense to pay the agency out of your billing.  Most stations I am aware of publish a local card and an agency card.  That assures that you get your published rate for your product and the agency gets paid by the client.  Print has always had a "local" and "national" rate.  Agencies have bullied radio stations for decades.  "Value Added"  "Discounts" "Free remotes".  "Take it or don't expect any business".

I was always glad that when these discussions came up we stood firm because we were proud of our product.  That doesn't mean that we didn't lose business. The agency should always be paid their commission but that doesn't mean the radio and tv station should pay it. I also agree with some of the respondents that you find compromise raising its' ugly head, particularly in the last few years as things get tight in the economy.  However, as one person remarked, "once you do it, you'll always be stuck."

Well, I can't speak for our stations, but I can speak from my own experience. Just adding 15% to a net rate for an agency doesn't bring out the right figures. However, if you take the net rate, divided it by .85, you will come out with the correction commissionable rate. For example, the net rate is $20. Divided it by .85 and your get $23.52 (which can then be rounded to the nearest even cents if you wish). Then if you take $23.52, deduct 15%, you come back to the same rate you started with. ADDING 15% to that net rate gives you a different figure. It has also always been my opinion that even though ALLOW at 15% commission (discount) to the agency, it is actually the client who should be paying for the agency's services they provide. Our stations provide the product. Some agencies work on a retainer for their clients--no agency commission. In that case, I would then be inclined to use net to station rates for them.

We add the agency's 15% commission to our local rates.

I've been in Radio for 29 years and that's how we've done in every market I've been in.

We add the 15% on top of the normal rate.

Gross up your net rates.  If you "commission" you net rates, you are in essence paying the ad agency and also increasing your cost of sales.  Agency commission(s) are the burden of the company that hired them, not the broadcasters.  

From Christine Pompeo

"At WBTX Radio we add the additional 15% on to our rates. the reason for this is for 2 reasons. We already have our rates down as far as we can put them. also, we have to give commission to our sales people on top of the 15% the agency gets. So we always give Gross rate, not net rate to agencies."