A rate card tells you exactly what you need to know to buy or sell advertising. It costs so much for that amount of space on this or that channel. It’s as simple as that.
Or is it?
Actually, no, it’s not simple at all. In fact, as a recent forum hosted by the Advertising Media Association of South Africa (Amasa) proved, the issue of rate cards can be contentious. Are they worth the paper they’re printed on? Do they merely serve the purpose of a starting point to haggle for the discounts that plague the industry? Do people still use them, or are advertising negotiations so loose that any old baseline will do? Are they a source of conflict between media agencies and media owners?
The Media asked media owners and media agencies just what the status of the rate card in today’s multi-channel multi-media world is.
Rate cards are about trust, says Gordon Patterson, chairman of VivaKi South Africa. “From a customer or advertiser point of view, rate cards are essential, more so than ever before, because without them we’d have to rely on trust and trust is simply not objective and nor can it be measured,” he says.
Procedures around procurement play a role too, says Patterson, adding that it’s essential to have a point of reference to start the discussion, whether printed or electronic. “A rate card also outlines a trading policy, creates a framework for negotiation and ensures recourse,” he says.
Chris Botha, group managing director of The MediaShop, says the usefulness of rate cards is being called into question because “so few people use them”. Botha believes South Africa is still “miles away from a true supply and demand and trading environment”, but at the same time, rate cards often don’t factor in real market issues, and “get thrown out the window”.
Botha believes the reality is that with very many media elements, “supply and demand should drive price”. But it doesn’t pan out like that. “A programme like ‘Generations’ is over-booked every single night and probably indicates that it is underpriced and, therefore if it wasn’t for the rate card, the media owner could have made even more. Out of home (OOH) can sometimes be the opposite. There are billboards that stand empty for months on end, because there is a rate card,” he says.
Avusa’s general manager of advertising sales and strategic communication, Trevor Ormerod, says the industry will always need rate cards, but as Patterson and Botha mentioned, more as a base from which to negotiate. “In very few negotiations are rate cards referred to, as often the deals are done based on time of the year, levels of demand in the title, long-term commitments, added value opportunities and other factors. These deals are done based on discount/added value grids, which ultimately are founded on the base rate set in the rate cards,” he says.
Critics say agencies need to sell their value and skills to clients and not just their volume buying or discounts given back to clients. “I believe a combination of all those are necessary. Skills, value, return on investment and deals/discounts are how any deal is negotiated in any business, not just media,” says Ormerod. “We have adopted the diagnostic selling approach, which helps us understand the strategic needs of a client. Only then can the medium be packaged to meet the needs of a client.”
Ads24 CEO Linda Gibson says in many cases industry players “have strayed so far from rate card or standard rates in terms of discounting that a view has been created that all prices are up for negotiation and that a guide is unnecessary”.
She says: “In Ads24’s experience, media agencies request to have rate cards in a printed format. We therefore believe they are a useful tool of the trade, providing the basis of price negotiations. Over time a ‘beat-the-rate-card’ approach has become standard practice, but without the rate card where would you start?”
Director of Vizeum media agency, Tanya Schreuder, says rate cards do apply more to some advertising channels than others. “Television rate cards are obviously published monthly, due to the dynamic nature of programming. Television is the most expensive platform on which to advertise, so there is always obviously high engagement around these rates, where we are able to make CPT (cost per thousand) or CPP (cost per rating point) comparisons to ensure that we are buying effectively,” she says.
“The remaining channel rates are published annually. Out of Home (OOH) is less controlled, where media owners release rates with new sites and don’t have a standard rate card for their inventory…”
Managing director of OOH agency Posterscope, Craig Page-Lee, says that in his experience, the rate card rate is never paid for inventory (on OOH). “The rate card is a signal to the market of the maximum price of an opportunity, but it is not the true value of the opportunity. Unlike other media types, where comparisons between opportunities can easily be made, OOH rate cards are very difficult to estimate accurately, as the value of an opportunity can be hugely subjective, depending on what is important to the brand,” he says.
“I believe that the rate card still applies its ‘true definition’ on smaller, less frequent and once-off bookings, but takes on a totally different guise when volume and frequency are taken into account. The supposed ‘preferential rates’ for high-value clients has lost its true meaning as media owners continue to haggle for the same marketing budgets and media spend.
“The net result is an open rate card price war and mass discounted scenario that exists these days. I do, however, believe that this statement is not necessarily true for all media channels, but predominantly for the channels undergoing severe pressure due to the changes in the marketing landscape and as the digital platform takes the centre stage,” he says.
Schreuder says rate cards or not, relationships are still vital. And media owners who employ skilled staff “differentiate the great from the mediocre”. “We are often faced with a choice between two or three channels that all deliver against our target market, but a media owner that delivers on a strategic idea or one that showed more pro-activeness will sway the decision. Relationships are key!” she says.
Carat South Africa’s managing director, Quinton Jones, believes the industry has a “bigger concern about media commission that is linked into the discussion around rate cards”. “Rate cards are absolutely necessary as a starting point to a costing discussion. The industry needs a base financing structure. What rate cards don’t address is value for money and the justification of a decision. Knowing what things cost only has perspective when it’s balanced with knowing what you are getting in return,” he says.
The main source of conflict between media owners and media agencies is commission, he says. “Does it or doesn’t it include commission? It’s antiquated and confuses the costing process and confines the media agency into a system that doesn’t always make business sense.”
How do rate cards stand up in the magazine industry? Caxton’s advertising director, Debbie McIntyre, says the magazine media sales landscape has “become far more complicated, with far more options, platforms and touch points needed to communicate effectively with consumers and we have already had to gear up our staffing and skills to offer effectively against these demands,” she says. “The traditional FPFC (full page full colour) on its own is becoming obsolete in terms of meeting clients’ communication needs. These options are too many and varied to be put simply on a single rate card.”
Of course, with so many differing views and agendas, conflict can arise. Aegis Media’s buying director, Agnes Barnard, says the root cause of disagreements is “insufficient notification of rate increases and the unjustified increases, plus unrealistic rates set to the medium’s performance”. She says the benefit of losing the rate card would be “being able to negotiate by target market, or other measures, and benchmarking”.
So, what’s the answer?
This story was first published in the October 2012 issue of The Media magazine.
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