A modern approach to negotiations in media.

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ONE STEP AHEAD

2. A P R I L 2 0 2 0C H E P R O X I M I T Y
M E D I A P R O D UC T F U N D A M E N T A L S

3. Media Product Fundamentals
Week 6 – Negotiation
May - 2020

4. A little about me …

5. I like consistency.

6. Each morning I wake
up around 7:15am

7. I get a coffee in
the morning and
if I get a small
it’s $4.50, a
medium is $5.00

8. I park downstairs
and it’s $12
for the day.

9. On the way from
carpark to the office
get another coffee
– a small ($4.50) and
sometimes toast ($5)

10. Maybe once a year
they change the price.
Maybe.

11. I enjoy the concept
of consistent pricing.

12. For jeans.
$280
For shoes.
$200
For bread.
$5.00

14. At 9am I enter
the office.

16. For the next 9 hours I am in
the world of “media pricing”

17. Where what was $18 last week
is suddenly $27 this week.

18. Where 89% off ratecard
is spoken commonly.

19. Where “It’s too expensive”
is said with no concept for
rationalising why.

20. Where a $50,000 magazine buy
can have $2.97m in ”premium
bonus activity” attached.

21. Inefficient.
Old.
Massive waste of time.

22. The trilogy of time wasting.
Upfront interrogation of problem.
Ineffective briefs.
Negotiation back and forth.

23. Here you go – it costs $x
That’s too much, client needs it to be .9 of $x
Hrm – not sure I can do it, I did throw in $100x of bonus
across our very popular website.
Yes, that is great, and that 10,000% value stretch is
impressive. Can you move on the price of $x though.
I’ll speak to Willbo our Sales Director, he is SUPER KEEN
to work with you and considers Agencyname a VERY close
partner, and come back to you …

24. Repeat x5-6

25. 17 years and this
hasn’t changed.

26. Here you go – it costs $x
That’s too much, client needs it to be .9 of $x
Hrm – not sure I can do it, I did throw in $100x of bonus
across our very popular website.
Yes, that is great, and that 10,000% value stretch is
impressive. Can you move on the price of $x though.
I’ll speak to Willbo our Sales Director, he is SUPER KEEN
to work with you and considers Agencyname a VERY close
partner, and come back to you …

27. Buyer:
No context
Seller:
Wrong context

28. Media negotiations have some
systematic flaws:

29. 1. Relationships are too influential
in evaluation.
2. Vanity metrics can cloud
real value.
3. The ‘Above your head’ lever
seeks to exert undue pressure
to force a result.

30. There is a better way.
1. Interrogate the problem upfront so you
are clear on what you’re solving; and
explore a wide variety of hypothetical
solutions as a result.
2. Spend adequate time on briefs and ensure
they are detailed and directive
3. Avoid the negotiation waltz and follow
these basic rules.

31. The solution could be
accelerated by Covid
compression™

32. And Ben’s rules
to concise
and fulfilling
negotiations.

34. #1: Have a reasonable idea
of component value when
you dispatch the brief.

35. Real world example
It’s pretty rare we personally look to buy a
product with zero idea of what we believe
a fair cost to be.
If we are researching a $200 pair of jeans
in depth, we need to do much more for a
$2m client brief.

36. Establish a value early
Let the partner know what you’re seeking
and what parameters you have established
around price and what is achieveable.
They can let you know early if it’s off and
it also provides them with a realistic idea
of what you’re after.

37. #2: Be clear on the
requirement to quantify
value at a granular level

38. Real world example
Your mechanic will provide a pretty clear
granular idea of parts/labour/other costs when
fixing your car for $500.
We need to do the same with that $115,000
production fee line with zero rationale behind it.

39. Request unit costs
Ask the partner to not roll all elements up
into a single price, and to provide you with
rationale behind each cost.
Then you can look closely at unit price,
labour cost, production, non-working and
establish how comfortable you are and/or
what needs to change.

40. #3: Establish a common
currency to evaluate options.

41. Real world example
If we are looking to buy a pair of jeans at outlets
that are in the UK, US and AU – we will work
back the cost to AUD so we can compare them
like for like.
Media is charged in AUD but that is where
pricing consistency ends.

42. Establish a common currency
Partner Cost Audience reach
- campaign
CPM - AP Effective TA
CPM
Impact – size of
unit relative to
screen
Dwell
Partner 1 $200,000 900,000 $25 $49 HIGH 15s
Partner 2 $85,500 110,000 $150 $410 HIGH 5s
Partner 3 $115,000 2,000,000 $6 $13.50 MODERATE 3s

43. #4: Value is only value if you
would have paid money for it.

44. Real world example
Imagine you walk into shop x and there’s a pair of jeans
you really like.
You have $200 – they are $220.00 – and there’s other
options you can get that are $200.00 and excellent - but
these are the best.
You ask whether they can sell them for $200 – they say
No, but they offer you 15x tshirts in XS even though
you’re a L – “valued at $900.00”
That’s $1,120 of value for $220.00 – 500%+ value!

45. Don’t fall into the bonus trap
Bonus is only valuable if it prevents you paying
money for something you were going to buy.
If you’re the sort of person who needs bonus
to feel like you’ve ‘won’ … at least make it
something the client wanted, not something
that is retrospectively sold in after the fact.

46. #5: Shortlist options and
quantify the gap between
asking price and what you
believe it is worth.

47. Real world example
You couldn’t just say to someone (mechanic,
fast food, clothes store) “it’s too expensive”
or “I need more bonus” without some sort of
explanation as to why these were reasonable
words to say.

48. Partner Cost Analysed cash
value
Key inputs Gap Options to close
gap
Partner 1 $2,100,000 $2,300,000 Audience, context,
competitive, stores
-200,000 N/A
Partner 2 $1,010,000 $920,000 Reach, spots,
timing, impact
$190,000 Require $100,000
reduction in prod,
additional $90,000
in spots
Partner 3 640,000 $340,000 Reach $300,000 CPM is 50% more
than comparable
options

49. #6: Understand that buyer and
seller aren’t really that aligned,
and that’s okay.

50. Real world example
No business is that altruistic that the customer
need completely usurps their own.
Apple is customer first – but if you don’t have
$399 for an Apple Watch 3 then you’re not
getting one … even if that makes you sad.

51. Partner/supplier/customer
– it’s semantics
A media company goal is to ultimately serve
the needs of their shareholders – generate
the maximum revenue in a sustainable way
and operate at a cost base that allows them
to make a profit.

52. #7: Leverage your strongest
factor - money

53. Real world example
A business operates to generate revenue,
and the most valuable commodity any
customer possesses is cash.
Cash is finite and scarce – companies make
a decision whether they want/need the
cash, or whether they’re prepared for a
competitor to have it.

54. You don’t have to get to a deal.
My view is never pay $1 more than you have
valued something at. If a partner doesn’t agree
on the value, it’s okay to walk away and try again
with the next brief. Just like it is in the real world
when you think something is overpriced.

55. #7b: Walk away if the end point
isn’t a win for both parties.

56. Real world example
Assume a coffee costs $3.50 to make, but
you love a deal and you’ve ‘crunched’ the
café to charge $2 as you wanted to say you
got 40% off ratecard.
Do you think this is a win/win? Do you think
the café will give you the full value or cut
some corners to even up the deal?

57. If it’s not a win/win you will lose.
Let’s say a sponsorship for x show is $2m, you
feel it’s worth $2m but you want to be a hero
and get it for $1.3m. You have created risk –
corners could be cut in servicing, production,
priority, quality, motivation. This might be
okay once, but if it becomes consistent it will
come back to bite.

58. If it’s not a win/win you will lose.
Let’s say a sponsorship for x show is $2m, you
feel it’s worth $2m but the sales person is
nervous and drops the price to $1.3m just to
cut a deal. Think about what could be at stake
– what could be the implications of this sort of
hasty rush to get some money booked?

59. #8 (free bonus rule): Never
disclose share.

60. Real world example
Imagine you went to buy a coffee, and the café
owner said ‘Hi mate … now before I price this,
can you tell me my share of your soy caps for this
week. My Sales Director has told me we deserve
a 30% share in soy caps and the market needs to
shift to this mindset’
…

61. Share is another media relic
‘Share’ is a relic from 4 decades ago when there
were 3-4 channels and 1-3 operators in each. No
one has any right to know anything aside you
and the client (who is the one paying)

62. 2020: Let’s ban ‘share’

63. Negotiations are all about getting
the right outcome for the client.
Don’t make them about you.

64. Contact me anytime
ben.shepherd@cheproximity.com.au

65. Materials
PDF will be sent to you
Webex recording will be available
to view via link
Dispatch 24-48 hours post session

66. See you next Wednesday
12:30pm AEST

67. Thank you.

68. Please join us next
Wednesday 3 June for
Maximising Working Media
and getting rid of things that
don’t add value.