Opinion: Peter Webb

Stephen Groom is a partner at law firm Osborne Clark and head of Br@ndlegal

When marketing managers are under pressure to justify budgets, payment by results on media spending becomes an increasingly attractive option.

While many routes to market have high entry costs and variable outcomes, accountable marketing, with a direct correlation between expenditure and results, is far more defensible than "image" or brand advertising when the financial director's axe is being wielded. This issue has come to the fore recently with the economic slowdown.

The key question is: how many media owners are willing to operate on a payment-by-results basis? Let's consider the point. Any media owner must be confident in the product, because offering payment by results is taking all the financial risk upfront, as advertisers pay purely for the responses received.

To assess the level of risk, the media owner must be able to predict an accurate level of responses for each type of advertiser. This is not easy.

Unfortunately, there is no fixed rate card that can be used, as the formula is different in each case. Past experience and a degree of judgement is needed to offer a competitive cost per response.

Clearly, the offer of a travel brochure will generate more response than a major home improvement product. Or a fashion catalogue will generate more response than a cosmetic surgery company. The value of the leads to the advertiser will also vary. High ticket items, such as a driveway or conservatory, can absorb a higher cost per lead than a charity Christmas card catalogue.

In many instances, payment by results is not feasible. Take press advertising. Who is going to decide what will be the most effective ad in next week's Media Week for example, and judge the number and value of those responses? And then negotiate a rate-per-response
sale with the advertiser? This is a complex task. Different advertisers will get different levels of response in the same media and it requires a huge knowledge bank and experience.

So, I am not suggesting that the days of the rate card are numbered and, that in future, we will be paying for results on all media because owners are not all going to roll over and offer pay per response.

Broadcast media is an interesting case in point. One-stage shopping commercials have been around for years, but
the channels are reluctant to take on new purely "payment by results" spots, as the response levels have generally drifted downwards, despite exceptions and highlights.

The risk is already there for publishers. Whether magazines, TV or direct mail, the production costs are committed up front and, if advertisers are not happy with their results, they don't come back.

However, for some media owners it is a feasible option, and they are able to tell advertisers what to expect for their money and can then plan their supply of leads accordingly.

Response Direct Publishing publish consumer card decks for which we charge our clients on a cost-per-thousand basis. It works for us and it works for our clients. But RDP also publishes The Consumer Information Centre, a response catalogue targeted to consumers at home, where participants are charged on a cost-per-response basis only. That, too, works for us and CIC clients. It's horses for courses and we're backing both.

Whatever the payment terms, media owners are acutely aware that their success rests on the results they deliver to their advertisers, as well as their readers and viewers. They provide the vehicle, it's up to brand owners how they drive it.

Peter Webb


Response Direct Publishing

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