By David Specht
The old saying, “Everyone loves a deal,” might not be as true as once thought. The advertising industry is notorious about cutting deals — perhaps to their own detriment.
Newspapers typically place their rates on a “rate card.” It contains pertinent information, along with the newspaper’s “open rate” — the amount the ad would cost if no “deal” was in place.
The open rate was once the staple of the newspaper advertising buy — with very few exceptions. However, in this ultra-competitive world, the open rate has given way to individually negotiated deals. It is a wonder there is an open rate at all any more.
I believe cutting deals (without good reason) is bad for business — both for the marketer and the client. Here are 3 reasons why.
1. Deals devalue your product. When a price is set for a product, it is based on the many factors. First, there is the value to the client. Market forces have a lot to say about value — and the price should be set accordingly. Cutting below the accepted market value of a product hurts everyone.
2. Deals Erode Profit Margin. The marketer needs to make a profit, thereby determining the price. In the restaurant business, the rule of thumb is 3x food cost. Cutting meal prices below that puts the entire operation in jeopardy.
3. Deals hurt sales/service people. If someone sells a $15 steak for $5, what does that do to the tip being left for the waiter/waitress? The same is true in marketing. Every cut in price hurts the commission for the salesperson — thereby hurting their take-home pay, their financial wellbeing and morale.
Certainly there is room for price breaks based on frequency and other legitimate factors. But when the breaks become the norm — everyone loses.
If your product/service valuable? Then act like it. Set a fair price. Speak to the value. Give great service. People will pay for value. Give them something worth paying for.
David is President of Specht Newspapers, Inc., a newspaper publishing and printing company in the northwest corner of Louisiana. For more than 20 years, David has been involved in all aspects of sales, design, journalism, production and distribution. His blog,www.davidaspecht.com is aims at giving business leaders the tools they need to not only survive, but thrive. David just recently launched the BIZ Tools Podcast, available for download on his website and via Apple iTunes.