Risk-free corporate trade?

It's in our hard wiring. To satisfy our need to avoid risk, we search for ways to test things before fully committing, right? So, how can you enjoy the benefits of corporate trade while eliminating any perceived risk?

First, let's identify what the risk may be. It's most likely the asset. After all, your motivation to enter into a trade transaction is probably to sell an excess inventory or other undervalued corporate asset. Even though that inventory, real estate or capital equipment has a relatively low value, it still has some value. So, wouldn't it be nice to test out the claimed benefits of trade without putting the asset proceeds at risk? That way, you could verify that the trading company could indeed place the media planned by your agency and do so at the same costs and with the same accompanying bonuses and merchandising?

To accomplish that, the trading company should be willing to issue you a trade credit without an asset, place a portion of your media, and allow you to use that trade credit to replace a meaningful percentage of your normal media cost. In the end, you'll confirm that the media is purchased at net according to your strict guidelines as directed by your advertising agency, and that a portion of your costs was covered by a trade credit. That trade credit represented a real savings cost to you.

Without an asset to fund the trade credit, however, why would a corporate trading company do this? 

First, it's common knowledge in business that it costs more to gain a new client, so this loss of asset revenue will need to be accepted by the trading company as a marketing cost. Second, without an asset, the trade credit portion of the media buy will be smaller. Perhaps much smaller. In other words, if you sell a piece of commercial real estate to a trading company, the funds will enable the trading company to provide you with a trade credit that represents a much higher percentage of the media buy. A higher percentage of trade savings makes the transaction much quicker and more lucrative to you short-term, which is why many trade clients eschew this type of test in favor of selling the trading company an asset. They typically choose this option after becoming comfortable with the transaction details and with the trading company.

Regardless of your initiation to trade with a particular trading company, you need to feel comfortable with the transaction mechanics and the capabilities of the trading company, If that means placing a portion of your broadcast, print, out-of-home, or interactive advertising without selling them an asset, the means exist to do just that. Eliminate the risk, then embrace corporate trade as a powerful long-term financial tool.

About Mike Lake

Mike is the Senior Vice President of Marketing for Evergreen Trading. When not playing jazz trombone he is probably obsessing about writing content that will capture the attention and interest of business people and fellow learning junkies everywhere.

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