By Scott Miles, Client Solutions Manager
With Corporate Trade growing in popularity as a strategic business solution, there are a few things every business leader should be aware of when entering into their next Corporate Trade deal.
In a typical trade deal, your company has just exchanged an under-performing asset (such as excess inventory), in return for a bank of Trade Credits that are used with cash to pay for routine budgeted business expenses. This is clearly a high trust transaction and you must feel confident in your Corporate Trade partner’s ability to deliver on their ability to help you spend your Trade Credits. A legal contract is a must, and for any business engaging in an unfamiliar practice with a lot on the line– this can seem daunting.
Today’s blog focuses on 4 essential elements to your contract. These, at minimum, are “must haves” in order to effectively protect your business in a Trade transaction:
- Inventory & Brand Integrity – if there are any restrictions on where your distressed inventory will be remarketed or distributed, make sure you specify as such in your Corporate Trade agreement. It’s important that your brand remains protected, with product being sold only in approved channels and markets. You want to ensure your business is never forced to sacrifice brand integrity.
One of my customer contacts at ConAgra Foods covered this point very well in a recent article discussing the Active/ConAgra relationship in Food in Canada magazine:
“It would normally take me more time to deal with third-party vendors, and I wouldn’t have control of where products end up or know if they’ve been resold or tampered with — but because it has your brand name on it that will hit you two or three years down the road. With Active I’m not going to have that problem.”
- Media Quality – Likely, the majority of your Trade Credits will be used to supplement marketing efforts, and specifically, your paid media budgets. Make sure your Corporate Trade company is applying Trade Credits to your authorized and approved (or your agency’s approved) media plan. By doing so, you’ll ensure your supplemented media plans remain of top-notch quality, thus ensuring the full dollar value of your credits remain intact.
- No Media Commissions or Fees – Corporate Trade companies typically do not take media fees as part of their business model. Be sure you aren’t being docked a media commission by your Corporate Barter company each time you use your credits. A central tenet of Corporate Trade is that your credits are used against your existing advertising rates – those that are expertly negotiated by your agency. If you currently employ an Agency of Record, be sure to continue compensating them for their services as you usually would. Their role in the process– defining the media plan, and as a check and balance setting pricing benchmarks and ensuring media quality – is vital to the success of your Corporate Trade deal. Your agency should be compensated with a media commission; your Corporate Trade company should not.
- Customer Service – Like any other service-based business transaction, strong customer service is absolutely vital to the success of a Corporate Trade deal. Before entering into a Corporate Trade deal, you’ll want to ensure up front that you have a dedicated account manager and media team assigned to your business. A strong account manager understands that your business only receives financial gain from the transaction once Trade Credits have been spent (within a reasonable time-frame). Therefore, your account manager should be diligently tracking your Trade Credit usage, routinely presenting opportunities for increased Trade Credit usage through formal business reviews, and attending all relevant media briefing and planning meetings with both your marketing/brand teams and your agency. Further, this account manager should manage the communication/workflow between all parties in a streamlined way that makes the most sense for your business. As a Client Solutions Manager at Active, this is the kind of service I try to deliver on all of the accounts I am responsible for. Your Corporate Trade company should be viewed as a valuable budgetary resource and not an extra step.
Your turn – what other elements are essential to your Corporate Trade contracts?