Slow payment by advertisers is just one more unfortuante result of the recession. And while a first impulse may be to get tough, that could damage relationships and cost money when the good times return. Perry Sook and Abe Walkingbear Sanchez have a couple of ideas.to address the problem that are more carrot than stick.
“They think we’re banks,” exclaims one TV sales executive who oversees a large station group and has been watching advertisers stretch the limits of endurance with late payments.
Another says he is telling clients to not even think about asking for value-added deals unless checks arrive in a timely manner.
Slow payment is one more symptom of the tenacious recession that gripped the country last year and has yet to let go. And it frustrates broadcasters trying to manage their own cash flow problems.
The impulse is to squeeze the delinquent customers, but that could damage relationships and cost money when the good times return.
So, it might be best to take an approach that is more carrot than stick.
Perry Sook, chairman, president and CEO of Nexstar Broadcasting Group, says his group had success with a rebate program this year that not only generated extra business, but also produced timely payments.
Here’s how it worked.
Advertisers who spent more during the first half of 2009 than they did during the first half of 2008 received a 20 percent cash-back rebate on the incremental business.
“The condition was that all bills for 2009 had to be paid current [i.e., net 30 days] by the end of July,” he says.
The plan generated $6 million in business in the first half of this year, Sook says.
And, as promised, Nexstar sent out 1,700 rebate checks ranging from $80 to $70,000 at the end of August — a total of more than $1.2 million.
“It was a bigger undertaking than we thought,” Sook adds, noting there was a lot of paperwork.
“But when you look at the results that we reported for the first two quarters of this year [for core ad revenue and net revenue] and compare them with the other public-reporting companies, our rate of decline was less than the others.”
Another idea for curing advertisers with the slows comes from Abe Walkingbear Sanchez. His firm, A/R Management Group, trains business executives on how to maximize profitability.
He calls the idea “funny money,” a slang term for the military payment certificates that he and other soldiers received when they fought in Vietnam and that could later be turned in for cash.
Under Sanchez’s scheme, customers who pay within a short period get “Valued Customer Discount Certificates” that can be used for dollars off their next order.
The certificates not only prompt early payments, but spark the possibility for repeat sales. And in some ways repeat business is better than new business, Sanchez says. “You have to look at it from the perspective of what it would cost you to bring in a new customer. It’s not just the marketing and sales cost, it’s the cost of a credit investigation and setting up a new account.”
The idea is meant to counteract a problem Sanchez has noticed with other payment stimulus plans, like the one where customers can take 2 percent off if they pay in 10 days or else the full amount is due in 30 days (or 2-10-N30, as it’s known). Problem is, some customers give themselves the discount, date their checks in the 10-day window, but post them afterwards.
Sook’s and Sanchez’s ideas may not be right for everyone. But they suggest broadcasters can generate new revenue by borrowing old ideas — rebates and coupons — and giving them a TV twist.
Spot Check is a bi-weekly column about TV station sales by Janet Stilson, a writer who specializes in the media business. If you have comments or ideas for future columns, contact her at 212-694-0126 or [email protected].