Lots of interest in Neil Bells’s sales article earlier this week on avoiding a race to the bottom.   We asked Neil for a followup article on the specifics of bonusing.

By Neil Bell, New South Outdoor

Several Billboard Insider readers have asked me to give examples on how resisting discounts will help profitability.Let’s say that the local economy is not doing well, but Joe’s Plumbing is smart enough to know that he needs to continue to invest in advertising during an economic downturn. He has other media options and they have resorted to cutting rates, but Joe likes the effectiveness of outdoor and contacts you.

Joe wants to advertise for a year on your digital display and wants your “best deal”. Instead of discounting your digital space from $1000 to $700 to get the business, you hold the rate at $1000 and give a bonus space available spot on another digital unit that you have across town. You explain to Joe that this effectively gives him a rate of $500 per panel and is essentially half off. (Retailers do this routinely with BOGO sales with great success.)

In a few months, local business is starting to come back and you begin to have other advertisers wanting to advertise where Joe’s bonus space is placed. You get $1000 from another advertiser for that space and, per your space available agreement with Joe, you move his bonus to another available unit.

So now you have $2000 billing instead of the $1700 you would have had if you had given Joe the discount. This is 15% more revenue. If you do this repeatedly across your plant, you can see how it can add up.

In addition to raising profitability across the plant for that year, you avoid the awkward negotiation at renewal time trying to get Joe back up to market value, or 30% higher.

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