Of Course You Don’t Take PI Advertising, But You Should!

Back when I was a brand new radio sales rep, I remember a sales manager telling me that if a prospect even mentioned the letters “PI” (or per inquiry)  hang up the phone and move on! “If you want to ride the freight you have to pay the rate,” was his mantra. 

In the 15 years since I received that sage advice the advertising world has changed.  Time and time again the online world has proven that companies who deliver performance for advertisers can richly rewarded.  Performance-based media buying (PI, CPA or any of the other monikers) has become a legitimate part of the marketing equation.

In my current position as VP of Business Development for a leading direct response media agency I am finding performance based media to be an important part of the picture of our clients.  While it is quite common in the online world, broadcasters have been less inclined to sign up for these kinds of deals. 

And I understand the reasons why broadcasters might look askew at PI deals.  In most cases advertisers believe PI payouts should be less than what their traditional media delivers on a cost per call basis.  However, for performance based media to work and be sustainable the payout must work for the client and station.    

At our agency, we counsel our clients not to be too stingy when it comes to their payout.  In fact, we’d argue that a client should take their average cost per call from traditional media buying and increase it by at least 10% to come up with their payout for PI Media.  Obviously a higher payout makes the deal more attractive for stations and it’s only fair to give them a financial incentive to take on the risk of not getting paid if no one calls.   Additionally for the advertiser a performance based approach eliminates the risk and costs associated with the required optimizing of buying spots on new stations. 

Here is our point of view on the current market for PI deals in the major offline media segments:

In TV…

One of the biggest drivers of rates in the direct response TV market is the network upfronts.  The 2011 network “upfront” marketplace just concluded with reported commitments between $8.8 and $9.3 Billion dollars up from $8.1 to $8.7 billion in 2010. The upfronts act as a bellwether for TV demand  in general, and this type of growth is sure to trickle down to the DRTV marketplace. 

A more robust TV marketplace will greatly shrink the available inventory for PI deals in the TV space.  In fact, PI deals will be further limited to the fringe cable networks.  At Integrated Media Solutions, we’re not spending a great deal of time focused on negotiating PI deals for short-form (:60 and :120 second spots) advertisers. 

We do see opportunities for long form (30 minute) infomercials to generate volume on a performance basis.

In Radio…

Our view is that radio can be a great source of performance based media.  Why?  Consider that according to Aribitron overall radio listenership has risen, slightly.  This comes at time when radio faces incredible competition for listenership from SiriusXM, Pandora, iPod, etc.  and increased competition for local advertising from online media.  The combination of increasing advertising inventory and increasing listenership is one that should open up performance based opportunities that can deliver volume for the advertiser and satisfy the stations effective spot rate goals.

In Print…

As a declining medium, print should offer up some opportunities for performance based media.  However, the hard part is that what is left of the newspaper readership has narrowed to a predominantly senior demographic.  And baby boomers entering the senior demographic are not becoming any more likely to read the morning paper.

This limits the opportunities of PI to advertisers who target our aging population. Fortunately at our agency we happen to have some of those advertisers.  Even still, we have not seen huge volume out of our performance based print opportunities.

What do you think? What’s your experience been with PI deals?  Are you taking more PI deals today?  I’d love to hear from you.