How to Negotiate an Online Marketing Contract (1,033 words)
With an array of costs, providers and services, choosing the right model can be a mystery
By James Crouthamel
As more and more retailers are competing for the ever-elusive consumer dollar, an online marketing strategy is becoming increasingly important and should be an integral part of your corporate marketing effort.
There is an array of online advertising models from which you can choose—cost per million, cost per click, cost per acquisition or cost per X (which is any variable), using banner ads, textual links, e-mail, wireless, etc.—all of which can be useful to both developing your brand and driving sales online. There are also many online service providers that can help you meet your online goals—banner networks, performance-based companies, e-mail providers, etc. This article will help you prepare for and negotiate your online marketing program, regardless of who provides your online programs.
Prioritize Your Service Needs
A contract should not be negotiated until you have an outline detailing your organization's needs. Perhaps you are looking to be branded across a very wide spectrum of sites. Maybe you're looking for lead generation for your service or product. Or maybe you just want sales. Whatever your particular needs may be, you need to identify the services you want—and determine the most critical elements for success.
This is where prioritizing comes in. The best way to prepare is to review the list of available services and decide what is important. If you're not familiar with online marketing, you might wish to survey industry colleagues. Ask them what the most popular services are, and what benefits, costs and rewards come with each service. Also inquire about the rationale behind different rates and programs. Performing this exercise will allow you to confidently go into negotiations knowing what is a "must-have" and what you can do without to achieve your ultimate program goal.
Contracts: Length of Service and Exclusivity
At first glance, contract length and exclusivity might not seem related. However, they both play an integral part in negotiating the best deal possible for your company, and should be carefully thought out.
When it comes to length of service, some providers will allow you to discontinue service without penalty and others will try to lock you into a specific time period, wherein the contract cannot be terminated for any reason. For these types of contracts, you will need to include clauses that can protect you in the event that the service provider does not perform as promised.
Contract length is a difficult item to negotiate. Many providers will allow you to negotiate the length of the "out clause" of a contract. You basically want to protect yourself if your goals are not being achieved.
Exclusivity is another stubborn contract item that is often hard to avoid. Basically, you will want to ask the following question when deciding on exclusivity: "What am I getting in return for giving exclusivity to a single provider?" The best scenario is getting the service provider to agree to an "opt-out" clause that can be used if your objectives aren't met. Protect yourself against the confines of a non-working relationship, especially since the online marketing world changes on a monthly basis.
A clause that is more of a win-win for both the marketer and service provider is an "auto-renewal" arrangement. This is where revenue benchmarks are set based on a specific duration of time. If the benchmark is met, the client automatically renews its contract with the provider. If the benchmark is not met, the client has the opportunity to either renew or terminate the contract.
This is where the true negotiation begins. Almost any service provider will negotiate pricing points given the right incentive. There are several ways to set pricing for the services you will be receiving. You may be in the driver's seat, but be sensitive to the fact that your chosen service provider is experienced and knowledgeable. Your provider might very well even be your closest ally.
You need to investigate the pricing models commonly used within your industry and work from there. This information will save you time when negotiating and allow you to be confident in your final agreement. Because the models are so different, they are difficult to compare. You might want to try breaking the pricing into a common denominator so you can compare apples to apples.
Most service providers have a start-up fee. Take a close look at the fee asked and decide if it is a reasonable amount to pay for the network of services you will be joining. Many service providers' programs are an all-inclusive solution where for a single fee, you get an entire online marketing program. Others will let you choose your marketing on an "à la carte" basis—paying for new programs and services as you ask for them. Some will offer only limited solutions that focus on single areas of interest, such as e-mail or search engines.
Many vendors have service and maintenance fees or monthly minimums. You will need to pay the fees to stay with your chosen provider. These fees are always negotiable. For instance, if you want lower pricing from your service provider, you will most likely pay a higher start-up fee and/or monthly minimum. When analyzing the fee and monthly minimum structure, ask yourself one key question: "Does this meet my ROI goals for online marketing?" In other words, will you be getting a return on your marketing dollars that supports your business?
In short, the best approach to negotiation is to be prepared. Do your homework—determine the technology and services desired, survey your industry for standard rate information, understand your program goals, prioritize service items, come to the table with a plan and lastly, be confident that with preparation, your online marketing program will be a success.
James Crouthamel is president and CEO of Dynamic Trade, an online pay-for-performance marketing services provider. He can be reached at (312) 644-6515 or via e-mail at firstname.lastname@example.org.