The Dreaded Renewal Recommendation

Here’s a scenario all planners and buyers face the second-to-last week of every month:

The first month of your client’s buy is almost over. The client has begun calling you, asking how things are looking for a second month’s buy.

“What sites are we going to run on? What sites do we want to keep? I really like ‘Inserthere.com.’ What do you recommend?”

Your heart is pounding, palms are sweating, ears are ringing… no, wait. That’s the phone ringing.

“Hi, I’m Joe Soap calling from ‘Inserthere.com.’ Your buy for Client X is expiring next week, and I wanted to see if we could set you up for another month.”

Great. Just what you needed. The client and the site publisher are both asking you for a decision on the same thing. Your mouth gets dry, and your eyes lose focus as you stare at your monitor…

So, what do you do? How do you make your decision? How do you tell a site publisher that you’re not going to renew? And what do you do to negotiate with the site publisher if you think there’s potential, but it’s not yet paying out?

This is a data-driven industry, folks, and right now, the crowned king of online advertising is direct-response metrics. Nine times out of 10, the decision to move beyond a one-month buy with a site is determined by some response metric. Be it click-through rate (the worst metric to use for a site) all the way to advertising-to-sales ratio (the best metric to use), the reason to renew with a site is almost always based on a response metric.

If your reason for not renewing with a site is that it’s not performing, tell the site publisher that. Be honest and clear about what the objectives were and how the site isn’t meeting them.

I’m sure most of the planners and buyers out there already do this, but for those of you who aren’t doing this, just lay it on the line and tell the site publisher the site is not paying out based on the metrics borne of the goals and objectives of the campaign. A site publisher can hardly argue with the numbers. The publisher will appreciate your forthrightness, and you’ll have either strengthened or preserved a relationship.

What if you think there’s a chance, though, and you want to try to keep the site on? With what do you approach the site publisher to negotiate a different rate?

When negotiating renewal contracts, the best thing to do is to back out a rate you need to accomplish the numerical objective of the campaign. If you’ve got a cost-per-action goal of $5, figure out what kind of rate is necessary to accomplish that goal, based on the site’s past performance.

Or work toward a campaign average. Apply the Hume rule (David Hume, 18th-century philosopher), and assume that the future will resemble the past. Take your average cost per action, and determine what kind of CPM you’ll need from the site to achieve it.

For example: I execute a buy for 100K impressions at a $30 CPM. My run yields 5,363 clicks, about 5 percent click-through (wouldn’t that be great?!), generating a cost per click of $.56. But my average CPC for the campaign is $.50. To yield a $.50 CPC, were I to run the exact same campaign at the exact same levels with the exact same click-through, I’d need about a $27 CPM. Go to the site publisher and say you’d like to renew, but you need the $27 CPM.

This is a great negotiating tactic because it lets the site publisher know where the site needs to be in relation to other sites that are going to make your buy. This is information that helps the site publisher out, without the buyer revealing what he or she might be getting from other properties. And it moves forward a buy that is almost certain to accomplish the goals set by the client’s objectives.

This doesn’t always work. Some site publishers will walk. But you’d be surprised how many are willing to meet you on the price.

So when that phone rings, take a deep breath, think ‘calm blue ocean,’ and take the call. The numbers are on your side.

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