Bartering has been used widely for all kinds of goods and services in an informal way for many years. The barter system allows organisations who do not have cash access to goods via an agreed exchange. For example, a car manufacturer may have all of its cash tied up in plant, machinery and stock and may agree to barter a car in return for advertising and marketing of the same value. No money changes hands. Corporate barter is used in higher value products using a “trade credit”. The value of the credit must be known and agreed in advance. Bartering may be used in times of monetary crisis when a currency is unstable or simply not available.
There are many advantages to using the barter system. Research has shown that the main reason for bartering is that an organisation is in a cash flow and needs to get the message out about the products and services it offers. The company may not have the expertise and knowledge to be able to carry out marketing activities effectively, so may rely on a bartering broker to fix up an agreement with a professional marketing company.
By using the bartering system, a company may have access to a wider range of marketing tools and channels and be able to barter for selected ways of marketing. Much will depend on the way the contract is negotiated. Bartering can be adapted to fit any situation and save money.
Bartering can be used in all sectors of industry and commerce. Everything from empty hotel rooms and conference facilities to mobile phone contracts can be bartered in return for agreed media exposure. Luxury goods, electronics, travel, drinks and telecoms are just some of the things for which a barter agreement can be drawn up.
There are three main models of bartering. There are three parties to a barter – the advertiser, the media agency and the media owner. Firstly, the cash plus trade barter system can convert old or unsold products into media coverage, while saving hard cash. This increases exposure of the product on the market place while achieving business growth. Secondly, the ROI model ensures a guaranteed return on the exchange and helps increase sales. Thirdly, the new clients barter solution can be applied to both new and old products. This is very competitive and will allow the organisation to realise cash on an incremental basis.
Lack of cash flow is often a challenge for any business, whether it is large or small. By bartering goods both parties get the best of the situation by getting media exposure for both older goods and new lines. The media owner gets the benefit of trying new lines through the barter. One party has the skills and experience to develop the product to barter, and the other the marketing and advertising expertise, as well as the contacts, to best promote the product. This may become increasingly popular during a recession when products have been made but not selling due to the lack of hard cash.