When The Allan Hackel Organization (TAHO) buys an excess inventory as part of its Asset Recovery service, TAHO pays for the inventory by giving the client a bank of "Prepaid Credits" or "Trade Credits." These Trade Credits can be used by the client, over a period of time, as partial payment toward the purchase of media, travel and other services from TAHO.
As set forth in the written agreement between TAHO and the client, each time the client makes a purchase from TAHO, TAHO will charge the client a combination of a Cash Portion and a Trade Portion. Together, the Cash and Trade Portions will not be greater than the client's normal price to purchase that item (or service). This normal price is also called the Benchmark Price and is defined as the cash price the client would normally pay for that service if purchased for 100% cash from a non-related third party.
(Cash Portion) + (Trade Portion) =
*(client's normal price
to buy the same advertising.)
As an example of the Cash Portion and Trade Portion billing, if the client wanted a $1,000,000 radio advertising campaign, TAHO might charge that client $600,000 in Cash and $250,000 in Trade Credits. The total of $600,000 cash and $250,000 trade would equal the client's "net" benchmark price. In other words, TAHO's total billing is equal to what the client would normally pay for the same advertising on a 100% cash basis.
In the above example, the percentage of cash required was 60% of the gross cost of the campaign. The exact percentage of cash required depends upon time of year, advertising parameters, markets selected, type of media and other variables. The exact Cash/Trade Credit ratio is determined when TAHO receives the specifications for each purchase.
In the case of an advertising campaign, the client's agency would submit the campaign parameters and benchmark budget to TAHO. Within a few days, TAHO would analyze the buy and determine the cash/trade ratio. In this way the client knows, before the campaign is ordered, what percentage of cash will be required to make that specific buy.
The Cash Portion is paid by the client to TAHO. The Trade Credit
Portion is deducted from the balance of the Trade Credit
"bank" established when TAHO purchased the inventory.
OF TRADE CREDIT UTILIZATION
- Spot & Network Radio
- Spot & Cable Television
- Consumer & Trade
- Billboards & Outdoor Advertising
- Sports Promotions
- Individual & Chain Hotels
- Ocean Cruises
- Sales Meetings
- Incentive Trips
- Premium/Incentive Programs
- Other Services
There are several areas where Trade Credits can be utilized. These
include advertising, travel, and incentive/promotional programs. Most of
our clients elect to use their Trade Credits to help pay for
advertising. TAHO's experienced Media Department can deliver spot and
cable television, consumer and trade magazines, outdoor and sports event
sponsorships. In the area of advertising, the historic average of the
percentage of cash required has been approximately:
above percentages are historical averages and can fluctuate
plus or minus 10-15% depending upon certain variables)
In addition to advertising, Trade Credits can also be used for corporate
and incentive travel. This includes hotel chains, a wide assortment of
individual hotels in most of the major markets across the country,
domestic and international airlines, as well as resorts and ocean
cruises for group sales meetings or individual incentive trips. The
percentage of cash required for travel services ranges from 60-80%.
Another area of Trade Credit utilization is full service premium/incentive programs. These range from customized merchandise programs complete with your own catalogue; to smaller individualized programs which take advantage of a combination of merchandise and travel. Incentive programs can be used to motivate employees or to reward loyal customers. The cash required for premium/incentive programs is approximately 50-85%.
It is important to realize that the percentage of Trade Credits utilized in any one transaction is financially beneficial, even in those rare cases when the percentage of Trade Credits utilization is only 5-10%. The reason for this is that Trade Credits are used to replace a portion of the cash you intended to spend. Since the Trade Credits actually represent your excess merchandise valued at FULL WHOLESALE price, your company receives an economic benefit every time Trade Credits are used, even if the percentage of use is small.
Since it is TAHO's goal to subsequently buy additional excess inventories from you, it is in our best interest to help you use the Trade Credits as quickly as possible. We are constantly striving to keep the cash percentage as low as possible and also to find new areas in which you can use Trade Credits. Each client is assigned an experienced liaison person in our office whose job it is to work closely with you toward 100% Trade Credit utilization.
A Brief History || Financial Advantages of Barter || Delivery of Advertising || Trade Credits || Credential Letters || Why Barter || Request Client Reference || Links ||
An International Trading Company Established in 1954
1330 Centre Street, Box 69, Newton Centre, Massachusetts 02159
617-965-4400 FAX 617-527-6005