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Kai Ryssdal: Two of the biggest names in the beverage industry are coming together for more than just a drink. Pepsi and Anheuser-Busch InBev say they’re going to expand a joint purchasing deal they announced back in October. Now they are going to be coordinating advertising buys as well. Together the two companies spend more than a billion dollars a year on television, radio, and print and billboard advs. With their new partnership, they’re hoping to leverage their joint power and negotiate lower ad rates.
Marketplace’s Jeremy Hobson reports now from New York.
JEREMY HOBSON: Haggling has long been part of the culture when it comes to buying advertising time or space. But collective bargaining?
GARY HEMPHILL: Companies are looking for every possible means to save dollars, and I think this is potentially one of those ways.
Gary Hemphill is the managing director of a research and consulting firm called Beverage Marketing Corporation. He says he can’t remember another example of two companies teaming up for better ad rates. But…
HEMPHILL: If this proves to be successful, it could have somewhat of a snowball effect with other marketers attempting to do kind of the same thing and recoup savings.
Savings that could really add up, according to George Belch, a marketing professor at San Diego State University.
GEORGE BELCH: You have two firms spending over a billion dollars. Even if they get concessions of 10 percent, that’s pretty significant.
Especially during highly watched events like the Super Bowl when advertising costs $5 million a minute. But it’s those non-Super Bowl shows with their dwindling audiences that are giving advertisers the upper hand.
Tim Calkins teaches marketing at Northwestern’s Kellogg School of Management. He says the only way for media companies to fight back is to produce content that’s irresistible to Madison Avenue.
TIM CALKINS: Clearly a lot of it’s going to drive by having properties that are must-buy, because then you’ve got some leverage against these advertisers who have huge budgets.
And now, a new strategy to make those huge budgets go even further. One Calkins says is likely to become more common if it works.
In New York, I’m Jeremy Hobson for Marketplace.
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