It's a simple equation. But understanding the details and the challenges of each factor can make all the difference.
FSI Distribution Quantity * Rate * Ad Frequency = Revenue
Advertising Directors across the country are staring at this equation looking for answers on how to offset revenue losses from major account advertisers.
Let's examine each of the components of this equation to identify the best opportunity and use of resources.
Along with page count and page size, ad frequency is the hardest challenge for a newspaper to overcome to increase revenue. Decisions typically require multiple department heads and have far reaching impact within a retail organization including budget, merchants, IT, store operations and creative resources.
From an advertiser’s perspective, the most optimal factor to change is rate. Lowering rate has no impact on store sales and increases ROI. Newspapers, on the other hand, fight rate decreases. Rate is the controllable aspect of the equation and provides a benchmark of equity among advertisers. Rate is the inverse partner of spending: as spending goes down, rates go up.
Therein lies the battle.
Both advertisers and newspapers engage in a not-so-subtle confrontation from their entrenched positions. Each side wins some and loses some. The net effect leaves both sides wondering "was the juice worth the squeeze?"
The greatest impact a newspaper can have at offsetting revenue losses from the major account advertisers is for advertisers to buy more distribution. Persuading an advertiser to add zip codes is not easy but it has the fewest objections to overcome - budget and ROI. Many newspapers believe that the advertiser or their agency has ownership of the methodology of buying zip codes and therefore do not take on the challenge.
A newspaper can – and should - make the case that their distribution is worth the investment and will drive sales. Pointing out the demographics of unpurchased zip codes is not enough. The advertiser knows all about these zips including an estimate of how much is spent in their stores.
Newspapers can provide local information that advertisers do not have. Advertisers have an insatiable appetite for data. Can you tell them how many of their locations are within a variable mile radius of each of your zip codes? How about the same for competitor locations? What is advertiser reaction to this question: Your competitor ran 10 events last quarter, you ran 6? Are you buying the right distribution to adequately compete?
The best approach to offset revenue loss is to employ a data-driven approach to contract negotiations. IMP has developed a two-pronged model: Justify and incentivize.
Justify the rates being paid by analyzing the agreed upon rate structure (all page sizes not just what the advertiser runs) and the invoice data (what the advertiser has run). The business intelligence gleaned from this mutually available data can provide a framework for pricing strategy.
Incentivize advertisers to add distribution. What do advertisers want more than anything? The answer is lower rates. What will they do to get them? How will they respond to a data-driven proposal which takes their ROI into consideration? Do you have the expertise and tools to make such a proposal?
What are you doing differently?
Inside Media Partners LLC provides consulting services to the media selling and buying industry. We establish pricing policies, deliver business intelligence, provide negotiation strategy including revenue impact, and prepare smart media buys by zip code. Contact Matt Gunderson or Lisa Haynes to learn more. Matt@InsideMediaPartners.com Lisa@InsideMediaPartners.com