Enhancing newspaper’s value as local advertising medium

Enhancing newspaper’s value as local advertising medium

Prater, Bruce W

Newspapers are often considered a mature product whose value is enhanced only with great difficulty. In recent years, to move them forward, more progressive newspaper publishers have tried to emulate the advantages of television’s mass audience or radio’s highly targeted audiences by offering either total market coverage (TMC) products or niche products that appeal to tourists, ethnic groups, etc. Others, content with a comfortable profit margin, have done little to enhance their newspaper’s value to its advertisers. In the meantime, total weekday newspaper readership, as a percent of the total population, fell from 78 percent in 1970 to 61.7 percent in 1993. During that same period, advertising revenue grew from $5.7 million to almost $32 million, but by 1993, the newspaper share of total advertising expenditures had fallen to 23.1 percent.(1)

A newspaper is like any other business in that it assembles talent, raw materials, and capital to produce a commodity/service for which it must then capture and maintain a market; maintaining that market means making news and/or advertising attractive to customers.

Unlike most other enterprises, however, newspapers are simultaneously in two businesses, which, at times, are at odds with one another. On one hand, they are in the business of providing news and commentary for readers, and fulfilling certain civic/social responsibilities (e.g. running council minutes, legal notices, public information, etc.) which set them apart as a service provider. On the other hand, they are also in the business of aggregating specific audiences for their advertisers. In short, they must try to satisfy the sometimes conflicting needs and desires of both their reader customers and their advertiser customers.

This paper seeks to address two questions that arise from this dual business nature of newspapers: First, what are some of the viable strategic choices that newspapers can make to enhance themselves as an advertising product? Second, given limited resources, what priorities should be assigned to those strategic choices?

In this pilot study involving a convenience sample at a single locale, these two questions were asked of both newspaper executives (insiders) and professional marketers (outsiders). While the results presented here have an uncertain applicability to other cases, a pattern of differences between these two groups invites further study. The two groups differ in the methods they would employ to enhance the value of a newspaper’s advertising. In general, newspaper executives, as insiders, seek to broaden the scope of their operations; they seek to enhance the newspaper’s value by adding new subscribers and advertisers, while marketers tend to prefer narrowing the focus of operations, concentrating on serving the existing customer base, or even further, concentrating exclusively on select market segments.

Adding real value to products and services

Another way to ask the question that this paper begins to address is to inquire how a newspaper, faced with limited resources, increasingly sophisticated consumers, and growing competition, can successfully add real value to its products or services.

This is the challenge facing all entrepreneurs large and small in today’s complex economy with its simultaneous demands for a more global focus and a more highly targeted delivery of goods and services. In the case of the newspaper industry, readers say they want their local paper to cover all the news, but they bridle at bridle inclusion of news that does not interest them. Meanwhile, advertising customers want the newspaper to aggregate only the consumers who are likely prospects for their particular variety of goods or services.

To make matters more complex and challenging for newspapers, consumers, in the past judged value largely on the basis of either price or a more simplistic perception of quality based almost wholly on the product’s positioning and public image. But today’s consumers — in part due to advanced marketing strategies and in part due to a growing immunity to advertising hyperbole — have adopted a host of additional criteria which go beyond the traditional price-quality quotient to include, among other things, reliability, service, selection, convenience, and proven performance.

For example, in the case of industrial products, John Forbis and Nitin Mehta suggest a focus on delivering a better value to the customer even if that may mean somewhat higher prices.(2) The key to strategy, they say, is to clearly demonstrate a product’s superior value using economic value to the customer (EVC) analysis. Vincent Reuter analyzes and promotes the benefits of Value Engineering (VE) for new products, and Value Analysis (VA) for existing products.(3) The methods are similar to the concept of value chain analysis advanced by Michael Porter, which involves the analysis of a business’ discrete strategic functions in order to enhance each part’s efficiency, economic viability, and relationship to the other parts.(4) While VA and VE are primarily value enhancement strategies, value chain analysis is a holistic approach designed to evaluate and treat the entire system. James Anderson, Dipak Jain, and Pradeep Chintagunta analyze nine customer value assessment methods and compare the familiarity with and usage of each by both industrial and market research firms.(5) These studies are all worthwhile as identifiers of various value measurement tools, but they fall short of addressing practical and strategic components.

Without well defined objectives and an understanding of the marketplace, these techniques will produce few strong results. As Michael Treacy and Fred Wiersema point out, attempting to serve up customer value in all its aspects, as in the case of Sears during the late 1980s, can lead to “unproductive dead ends.”(6) They report that, “companies that have taken leadership positions in their industries in the last decade typically have done so by narrowing their business focus, not broadening it. They have focused on delivering superior customer value in line with one of three value disciplines — operational excellence, customer intimacy, or product leadership. They have become champions in one of these disciplines while meeting industry standards in the other two.”(7) product value enhancement, then, must necessarily involve an evaluation of the producer’s core competencies and an inventory of available resources; only then may appropriate tools and strategies be determined.

There has been a good deal of discussion in both trade and academic journals regarding the problems that newspapers currently face. Indeed, an entire issue of this journal was dedicated to the future prospects and viability of the industry (Vol. 14, No. 2, Spring 1993). While Stephen Lacy documents in that issue the difficult task of maintaining newspaper market share within a shifting market structure and William Blankenburg examines the relationship between market share and profitability, there seems to be a dearth of literature quantitatively assessing the ultimate judge of industry strategies: the advertiser.(8) Whether the approach to declining market share and profitability is mass, class, individual, or direct appeal, the value placed on each of these strategic options by the customer should be at least a significant part of the management decision to pursue one, another, or combination of them.

Methodology

This paper includes two studies.

The first study was exploratory and qualitative. Its purpose was to generate a list of viable strategic options which can be used to enhance the value of a newspaper as a vehicle for advertising. To that end, an in-depth interview was conducted with advertising executives from seven daily newspapers. This focus group interview was designed to allow them to discuss and respond to the challenge of adding value to their newspapers’ advertising in an increasingly competitive environment. Represented in the group was one large West Coast urban daily, one East Coast national specialty daily, and a scattering of midsized dailies in New England and the Midwest. A list of recommended strategic actions was generated during the focus group interview and subsequently condensed into 17 possible courses of action (found below) which formed the basis of the second study.

The second study was designed to observe these strategic choices in action, and to further test the survey instrument. Its point was to examine how, given limited resources and increasing competition, managers both inside and outside of the newspaper industry would assign priority to these strategic choices. To that end, a survey instrument was designed with the following hypothetical scenario:

Imagine that your friend, Lisa Smith, is the advertising manager of a local daily newspaper. Lisa has been contemplating the challenges that she will face in the coming years. In the past year alone, she has seen her advertising revenue begin to soften in the face of new competition from cable TV and direct marketers. Also, she senses that her subscribers are growing older and fears that her newspaper has failed to garner sufficient interest from the new generation of readers.

In response, Lisa is interested in investing some of her company’s resources to strengthen her newspaper’s position in the marketplace and to increase its value to local advertisers. She has created a long list of possibilities for action, but hasn’t nearly enough funds to address every item on the list. She has asked you to help her identify a few priorities on which to focus her efforts and limited resources.

How should Lisa allocate her available resources? On a scale of 1 to 7 (1 = very low priority, 7 = very high priority) advise Lisa as to the importance of the following items:

The strategic choices comprising the survey are as follows:

1) Attract more business from existing advertisers;

2) Gain a better understanding of the needs of newspaper’s potential

3) Learn who is not advertising in the newspaper and why;

4) Learn how advertisers use the newspaper;

5) Create a schedule of rate discounts for volume advertisers;

6) Improve the productivity of the advertising representatives:

7) Gather empirical evidence on advertising effectiveness;

8) Create zones that would improve the newspaper’s ability to target advertising;

9) Increase circulation;

10) Acquire demographic profiles about readers;

11) Learn how readers use the newspaper;

12) Learn who is not reading the newspaper and why;

13) Create zones that would improve the newspaper’s ability to target news;

14) Improve the quality of graphics, color, ink, and paper;

15) Develop special editions and/or special interest sections;

16) Acquire greater knowledge about the news competition; and

17) Acquire greater knowledge about the advertising competition.

These strategic choices can be further organized into one of four categories:

I. Items 1 through 8 fall into the Advertisers and Non-Advertisers category which focuses on serving the advertising customer and attracting new accounts.

II. Choices 9 through 13 fall into the Readers and Non-Readers category which highlights improvements in subscriber service and gaining new subscribers.

III. Choices 14 and 15 fall into the Content category which focuses on the editorial product and mechanical specifications.

IV. Choices 16 and 17 are in the Competition category which includes actions that would take on competitors for both readers and advertisers.

Subsequent to ranking the 17 strategic choices, respondents were given an additional task: Lisa would like you to pick the top three items on which she should focus her attention.

Finally, respondents were asked to indicate their own job title.

This survey instrument was protested with both academic colleagues and newspaper industry representatives. Then, two groups of respondents were recruited. The first was from the staff of a 200,000 circulation daily newspaper in a Midwestern city; they represent the newspaper industry, or insider sample. Fifteen of the 20 surveys distributed among the newspaper’s management were completed and returned. The following departments were represented by this sampling of newspaper executives: marketing/promotion, advertising, editorial, customer service, circulation, market research, and human resources.

The newspaper’s penetration is exactly 50 percent in a Metropolitan Statistical Area of approximately 400,000. Just over one fourth of the population is under the age of 17, 44 percent are between the ages of 18 and 44, and just over 30 percent are 45 or older. The annual income per household is approximately $38,000.

The second group of respondents was recruited at a conference of the American Marketers Association in the same Midwestern city. Forty-five surveys were distributed among the marketers in attendance at the conference and 39 were returned. This group represents the non-newspaper industry, or outsider, sample. The following job functions were represented by this sampling of marketing executives: creative, research, consulting, account management, and general management/president,

Results

Tables 1 and 2 shows the mean scores of the two groups’ internal and external responses to the scenario and assignment of importance to the 17 strategic options.(Tables 1 and 2 omitted) One-way Analysis of Variance was conducted to determine statistically significant differences between these group means; an asterisk indicates a significance level of 0.05 or less.

As is shown, a statistically significant difference exists between the means of the two groups for four strategic options: 3) Learn who is not advertising in the newspaper and why, 9) Increase circulation, 12) Learn who is not reading the newspaper and why, and 14) Improve the quality of graphics, color, ink, and paper.

For all of the strategic choices where there was a statistically significant difference between means, the insider view supported pursuit of measures which would in general broaden the newspaper’s appeal to advertisers or readers, while the outsider view rejected those options. For example, the outsiders were less likely to focus their resources on non-readers and non-advertisers, while insiders were prone to just the opposite course of action.

While the differences between the means of the remaining strategic choices are not statistically significant, an overall pattern also emerges which reflects this widening versus deepening tension. There the external view, in general, supports choices that would deepen the newspaper’s relationship with an existing customer base. The internal view supports choices that would widen the newspaper’s advertising and circulation appeal.

The final item on the survey, requiring respondents to list their top three choices, is a departure from the rest of the survey in that this exercise limits the survey respondents’ resources. Responses to this question most closely resemble the introductory dilemma posed to the executive with limited funds to spend on enhancing her company’s value. A decision to invest in one area costs diversion of resources from other areas. Table 2 analyzes the responses to the final question.

Once again the data are divided between the internal newspaper executives’ responses and external marketers’ responses. The first three columns under each group list the frequency with which each item of the survey was selected as First Choice, Second Choice, and Third Choice, respectively. For example, strategic option 1) Attract more business from existing advertisers, was listed as a First Choice by three insiders and eight outsiders. No one from either group made it their Second Choice and one from each group made it their Third Choice.

The frequencies were then weighted. Each time an item was selected as a First Choice, that selection was given a weight of three; a Second Choice was given a weight of two and a Third Choice was given a weight of one.

The weights of all the aggregate selections were then averaged to reveal a mean weight of 5.24 for each option; the individual weights for each choice, when placed over the mean and multiplied by 100, converted into the Priority Index number, which served as a basis for comparison of the two groups’ responses. This same procedure was performed for the other group, and the Priority Indices of each group were compared. For the internal group, choices 2, 1, and 3 were ranked first, second, and third respectively while choices 8 and 10 tied for fourth place. For outsiders, choices 1, 10, 4, 2, 11, and 8 were in first through sixth place respectively.

From Table 2 emerges a picture similar to that presented in Table 1, yet with some important differences. Strategic choices 2) Gain a better understanding of the needs of potential advertisers and 4) Learn how advertisers use the newspaper, respectively, are enough alike to conclude that internal respondents, in this study, value understanding their potential customers’ needs and wants and the addition of those potential customers to the lists of accounts the newspaper serves. What is also clear, however, is that the internal newspaper executives also valued the servicing and cultivation of existing accounts, as evidenced by the number two ranking assigned to strategic choice (1), which was ranked number one by marketers.

For this group of newspaper executives, at least, it appears that the current trends of target marketing — customer service, relationship building, and responsiveness — have taken hold alongside more traditional priorities such as capturing additional market share in advertising categories usually found in the newspaper. They are also interested in attempting to reach new advertising categories not traditionally found in the local print media.

By contrast outsiders’ (marketers’) views represented in this survey, as shown in both Table 1 and Table 2, consistently place very high priority on growth through the cultivation of existing accounts, even at the expense of expanding the customer base. Note that strategic options (2) and (4) rank in the middle of the pack with marketers.

An important question then arises from the evidence presented by this comparison: Have marketers been adequately educated by newspapers as to the diverse functions that newspapers play in the community and on how those functions differ from, say, a specialty magazine or radio station, both of which are niche-not mass-based?

An even more interesting question arises when the different rankings of strategic choice number 10) Acquire demographic profiles about readers, are compared between the two groups. The external respondents placed very high priority on this option, ranking it number two, while internal newspaper respondents assigned it comparatively low priority, ranking it fourth overall in a tie with option (8).

Two conclusions may be drawn from this result: A) the high ranking by marketers is consistent with the emphasis on deepening over widening that has been present throughout this study; and, B) the target marketing techniques valued highly by newspaper executives in regard to advertising clients have not infiltrated their thinking when the circulation side of the equation is considered.

Discussion

In the course of these studies, we have identified a dichotomous relationship between the priorities of newspaper executives inside their newspapers and professional marketers who are employed elsewhere. What may be learned from this phenomenon and how can newspapers respond to it?

A clear difference between marketers, the buyers, and newspaper executives, the sellers, is evident. Newspaper executives are saying that they may not be able to serve multiple audiences in the manner proposed by outside marketers. Newspapers, then, must choose from among three options: a) ignore marketers’ wishes, b) attempt to educate marketers as to the function of a newspaper, highlighting the newspaper’s traditional social responsibilities, and the advantages newspapers have as a vehicle for product bundles focused on multiple segments in an age when the other traditional media, particularly television, are fragmenting, or c) make a decision to limit their audience and target fewer, more highly valued segments, thereby abandoning their roles as mass-market advertising vehicles and community servants.

Caution must be exercised in extrapolating from this study’s results. The 17 strategic choices produced in the focus group may not be an exhaustive list of viable options in more unique markets of size and/or in a competitive environment widely different from the test market; the needs of those markets would dictate some different options. Moreover, the correlation between the strategic options in this study and success in adding value to a newspaper’s advertising should be tested as part of exploring these issues. Indeed, the information presented here should be seen as an invitation for replication, further study, and contemplation rather than as a definitive statement on the nature of the newspaper/advertiser relationship.

Newspapers, like any other business, should constantly check their priorities and examine the market challenges facing them. It would be far too simplistic (and, some would argue, an abdication of social responsibility) for newspapers to simply abandon the mass market and target segments only of interest to advertisers. On the other hand, it would be foolish to ignore the needs of advertisers, who are typically responsible for between half and three quarters of a newspaper’s operating revenue.

The selling of goods and services is far from being a science, and, though the fundamentals of marketing are easily mastered, execution of a successful marketing strategy remains exceedingly difficult and elusive. At a time when the electronic and digital media are leaving the mass-market playing field, newspapers remain in a strong position to continue filling the role of mass-market vehicle, a role that will almost certainly have a long life, if in a somewhat more limited capacity. At the same time, newspapers need to become sensitive to shifting demographics in order to stem the decline in readership, and also become even more responsive to the clanging needs of their advertisers. These conclusions are buttressed by the newspaper’s unique ability to simultaneously target multiple segments through a variety of means (special editions, additional sections, launch of new products, events promotion, etc.) and also reach the larger, mass audience.

Having said that, though, it is important to remember that a newspaper cannot be all things to all people. Without well-defined objectives and a true understanding of the marketplace, a newspaper, like any business, can lose silt of its mission, spread itself too thin, and end up serving no one’s needs.

Notes

1 From the 1993 edition of Facts About Newspapers, published by the Newspaper Association of America, p. 7, citing figures based on Simmons Market Research Bureau data and p. 11, citing figures based on McCann-Erickson Inc. data.

2. John J. Forbis and Nitin T. Mehta, Value-Based Strategies for Industrial Products. Business Horizons, May-June 1981, pp. 32-42.

3. Vincent G. Reuter, What Good Are Value-Based Programs? Business Horizons, March-April 1986, pp. 73-79.

4. Michael E. Porter, Competitive Advantage. New York: MacMillan, 1985, pp. 33-61.

5. James C. Anderson, Dipak C. Jain and Pradeep K. Chintagunta, Customer Value Assessment in Business Markets: A State-of-Practice Study, Journal of Business-to-Business Marketing, 1993, pp. 3-29.

6. Michael Treacy and Fred Wiersema, Customer Intimacy and other Value Disciplines. Harvard Business Review, January/February 1993, pp. 84-93.

7. Ibid., p. 84.

8. Stephen Lacy, Understanding and Serving Readers: The Problem of Fuzzy Market Structure. Newspaper Research Journal, Spring 1993, pp. 55-67; William B. Blankenburg, The Viability of the Comprehensive Daily. Newspaper Research Journal, Spring 1993, pp. 68-80.

Prater, Wang and Lavine are with the Newspaper Management Center at Northwestern University in Evanston, Illinois.

Copyright Ohio University Summer 1994

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