Regional newspapers discover service differentiation

Publishers can increase revenue by offering new services to existing advertisers

John Hill

WITH THE pressures created by escalating costs in the regional newspaper industry, there has been increasing recognition of the need for a far-reaching review of the options available to managements. As it is unlikely that increased circulation sales revenue will be available in sufficient quantity to make a substantial difference, the burden has to fall upon the advertisement selling function. The options are both limited and stark: sell more of the same to the same people; sell existing products to new people; sell new products to existing advertisers; or sell new products to new people.

It does not take long to see that continuing to do the same thing in the same way and expecting a different result is considerably less than rational. Equally, regional newspapers which operate within mature markets, where everyone has had an opportunity to sample the product, are extremely unlikely to have large untapped market segments waiting to be exploited. Selling new products to new customers is diversification and is outside the scope of this article.

The only option available to most newspaper managements is to sell new products or services to existing advertisers. 'New', in this context, is taken to be advertising with a much enhanced service element. There does not appear to be any alternative to service level improvement in regional newspaper advertisement sales departments for those newspaper managements who wish to maintain or improve margins.

This highlights the pressing need for an analysis technique to evaluate the roles of available applications. Currently, these extend from simple cut-and-paste artwork services, through professionally designed complete advertisements, to copytanks. Today there are advertisement planning systems which range from the simplest paper-based systems to the most sophisticated software packages resident on either personal or notebook computers.

It can be difficult for a newspaper manager, faced with the growing range of available products and services, to evaluate each in terms of the company's and his customers' needs, and where each fits in the departmental tool kit. A useful technique is to categorise the products or services as being either aids to effectiveness or aids to efficiency.

Aids to effectiveness are those which improve the advertisement directly. So, well-chosen artwork from an artwork service will enhance a typeset advertisement, as will a professionally designed complete advertisement. Included in this category would be ads generated in-house by a graphics unit or studio, which may themselves be using artwork from outside sources.

Aids to efficiency are those which enable the greatest possible output from a defined input, in this case making the greatest possible use of the advertiser's expenditure. This involves ensuring that the timing of advertisements is optimised, that the advertiser is matching his expenditure with consumer demand, and that he is spending the right amount of money in the first place. This is what has come to be known as Planned Advertising - a technique with which most advertisement managers are familiar.

Moving beyond the fairly basic Planned Advertising, systems available include computerised campaign planning which adds media scheduling for all publications that the advertiser may wish to use, and a method of measuring the effectiveness of the advertising. This has enabled newspapers to work with a degree of sophistication on behalf of its advertisers which would have been quite unthinkable ten years ago.

Clearly, the service element of each of these products and services grows substantially as they progress from the effective to the efficient. This type of approach is radically different from current practice. Converting an advertiser to a planned advertising campaign will substantially increase revenue. In addition there are substantial benefits from the enhanced relationship with the customer, who receives a demonstrably improved service.

Exhibit 1 shows the likely notional effect on revenues of three different types of service improvement. The first graphic shows the effect of a series of step improvements. It ignores the service level leakage that takes place over time as customers become accustomed to the higher service level. What, in effect, happens is that the horizontal lines between each step begin to slope downwards which means that the next step improvement is starting from a lower base point. Obviously, the more delayed the introduction of the next step improvement, the more progress will have been lost.

By contrast, the effect upon revenues of the introduction of aids to effectiveness, or to give them a better name, continuous service improvements (CSI), is less dramatic, but their service leakage rate is slower. This is because each advertisement tends to be markedly different from the one before and so each is new as far as the advertiser is concerned. The chart demonstrates that the service leakage takes place at a slower rate, although, as has been pointed out earlier, the rate of improvement for CSI is slower than for step improvements. Those managements deciding to implement continuous service improvements can look forward to steady, but comparatively unspectacular, progress. Those choosing the step route could have dramatic, but volatile, rewards.

The optimum answer is to combine the two types: the step to provide large increases in service, and the CSI to maintain growth between step introductions. If, for reasons of simplicity, we denote CSIs as straight lines, a combination of the two would look something like the third graphic.

Steps or CSIs can be introduced in any order and at any time. However, for greatest effect on revenues the step improvements should be introduced as early as practicable. Their introduction and implementation is largely dependant upon the skill levels of the sales staff. However, this is not a large problem as most suppliers of products in this field offer expert systems which require little training, and are usable by relatively inexperienced staff.

Implicit in any service improvement planning is acceptance by managements that improvement is necessary, and that the most direct beneficiary has to be the advertiser. The newspaper will benefit from the much improved relationships, but there tends to be a delay while advertisers become accustomed to the new service levels.

It may be that some newspapers do not need to implement a service improvement programme; others may not be certain how much they need to do. The simplest way to determine if there is a mismatch between what is being offered and what advertisers want, is to ask them.

The best way to accomplish this is to assess the number of perceived key services elements that should be offered to advertisers. These might include speculative visuals, a complete design service, a copywriting service, etc. It is better to limit the list to those services that are currently offered, or which could be offered from within current resources. It does not matter how many there are in the list.

The next step is to allocate 100 points between the key service elements, with the most important receiving the largest amount and so on downwards. This becomes the company measure. A broadly representative set of advertisers should be invited to indicate its preferences by allocating 100 points to a blank copy of the list. It is important that the advertisers are limited to the original list, as the objective is to compare the differing priorities.

By drawing a star diagram with arms radiating from a central point, one for each selected element, and superimposing the polygons representing the newspaper management's opinion and those of the advertisers (Exhibit 2), it will soon become clear if a mismatch exists between what you are offering and what they want.

This form of analysis will also give a strong indication of the type of improvements that find favour with your advertisers, and which should therefore yield most revenue benefit. Whether up-rated service provision is being considered for either reactive or proactive reasons, the analysis required is basically the same.

It is clear that the service aspects of advertisement selling will become increasingly important as the market environment becomes more complex. Not only are customers becoming more demanding but the competition is becoming more sophisticated. For a variety of external reasons, reliance on being cheaper or cheapest is having to be replaced with justification for higher prices or smaller discounts.

This has focused managements' attention on the strategic implications of sales and service policies instead of the rather laissez-faire attitudes that tended to regard them as tactical issues which could be left in the control of the advertisement department. This is not to argue that day-to-day control need leave the department, but rather that this aspect, in addition to rate setting and discounting, requires overview.

The employment of these and similar techniques is indicative of the growing willingness on the part of regional newspaper managements to begin the process of strategy evaluation in a rapidly changing business environment. This, and the steps being taken to manage the resulting change process, are the best guarantee of the long-term future of Britain's regional newspaper industry.

NOTES & EXHIBITS


John Hill

John Hill

John Hill has had over 30 years experience in and out of the regional newspaper industry. He currently provides consultancy services both in the the formulation of corporate and business unit strategy within newspapers, and implementation of the necessary change processes.
Regional newspapers discover service differentiation

Exhibit 1. Effect on revenues of different types of service improvement


Regional newspapers discover service differentiation

Exhibit 2. Evaluating service mis-matches