Tuesday, July 05, 2011

Measured, educated response
best way to handle
cut-throat competition

By John C. Peterson
The Peterson Group

Many community publications are suffering severe and sustained revenue loses at the hands of desperate competitors it seems will do anything for a little cash flow.

It’s hard to be smarter than your dumbest competitor.

That gem was not an original thought. I heard it from Dan Burke, then president of Capital Cities/ABC in a publishers’ meeting many years ago.The comment came after a publisher was lamenting revenue loses driven by the low rates of a competitor’s start-up. Think about it for a minute, it’s a beauty.

Dan’s comment couldn’t be more appropriate in today’s operating conditions. Many papers are doing some pretty foolish things in the name of cash flow. Some do it in the name of “value-added packages,” special offers, or just plain unabashed and reckless price cutting.

So how do you respond?

If the consequences weren’t so severe I could be amused by one metro daily’s “January-only” limited special rate that continues as I write this in late May. You can buy a full page black and white ad in any Sunday zone for $400.00. Process color is an additional $100. No contract or commitment is required. The normal price for a black and white ad is in the $1,500. range, with a contract.

So how does a 35,000 news weekly respond when its 52-week contract price for a full page is near $2,000? They couldn’t produce that ad for $400.


The last thing you want to do is cut your price. You sell value and effective circulation, local and relevant content. They may have more circulation but you’ve got the copies that count. Your circulation saturates the area; it’s not spread over a remote massive county with aggregate readership that has limited benefit to a local business.

You risk your credibility and account relationships if you cut price. Your regular loyal customers who have been with you for years will wonder if you can sell it dirt cheap now, have you’ve been screwing them in the past. How will you ever get back to real prices?

It’s like a punch in the gut if you’re a struggling community paper. This daily is likely trying to generate cash flow and snag a few new customers. They’re attracting bottom feeders and people looking for deals, you’re there for the long haul. The daily is taking away business with its crazy pricing but those rates are not going to last forever. You have to wait it out because when that daily tries to sell real rates it will lose a lot, if not most of that business. You’ll still have your integrity and real rate.

The metro’s January-only special has become a January-February-March-April-May special and shows no signs of stopping. Extended by popular demand? Right...

Not only have they made a joke of their rate structure, but what have they done to their integrity? Makes you wonder how many of these “special deals” contributed to the poor first quarter results some of the larger newspaper companies.

This specific situation has clearly hurt the local weekly competitor. Small accounts thrilled with the lure of a metro Sunday edition for such a cheap price dropped out of the weekly to try it. The weekly lost a lot of revenue before accounts realized the difference between price, value and response and the difference between circulation and effective circulation.

Your best protection is to do a good job educating your advertisers about the value of your product before you have a challenge. You’ll have more credibility when it comes time to confront the “great deal” offered by the competition if you’ve already told your story. With reps trained to sell value, reps who can clearly differentiate your publication from the competition, you’ll be in a much stronger position. If you have a rate card with integrity your sales reps can also sell with more conviction.

The temptation to fight price with added value can be a risky proposition. Accounts will wonder why you can do it now when it wasn’t there before. Roll it into a new commitment if you can, but don’t make it look like they’ve got you on the run, and never do for one account what you’re not prepared to do for every account at that level.

There are two things to keep in mind. First, a precedent can easily become a principle. I remember listening to an agency buyer on a panel a few years ago who said newspapers should never send him a special rate they were not to prepared to live with forever. Makes sense, you just set the value of your publication. If you did it once why can’t you do it again? And again and again…

Secondly you can never increase prices as quickly and drastically as you cut them.

Your pricing and every decision you make about it reflects on how you value your product. Any adjustments you make along the way send a message to your customers.

Think long and hard before you do cut price, because it’s a pretty good bet you will risk value if you have to adjust your costs to compensate.

As difficult and threatening as these situations may seem, don’t blink. If your product is strong, you will prevail. In the end, it’s about response, not price and that’s a song you need to sing to accounts on a regular basis as preventative medicine.

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