Cut-throat agencies hurting

community publications’ revenue

While the recession has certainly taken its own toll on community newspapers, two other forces—aggressive agencies and competitor price wars, are wreaking their own havoc.

“Let’s start negotiating,” was the first sentence of a recent email received from an agency representing a major wireless company. Not quite the way I would start the conversation but this email, only went downhill from there. It went on to explain the account which it had recently obtained was reevaluating all its media buys and was prepared to cut any that didn’t make financial sense. The account had been in this particular paper ten years.

The agency expected the paper to be aggressive and wanted the absolute best rate (lower) wrapped around a value added package of free ads in both print and web products. The agency was not prepared to sign any contract but if one was legally necessary they wanted short rate protection. 

Consider the irony, a wireless company that didn’t want a contract.

The email was sent to a publisher I consider one of the most highly-principled publishers I have ever met in 43 years in the business. He is passionate about his newspaper and his community and fiercely loyal to his local business community. 

His principles are carved in granite. If the newspaper has integrity, so must the rate card. No business should have an advantage over another and that applies to the major retailers and agencies well-known for their arm-twisting. He has never deviated from his rate card, and yes, he has lost business because of it. His sales reps know better than to ask, but they say it does make their position tidy in the market.

In the publisher’s response he pointed out the paper’s circulation penetration, its high readership and strong editorial content and how the publication and its products were different from others in the market. He sent copies of the paper because the buyer had never seen it.

“The key to successful advertising is not price or saving money, but rather a consistent and engaging program presented in an environment that readers value,” was the publisher’s closing comment in his email response. It was lost on the buyer.

The buyer’s reaction was predictable. “I work with over 100 papers in the country and I’m telling you your rates are way too high.”

Too high compared to what? Where, what kind of content, how much circulation? Are any two newspaper cost platforms alike?

I’ll respect any buyer looking out for their client, but this was nuts. At this point of the transaction it became clear this was all about price and had nothing to do with value or response. The buyer’s price objection was attitude driven. It was now a wrestling match and only he would win.

In this on-going saga, the “negotiator’s” boss who called the publisher when discussions reached a roadblock said the agency is prepared to drop nearly 100 print products from its schedule because of rate.

How do you tell the client they were in 100 wrong places paying too much the year before? Sounds like walking the plank to me.

There was another case involving a daily in New England with about 15,000 paid circulation and a saturation product with another 10,000 to non-subscribers. The agency represented two major retailers who were competitors and then took on a third competitor client in the market who had been advertising in the paper for about a year. All three accounts had contracts to run inserts 52 weeks in both products and they were all charged the same rate.

The agency said the new client was struggling and demanded a 20 percent price reduction saying it would have to cut or eliminate the schedule if they didn’t get it. The publisher responded he was unwilling to cut the rate. The paper had not had a rate increase in four years and it would not be fair to other customers.

Additionally, the publisher pointed out, it would not be in the best interest of the client to reduce the buy because the competition would be reaching 10,000 additional households in the market. The agency replied the client had a budget and if the publisher was unwilling to negotiate they had no choice but to drop the non-subscriber circulation. The publisher talked with the store manager who was opposed to the change but had no say in the decision. The publisher’s efforts to go around the agency and talk to executives at the corporate level were unsuccessful.

So that $65,000 a year account was cut to $40,000 and then a year later the store dropped out completely, claiming the paper no longer worked for them. It moved its inserts to a competing daily with 60 percent less penetration in the immediate market but much more circulation in remote areas which would seem very unlikely to benefit the store. On a cost per thousand basis it might have looked like a good deal, but it was certainly not effective circulation for the store. 

Put yourself in that publisher’s shoes. He could have given in to the demand for a discount, sacrificing about $13,000 to possibly save the $52,000. I say possibly without a lot of conviction because I think it was only a matter of time before the other two competing stores represented by that agency would have demanded the same reduced price and the publisher would have been looking at $39,000 less per year and fulfilling that business at break-even or even losing rates. In the end he lost revenue but protected his margin, and very important to him, his integrity. The two other competing stores have continued to maintain their schedule.

There are several ways to look at this. The cynics among us could say the agency was trying to recover its fee or look good by cutting the size of the advertising buy. Since there was never any direct contact with the client we can only wonder if anyone at the executive level realized the savings was the result of reduced coverage or the agency’s negotiating. Did the store feel the impact of less circulation? We can assume so, but probably not immediately because I’m guessing there was some residual value from its previous advertising.

But you have to wonder about the motive. Is this about the agency and its cost or what’s best for the client?

Remember the “old” K-Mart in 2001 that went bankrupt? Its stock was up 92 percent in August when then and soon former “turn-around” CEO Chuck Conoway decided to make immediate and drastic cuts in the marketing budget. The epitome of arrogance, cut advertising in your hottest sales months. The company then did what is very hard, almost impossible for a major retailer to do; it lost money in the fourth quarter.

Advertising is a consumer service and these were the months they needed information most. The answer was simple for analysts, Target and Wal-Mart gained market share while W-Mart was saving advertising expense. By mid-January 2002 K-Mart stock had fallen from $13.35 to $1.25. Conoway’s farewell speech included the following comments:

• "There’s no doubt we made a mistake by cutting too much advertising too fast."
• "Clearly we’ve learned where the threshold of pain is in advertising."

Might the expression, “Out of sight, out of mind apply?”

Next: What do you do when the competition suddenly offers prices below your costs?

Smart sales operations channel business

“The best time to plant a shade tree was 25 years ago.

The next best time is today.”

--Old Chinese proverb

Read that a few times and then think about using it as the quote of the week for your next sales meeting.

That little nugget is the difference between a successful sales department and one that’s stressed and struggling.

Successful reps manage their business, stressed reps react to it. Both types could be working very hard-- the stressed ones maybe even work harder. The difference is results. The smart rep has already planted the tree; the stressed one is looking for a shovel and a place to dig.

The smartest reps I know have created a pipeline of business because they know you lose accounts a whole lot quicker than you can ever sign new ones. That ten year regular could be gone in a heartbeat but it generally takes weeks and months to develop a good new advertiser.

Several years ago Ottaway Newspapers, now Dow Jones Local Media Group, surveyed its community newspaper sales reps about how much of their time they spent reselling existing business versus developing new business. The answer for new business was somewhere between five and 10 percent. I’m betting the five percent was a stretch for some.

Account turnover is inevitable. You know you’re going to lose business. People are going to cut back, drop out of the paper or go out of business. In the old days you might have been lucky with new store openings, but save those stories for your grandchildren.

I’ve seen plenty of companies that churn over 30 percent of their business annually. So if turnover is a given then planning is your insurance.

Business owners aren’t sitting around waiting for the rep to drop by so they can place their order. If they were convinced advertising in your publication was good for them they’d likely already be in it. Sales are a process and it takes time to move people to action. It’s highly unlikely you’ll drop in and walk out with a six-month contract on your first visit.

Done right and in the interests of creating credibility and trust, not to mention creating an advertising program that works, the process takes time. I advocate a three call process that starts with a drop by to make an appointment to conduct a needs analysis at a time convenient for the prospect. Go there in person, it gives you a chance to look over the store and you’re not a stranger for the next meeting.

It might be a week or two before that meeting happens, then a few weeks before another meeting to make a presentation on what you learned in that first meeting. People aren’t quick to go from spending nothing to committing to serious money. They may want time to think about it, or they may want to try a less expensive test to see if the paper works for them. Time passes. One month, two months, maybe more. It takes time and effort to educate them and move them from indifference to conviction.

The channel or pipeline approach understands and compensates for that timeline. It acknowledges that the process takes time. The first appointment may not produce a meeting for several weeks and it may be a month after that before you reach the proposal or decision stage. But the smart rep is out there making appointments and having meetings every week, moving the process along.

If you’re not doing anything like this start off slow. A minimum of two new accounts per week is certainly reasonable. The two appointments will eventually become meetings and then presentations. The key is getting the ball rolling so activity is constantly evolving and replenishing itself.

In a perfect world all of this should happen naturally, but we know it doesn’t. So absent self-motivated and ambitious sales reps, someone needs to make sure it happens right, and to do that you need to track it. Week by week, and step by step to be sure the pipelines get filled with activity.

Success comes with tracking. That dirty word, I know. Tracking means paperwork and just about every sales rep or manager I’ve met In 40 years hates paperwork. I haven’t found any better way to accomplish this, but you can make it pretty simple and painless like the example that accompanies this article.

To make this work, managers need to offer comment and suggestions because the process is useless without it. It’s not busy work or the publisher’s new quirk of the month. It should be the starting point for meaningful conversations about revenue development and that should be in everyone’s best interests and a company goal.

Email John@johncpeterson.com if you would like a free example of a good tracking report.