Circulation Revenue - The other Revenue Stream

This is a presentation that I recently gave at Publish Asia 2009. It examines why newspapers should not lose focus on circulation revenue in the pursuit of advertising revenue and how it is possible to both increase price and hold circulation.

Circulation Revenue - The other Revenue Stream

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Thriving Beyond Surviving

The business environment is tough with low consumer and business confidence. Budgets are being cut and marketers are hunkering down to ensure that their brands and businesses (and they themselves!) survive this difficult period. This is kind of action is certainly appropriate for the times but business cycles are called cycles for a reason and it is only a matter of time before things improve. Smart marketers are planning for the inevitable upswing now to ensure that they remain ahead of this curve and set themselves up to thrive beyond this survival period.

Which Way Is Up?

How will you know that we are back on an upswing? If you wait for backward looking economic data you will only know after the event and your competitors may have stolen the jump on you. What are the forward looking indicators for your industry? Sustained stock market growth (how do you define this?)? Perhaps it’s the lunchtime queue returning to your local sandwich shop? Work out your harbinger of growth and start to monitor it now.

What then? Once you are reasonably confident that the upturn is nigh what will you do to leverage it? Plan your activity now so you’ll be ready to act quickly. Will you return immediately to your previous level of advertising (assuming you have cut now) or slowly ramp up? Will you need to bring your customers along on a new journey or reassure them that this in indeed a good time to buy / buy more? By knowing what you need to do and planning your lead times you’ll be best placed to get the jump on your competitors.

Plan Now, Save Later

Governments around the world are working hard to avoid deflation by flooding the economy with stimulating cash, however, policymakers have a poor record when it comes to overshooting the mark. Many commentators (including Warren Buffett) warn that this could lead to significant inflationary pressures (and potentially stagflation).

The best protection against rising prices is to lock in low prices (hey, I never said I was a rocket scientist!). What future costs can you hedge now? Is now the time to lock in future pricing with suppliers? Obviously be careful of committing to purchases that you may need to extract yourself from if this recession turns out to be longer than you initially expect.

Cyclical vs. Permanent

The global financial crisis had a significant impact on all manner of markets. Some of the changes we have seen will revert when things improve but inevitably we have experienced some fundamental shifts in consumer behaviour that will turn out to be more permanent. For example, will consumers revert back to name brands after trying supermarket generics and, in many cases, finding out that they are not too bad?

What changes are you experiencing in your market? Will these revert or are there some fundamental changes to be made in your business model or product offering? Now is the time to plan and commence implementing these changes.

Great Tactical Advertising

The photo below shows how a local BMW dealer in Santa Monica responded to a national campaign by rival Audi. Bravo!








The Audi billboard promoting the Audi A4 on the left reads "Your Move, BMW". The BMW response shows the BMW M3 with the headline "Checkmate".

Marketing in a Downturn

All the textbooks say spend up in a downturn to set yourself up for the inevitable upswing - but how many marketers are doing this? McDonald’s is one marketing company that certainly is looking to make hay whilst the sun is obscured behind the storm clouds with advertising spend tipped to increase by just under 5% this year according to the Australian Financial Review.

McDonald’s Australian chief, Peter Bush, was quote stating “We see an increased ad budget as a source of competitive advantage. At a time when other companies will be cutting back, we’ll be able to increase our presence, market share and sales.”

Research from the early 1980’s backs this up. Tracking the performance of 600 companies in the United States researchers found that the companies that decided to hold or increase their ad budgets during the 1981-82 recession had significantly higher sales after the US economy recovered. Companies that advertised aggressively during the recession had sales 256% higher than companies that did not continue to advertise.

When bottom lines are threatened it is tempting for companies to look for a quick fix by cutting costs. This then raises the age old question – Is marketing spend a cost or an investment?

I’m not suggesting that marketers should be reckless, clearly we need to ensure that we extract maximum shareholder value from every dollar that we spend but economic downturns can provide an opportunity to get a leg up on the competition and position our brands to extract maximum leverage from the current environment as well as the during the inevitable upturn.

Brand Strategy

Now is a good time to revisit your brand strategy (if you haven’t already). This is not to say that you should be reinventing your brand but you should consider tweeking the expressions of your core values to ensure that they reflect the current environment and maximise opportunities.

Accepted wisdoms of the last few years may no longer apply so question everything. For example, conspicuous luxury consumption is out, austerity is in. Foxtel recognise this in their recent promotions, positioning their service as a cost saver (no videos and movies, affordable bundle with no install cost and short contract) rather than a luxury.

At a minimum you should endeavour to keep your share of voice, however, you may find that you can even grow it on the same (or lower) spend.

Sales Promotions

Sales promotion should similarly tap into the current mood. Now may not be the best time to give away a “frivolous” prize but rather to give your customers (and community) something that is more meaningful. eg

1. Value bundles – ie Meal deals, price caps, etc

2. Value adds – Bonus (useful / valuable) widget

3. Support for charity – This is a classic win-win-win. Your customer feels good about purchasing from you, your brand affinity is increased and charities get a leg up at a time when donations are down.

Leverage Every Touch Point

Your company communicates with its customers (and potential customers) in many different ways but are you maximising your returns on these. Bill inserts, customer service contacts, etc. For more on this see my 4 September, 2008 post http://edwardbaral.blogspot.com/2008_09_01_archive.html


2009 is not a time for the faint-hearted. Be brave, think differently and make sure your brand is ready for the inevitable upturn – their called “cycles” for a reason!

Would You Want to Be Friends With Your Brand?

Ask someone what a brand is and most people will say that it’s a logo or a name. Dictionary.com defines a brand as “kind, grade, or make, as indicated by a stamp, trademark, or the like: the best brand of coffee”.

Such a definition is akin to suggesting that a person is simply their name, however, a brand, like a person, is more complex.

Just as a person demonstrates outward signs of who they are such as hair colour and clothing so to does a brand have outward expressions such as logo and advertising.

But ask the people who know you well to describe you and their description will generally go beyond looks to describe your personality and the history and experiences that they have with you will colour their view.

And whilst you may have different personas at work and at home the essence of who you are doesn’t change. Similarly, whilst a brand may express itself differently to different audiences the brand essence must remain consistent in all spheres or risk appearing schizophrenic.

Every experience that your customers have with your company / product is a brand experience. You might have the coolest logo and the funniest ad but how will a customer feel about your brand when they are cut off by a harried (rude?) customer service representative after sitting on hold for 30 minutes?

Brand management in many respects is like image management. It is not simply about packaging and advertising but taking responsibility for every experience that a customer (or potential customer) has with your brand. Sure, some aspects of this relationship are not generally under a marketer’s direct control but your customer doesn’t care about “channel management issues” and the like. You can either take responsibility for optimising the experience or you can put your head in the sand.

Just as a strong friendship will endure mistakes and tensions (have you ever left a friend waiting somewhere because you forgot that you were meeting?) so too a strong brand relationship will endure occasional “slip-ups”. In order to endure, however, you must invest in your relationships with your customers so that they know you respect them and are dependable.


In short, brands are as complex as people. Every interaction that a customer (or potential customer) has with your brand will impact on their perception of it.

Is your brand someone that your target audience would want to be friends with?

Leading Your Business Beyond the Core

Chris Zook in his books Profit from the Core, Beyond the Core and Unstoppable describes three phases a business progresses through in order to grow and thrive. Marketers are well places to lead their businesses through these developmental phases.

1. Focus on the Core

In the first phase a company focuses on its core business in defining and maximising the return from its primary strengths. Questions to ask in this phase include:

• What do we sell?
• Who is the core customer for what we sell?
• How can we develop the product to better meet the customer opportunity?
• How can we do what we do better?
• How can we do it more cost efficiently?
  

2. Expand the Core

In this phase a business begins to leverage its core competencies to grow beyond its core. This is the phase of line extensions, new geographic markets and new channels to market. The progression is evolutionary, not revolutionary moving a business into new but “neighbouring” opportunities for growth. Questions in this phase include:

• Where can we “stretch” the brand? EG Can our juice bar product be pre-packaged?
• How would this work overseas / interstate? (and where?).
• What distribution channels are we not leveraging? EG Can our juice bar juice be distributed in supermarkets?
  

3. Beyond the Core

Sooner or later the core cannot be stretched further, in fact, it may well be shrinking. This could be for a host of reasons – the market is close to saturation (mobile phones), a competitor with a better cost structure or new innovation has entered the market (air travel significantly disrupted the railway market in the US) or maybe a fundamental shift in the market environment has changed the very basis of your business (I suspect many Hedge Fund managers are asking themselves this question today).

It is in this phase that business must reinvent themselves or die. Questions to ask in this phase include:

• What business are we really competing in? EG Railroads or Transport?
• What are our hidden assets? EG Marvel Entertainment have identified their characters (rather than their illustrations) as their true assets and have introduced these to a new generation via film and merchandise licenses.
• What are the related opportunities that we should focus on? eg Apple’s decision to focus on digital music via the emerging MP3 market saved the company.
• What competitors could threaten our core? How do we defend?
  
  

Source: Unstoppable, Chris Zook. Harvard Business School Press, 2007.

The world is moving quickly and is so interconnected that change is happening at an exponential rate. The average lifespan of a company is 10 years - in the 1980s it was 14 years. Back then the average tenure of a CEO was around 8 years today it is less than 5.

Marketers are ideally placed to lead their companies through these changes. We know (or should know) about our customers needs, we are constantly on the look out for opportunities and threats in the market and we are generally adept at moving quickly to exploit them.

Marketers, rise up beyond your current campaigns and move beyond the core!

Segmentation

Below is an edited transcript of an interview that I did with Douglas Nichol of Mongrel Marketing. To listen to the interview please visit www.mongrelmarketing.com.au/podcasts.asp


Q: How have you used customer/prospect segmentation in your marketing programs in the past? Have they worked well?

Many marketers tend to think of segmentation as a tool to assist in more targeted communications but this is just scratching the surface.

The most far reaching segmentation project that I undertook was whilst working with Telstra BigPond.

In the years since it had launched, the number of BigPond packages had slowly increased to meet various market needs and opportunities ultimately growing to an unwieldy and confusing 13 plans. This resulted in significant customer frustration and confusion as they tried to determine which plan was right for them.

By segmenting the market based on both volume and sophistication of usage and profiling our existing base we were able to identify distinct clusters.
This, in turn, facilitated the simplification of the offering to just 4 plans.
Each plan was associated with a simple customer statement to assist prospective customers in identifying the plan that best met their needs (eg “I don’t know how much the family use, I just want a plan that gives me a flat price and the family what they need”).

By tailoring the offering to better meet the needs of consumers we were able to achieve three things:
- Increase yield
- Improved acquisition and
- Retention maintenance.

More than simply targeting consumers better, segmentation became a tool for driving business planning and pricing.

Moreover, a subsequent global benchmark survey found 89% of prospective customers were able to easily identify the appropriate plan, understand pricing and sign-up online. This highest score of any ISP worldwide.


Q: What bits of advice can you give our listeners on how to get it right?

I don’t believe that there is one right way to segment your audience. I have found, however, three key considerations when commencing a segmentation project to ensure that the outcome is useful.

Firstly, be conscious of why you are segmenting. It sounds obvious but a useful outcome will look different based on your purpose. For example, are you looking for a deeper understanding of your audience (ie a true customer segmentation) or simply a method for grouping customers for internal purposes (ie product groups or value groupings).

Will you use your segmentation to target communications channels (in which case demographics will be important) or to look for business opportunities though a deeper understanding of consumer mindsets and behaviours (in which case your focus will be more on psychographics).
None of these are right or wrong – it’s horses for courses.

Secondly, consider your product category. Is it high involvement or low involvement? Do customers transact regularly or infrequently? Are transactions high or low value?
Simple transactional data such as this can be useful in understanding customer behaviour and assist in your segmentation.

Just be sure that the data that you are basing this on provides a complete picture of the customer behaviour and not just their interactions with your company.

Finally, and most importantly, consider how your target audience view themselves. Put them in a box that they resist you may find that segmentation actually hinders your customer interactions.
A classic example of this is Marketers targeting the so-called “Small and Medium Enterprise” or SME segment.

SME is a convenient grouping for large business to describe small and medium businesses and can be relevant internally, however, the target audience do not think of themselves in this way and often view the terms “SME” and “Small Business” as descriptors used by large businesses that don’t understand them.

This audience tends to view themselves as “IN Business” rather than “small business” and group themselves by industry rather than number of employees, phone lines, newspaper subscriptions or computer screens.

For this audience in particular, I have found that targeting by industry is most effective, however, this requires very specific groupings. A broad industry grouping such as “Property and Business Services” may include anyone from Real Estate Agents to Consultants to Janitorial Staff.

I may sound like a Marketing heretic but sometimes it may also be appropriate to choose not to segment at all. For example, in the case of SMEs, if you are not able to effectively target by industry, you may find that simply proposing business solutions that your products and services can deliver and allowing the audience to self select and effectively self segment can be an effective approach.

Q: Where do people get it wrong?

There are probably a million ways to get it wrong, though equally a million ways to get it right! There are some common pitfalls, however.

1. Segmenting based on your current customer value without taking into consideration potential value.
For example, consider a Telco that segments based on number of phone lines. They may believe that a particular company has 5 phone lines and is a small business. What they may not know is that this company has another 200 lines with one of their competitors.

2. Over complicating segments – you should only have as many segments as you can actively manage from a customer communications and service perspective,

3. Not integrating customer segments into every aspect of the business. All too often segmentation is purely used by marketers when- in reality - their true value lies in helping front line staff engage with customers in a more meaningful and relevant way.

Finally, never lose sight of the fact that segments are not homogeneous but simply approximate groupings.

At the end of the day you are interacting with individuals each with their own experiences, needs and wants. By all means present what you believe will meet their needs but don’t tell them – allow them to decide.