Miles E. Groves

MG Strategic Research, Ltd.

Telephone: 202 256-5784

Email: miles@milesgroves.com

Web: www.milesgroves.com

Information Strategies for Growth ASTECH InterMedia Strategic Marketing Roundtable

August 22 – 25, 2004

Newspapers: Facing the Challenge

• Circulation Uncensored

• Marketing Best

Practices

• Marketing Triangle

• Practices to Adopt

Circulation Uncensored

• Circulation trends worse

than reported

• Metro circulation under

intense pressure

• Ad rate negotiations

impacted

Circulation Uncensored

• Circulation Trends Worse – Structural shift from > 50% to <50% and “other circulation” – growth of

this category is accelerating

– Heavy discounted from 0.4% to 2.6% in 2 years

– Other circulation from 5.6% to 8.9% in 2 years

• Intense Circulation Pressure – More print news choices

– Greater broadband penetration

– National DNC list

• Advertisers Understand Difference – Not willing to pay for growth in “other circulation” despite positive

impact on readership

– Not willing to pay the same for 100 readers as 100 home delivery subscribers

Local Advertising Weakness

• Technology is changing how consumers go to market.

• The Web is gaining in importance.

• All local categories are experiencing structural change. The shift from retail channels that advertise to channels that do not is accelerating and those that advertise are reducing investments.

Local Advertising Weakness

• Retail shift from Display to Preprints introduces new dynamics.

• Retailers are beginning to explore Web channels more

• Classified growth is driven by local market strength and our ability to deliver reach. Our print reach is declining, but we have opportunities to leverage our Web reach.

Share Trend is in Decline

Newspaper Advertising Share

15%

17%

19%

21%

23%

25%

27%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

1990 to 2003

Impact of Protecting Share

Newspaper Advertising Volume

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

19901991

19921993

19941995

19961997

19981999

20002001

20022003

2004

1990 to 2004

$Mill

ion

s

Actual

Potential

The loss in share is measurable in terms of “missing revenue.”

$54 Billion is Cost for Past 10 Years

Revenue Gap

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

1990 to 2004

$M

illi

on

s

Instead of 17.9% share, we would have 21.9% share

Margins Rose From Under 15% to

22% in Past Decade Newspaper Operating Margins

10%

12%

14%

16%

18%

20%

22%

24%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

1990 to 2003

Industry is trading off potential revenue for higher margins

Time to Avert Crisis . . Maybe

• Invest in marketing technology and adopt business intelligence methodologies

• Measure performance and execution

• Adopt cross-channel marketing

• Expand local business model to include all marketing & communication channels

• Do not require that all channels have same profitability

• Promote better reach desired by advertisers

Best Practice: Components • Strategic Planning Process

– Research, Segmentation, Positioning, Gap Analysis, Targeting

• Product Development

– Core Editorial Enhancements, Web Extensions, New Products

• Customer Acquisition – Sales Channels, Pricing Strategies, Promotion

• Advertising Development – Inch Rate Analysis, Category Analysis, Sales Trends, Territory

Analysis

Best Practice: Components

• Customer Retention

– Renewal Programs, Customer Service, Satisfaction Surveys,

At Risk Advertiser Identification

• Distribution Capabilities

– Zoned Editions, Frequency, Single Copy Management, Web

Channel

• Execution

– Organization & Staffing, Education & Training, Performance

measures

Best Practices Framework

STRATEGIC

PLANNING PRODUCT

DEVELOPMENT

CUSTOMER

ACQUISITION

CUSTOMER

RETENTION DISTRIBUTION EXECUTION

INFORMATION TECHNOLOGY: ANALYSIS, FEEDBACK, CONTROL

Well designed information technology systems will link these

elements together, enabling better control and execution.

Avoid “Flying Blind” Syndrome • Centralize contact

Information

• Easy access to advertiser profiles and account histories

• Access to subscriber status and history

• Track performance indicators

• Revenue analysis

Business Intelligence

• Real-time analysis of data

• Drill-down from net paid summary level to

route- and outlet-level detail

• Identify exactly where audience and

advertising gains/declines exist

• Set performance benchmarks and exceptions

reporting

Operational Performance

• Department-level budgets

• Gains/declines at individual business level

• Starts/stops

• Churn, retention, tenure

• Customer service

• Individual account histories

• Customer profitability

Critical Questions to Answer . .

• Are we meeting our strategic and budget objectives?

• Where are gains and declines coming from?

• Where are the best opportunities for subscription growth?

• What is the impact of pricing on retention?

• What customer groups are most profitable?

. . to grow readership franchise

• What factors contribute the most to churn?

• Is the product/reader fit appropriate for high-opportunity customer segments?

• Where are the best opportunities for single-copy growth?

• How do we develop long-term relationships with readers?

• Which customer segments are most important to advertisers?

Critical Questions to Answer . .

• Are we meeting our strategic and

budget objectives?

• Where are gains and declines

coming from?

• Where are the best opportunities

for advertising growth?

• What customer groups are most

profitable?

• Are we getting maximum share of

ad budgets?

. . to grow advertising franchise • How are sales reps performing?

• What factors contribute most to

advertiser churn?

• Are we getting the most out of our

territories?

• Where are the best opportunities for

classified growth?

• Is average inch rate improving or

declining?

• Which reader segments are most

important to advertisers?

Critical Questions to Answer . . • Who is visiting our Website?

• What parts of our site get the most visitors? What parts are least visited?

• What content is most valuable?

• What ads are visitors viewing and clicking?

• How can we induce visitors to register with our site?

. . to grow web franchise • What products/services are they

consuming/buying?

• What marketing activities drive site traffic?

• How do we develop profitable relationships

with customers?

• Which customers are most important to

advertisers?

• How profitable is our Website?

Marketing Triangle

Best Practices

CRM/BI

Technologies Knowledge

Transaction Data Market Data

Research Data

Knowledge Resources

Data Fusion

Consumer Research

Transactional Data

External Research

Segmentation

Household Demographics

Knowledge Base

Household Level Database

Web Site Database

Registration

Marketing Technologies

Knowledge

Base

Business Intelligence

Customer Relationship Marketing

Decision Support Systems

Database

Technologies

Better Business Decisions

Campaign Management

Circulation Development

Advertising Development

Direct Marketing

Cross-Channel Marketing

Practices to Adopt

• An enriched household marketing database is critical to support circulation marketing, editorial development, and advertising efforts.

• Consumer research designed to support segmentation strategies for acquisition and retention, channel development, advertising support.

• Use of business intelligence tools to create critical alerts of service issues, identification of at-risk subscribers, dashboard development, and other metrics to aid the support of the community franchise.

Practices to Adopt • Adoption of data-fusion applications to operationalize

market research to that survey research can be leveraged at the household level for circulation, editorial, and advertising development.

• Market Research professionals become key members of the consumer marketing team as their expertise is applied to aid strategy development and solve tactical challenges. They move from advertising presentation support to analytical marketing support.

• Campaign management applications to support marketing efforts and experimentation. The complexity of markets requires segmentation strategies and the ongoing measurement of those strategies.

Practices to Adopt

• Evaluation of how departments and processes that support the customer relationship are organized to determine whether manufacturing focused structures are effective in an information oriented consumer marketing environment.

• Application of consumer research to support segment pricing strategies. It is important to understand the concept of value at the segment level and price is a component of a reader’s value perception.

• Use of optimization applications and tools to identify and re-tune the acquisition blend. This brings together the cost and retention in terms of offer and source. The resulting mix is what determines the cost of the next circulation unit.

Grow the Franchise!

• Recognize that the future is cross-channel marketing.

• Invest in business intelligence technologies.

• Adopt information strategies that will help focus on franchise growth.

• Measure execution.