So it looks like we are hurtling into recession. In the United States certainly. In Europe probably the worst is yet to come. In Asia, probably not ... yet. 

Sadly, I’m old enough to admit this is my fourth experience at this. I was made redundant (fancy talk for losing my job) in 1982. Ran an advertising department through 1991. Launched a newspaper prior to 9/11, where I was fired and the paper failed. Believe me. I’ve experienced recession from all sides.

So what should we be doing about it?

 

The issue for newspapers is that we always come out of recession worse than we went in.

And two mistakes have driven this. Combined, these have got us into the mess we (in Europe and North America) are in.

Now we need to learn from our mistakes and reverse the structural pressures we are seeing by exploiting the cyclical pattern.

Our first mistake was to overreact on cost cutting. As recessionary fears took hold we took out costs to retain margins, in full knowledge that the trend was cyclical. And then when things recovered we kept out the costs, driving, at the time, and certainly with hindsight, margins that were clearly ludicrous.

During a recent trip to the United States, I was struck by how many people were commenting that newspaper products are not as good as they used to be. That printing quality was down. That advertising quotas are too high. The reality is that much of our industry has lost its ability to fight back. And that is what we have to do now.

Mistake No. 2

Because the second mistake we made was that we failed to recognize that during recession our advertisers cut back, discovered they did not need us and didn’t come back.

The result is that in most newspaper companies I have visited recently the number of advertisers has fallen dramatically. Typically, newspapers have lost between a third and a half of their customers.

I hear the cacophony of response. “Consolidation!” “The Wal-Mart effect!” “The Internet!” It’s all nonsense.

In most markets in North America, Europe and Asia, the number of businesses is growing very fast. What is declining is the direction of salespeople to sell to new customers (and, I suspect, the training they receive to direct them).

This trend has been accelerated by the absurdity of upselling and encouraging converged advertising sales (see previous rants). By forcing salespeople to sell print and online together we are encouraging them to focus on the few advertisers who need or wish to buy both together, at the expense of the others.

More at end

Our experience demonstrates that by simply encouraging salespeople to end the month with more advertisers than when the month began, and by compensating them appropriately, the rot can be stopped.

This habit of replacing loss by selling more space at a higher price to fewer advertisers can no longer be supported. Increasing ad rates has forced smaller companies to look elsewhere. Selling bigger and more frequent insertions has not resulted in advertisers getting a proportionately better ROI.

Advertising effectiveness does not increase linearly with ad size.

Today, as the Web becomes an increasingly significant part of the revenue mix — and more importantly, an important contributor to potential profit and value — it is vital that we revisit these smaller lapsed advertisers.

We can certainly woo these companies to buy space online, but we also should encourage them back into print, either in the main product or perhaps a niche product.

Advertiser count must become as important a measure as revenue. Once stable, other criteria such as yield and frequency can be developed.

But this requires newspapers to rethink their ad sales operations. The core sales team must learn to end the month with more customers than it began with. It must acknowledge that customer retention is a primary priority.

Tackle opportunities

Converting prospects to our wider range of products means the creation of a new sales force specifically charged to cultivating new customers.

As the recession diminishes, and it will, action now will not only lead to recovery, but also place our business to be in a stronger position than ever before.

Up until 2006, newspapers’ new revenues were helping offset the losses they were experiencing in print. There is no question that the industry is in difficult economic straits. But the underlying cause — failing to retain advertisers — is both solvable and rewarding.
 

Jim Chisholm is joint principal of iMedia, Ifra’s joint venture advisory service. He can be reached at jim.chisholm@imediaadvisory.com.