Thursday, January 10, 2008
Circulation Outlook for 2008
By Kristina Joukhadar
In speaking with circulation marketers and audience developers about what they see as the major obstacles facing them in 2008, we got a wide range of answers. But there are a few common denominators-the effect of current economic conditions, integration of new technologies, shortage of experienced staff and the increasingly important interface with the reader were consistently cited. Here, in no particular order, are their concerns.
CHALLENGE NO. 1: INTEGRATING NEW TECHNOLOGY
For Terri Smith, director of circulation, Branch-Smith Publishing, the end of 2007 brought a new online lead generation system, which is increasing leads for the advertisers. One of the projects for 2008 will be integrating the new technology with the existing database and marketing expertise to make the most of this new capability.
"The sales people are loving the names, but it requires lots of double checking. We're diving into the data in our marketing department, tracking emails from readers and advertisers to see what they're saying [about the system and how it serves their needs].
"We've only had one or two months of it and we're working on what the advertisers are going to expect-are these quality leads? We're separating them into types-soft sell or hard sell or more serious.
On the consumer side, says Thomas Masterson, VP consumer marketing, Hachette Filipacchi, "the cost of technology has come down so much that it's easier to apply the technology and advance modern direct mail response models, like with your marketing database. Now we can afford to do it. Using the technology and analysis at an acceptable cost makes me a lot more optimistic than the magazine industry of two or three years ago.
In b-to-b media, "Continued technology advances will allow us to communicate with our customers in a more personalized manner and provide custom products for them," says Shannon Aronson, director of circulation, CMP Media. At the same time, "continued saturation of marketing through email and traditional marketing methods will continue to push marketers to find more effective and creative ways to communicate with their customers."
This will lead, Aronson says, to the need for circulators to work harder to build trust and a sense of community with their customers.
CHALLENGE NO. 2: NEW SUBSCRIBER SOURCES
Smith says the readers of Branch-Smith's greenhouse, nursery and retail garden center titles are basically small businesses, whose main competition is the Wal-Marts of the world. "The independent retailers, the little stores, are being lost," she says.
If a potential reader is looking for a magazine on these topics, says Smith, they will not know to go to one of the magazine Web sites. And if they do a search, they will end up on one of the large online magazine sales sites.
"We were riding on a pink cloud of readers coming to us," she says. Now, on the Internet side, "we've been using magazines.com and tradepub.com with great results," she says. "We do need to evaluate the quality of the readers. I peruse every order myself when we bring in subs that have been outsourced.
"They may not be qualified, and we're paying for every sub. But these companies are very reputable and they've been great. They grant credit if the people don't qualify.
"It's taken a long time to get there, but it's great: the boss is happy," says Smith.
CHALLENGE NO. 3: EMAIL DELIVERABILITY
For Christine Oldenbrook, director of marketing and emedia, Bobit Business Media, the biggest challenge for 2008 will be email deliverability and email address collection-for example by getting people to register for things on the Web. "We need to improve on the number of names," she says. "Deliverability continues to be a big issue.
"The more sophisticated the software gets, the more default filters there are-for example, in Outlook 2007. And enterprise firewalls bump everything into junk mail, so the delivery level is dropping. We're now doing it internally, but if the situation continues, we could be forced to send it out and go looking for a delivery solution."
"We're spending money on the software, but have to hire someone and make it their job," says Oldenbrook. "Building a unified database will help. When you're asking how many email addresses you really have, it becomes [crucial]. This year we'll figure it out, even if having a system means doing it internally."
CHALLENGE NO. 4: THE ECONOMY
Another force to be reckoned with is the economy, both in general, and in terms of the state of the print vs. online revenue equation in the media industry.
"The 80's are not coming back," says Masterson, "but the industry has come back quite a bit. Some of the most profitable magazines are life style and special interest. The consumers need them.
"We're not seeing the rapid growth of the past, which is bad. The good news is the business is profitable," he says, "even though individual titles are having a hard time.
"For example with the car books, the research shows that trips to the dealership have declined. But people still use the books," he says. "They research online but read in print, particularly as part of their leisure time. It's easier to digest.
"News magazines have been dramatically impacted by the Internet," Masterson adds. News and business have a different shape on the Internet and there is an endemic advertising base that has gone away since the tech bubble burst, and it's never coming back. There's been consolidation with the national advertisers online. And news and business magazines are closer to being affected by the online cannabilizing the print.
"It's interesting," Masterson says, "that according to research, women go online for recipes and health information, but there are some things, like fashion, that they want to read in print. So although everyone is feeling the financial pressures [of online content viewing], in some genres, it's not as bad.
"There's still a place for magazines. The way people read magazines is changing, but it's not all gloom and doom," he says.
CHALLENGE NO. 5: SPECIFIC INDUSTRY DOWNTURNS
"It's always true that when you serve a particular market and the market you serve goes through a major downturn, it's going to have an impact on your business," says Nick Cavnar, VP circulation, Hanley-Wood Business Media. Their primary market is residential construction, an area especially hard hit.
"There's not a lot you can do. You can have the biggest market share and the best sales force in the world. Subscribers can actually pay more attention to your product in a downturn. They may be reading for more ideas on what they can do to counteract the business climate, or they may have more time to read. But the advertising market gets tough," he says.
"People need good information more, especially if you have free subs (it's a challenge if people have to pay). It's not harder to maintain controlled circulation, but circulation people are under more pressure to pull the costs down and keeping the costs down means you need to spend more time on analysis, both for the sake of the company and the owners who need more information and analysis. You need to control costs and show how you are going to do it-under a microscope," Cavnar says.
"When times are good, you submit the budget-and you're always going to have reductions. But in a downturn, it's scrutinized a lot more, even if the budget is good news," he says. "You have to be careful to analyze in detail-everything has to be calculated more. There's more pressure to control costs and do analysis and documentation."
Cavnar's advice: "Be realistic and step up and provide as much information as you can. Do an analysis for the company on further cost savings. Look at your comp list for possible cuts; look at the circ on the file that may not be efficient.
"Maybe advertisers don't want certain circ, or they don't serve specific segments of the file. It may not be a segment the advertisers want to buy."
CHALLENGE NO. 6: INCREASED REGULATION
Consumer marketing is facing regulation from all sides now and it makes things more difficult, but it's all part of our modern world, says Masterson. "It's challenging, but the increased privacy that people are focusing on now as a bad thing also has a positive side. Consumers all want more control over how they are marketed to-for example with the opt-outs.
"You don't want to send marketing to them if it makes them feel bad about you," he says. "It's the concept that doing it [marketing] the wrong way damages direct mail and risks the channel. But you can do it the right way and meet their needs-as we all try to do."
CHALLENGE NO. 7: NEWSSTAND-MERCHANDISING
"We need to find a way to grow sales in the industry," says William Michalopoulos, senior director, retail newsstand marketing, Hachette Filipacchi. "We've made an impressive effort to cut copies out of the system, and now we need to see how we can grow sales using the smartest marketing successes and coming out of the box with a strong product.
"I'd like to see the industry have a unified marketing message. We're currently seeing the attack of candy and gum at the check out-they have a unified message.
"Publishers also overpay for stuff [at checkout] and in the end it drives up costs for everyone. The wholesalers put extra points over the prices for the checkout rack. It's ugly. I've always been an optimist, but it's getting harder," Michalopoulos says.
"We had a pretty good year-we rolled up our sleeves and cut out a million copies from distribution and still maintained sales across the line. It's been a successful program, finding the right products and the right place and executing it.
"We're still selling magazines, executing at the store level and having the right products are key," he says. "For the budget in 2008, across the line, we hope it will be flat. We're planning a couple of new things. Next year, we'll dig deeper. We've picked the low-lying fruit now so we'll have to work harder. And of course staffing is leaner all through the channel."
CHALLENGE NO. 8: NEWSSTAND-COST OF THE WIRE
"Looking ahead, one of our big concerns is the evolving dynamics at checkout," says Doug Serafin, director of newsstand planning, Hearst Magazines. "As the overall number of checkout pockets continues to shrink, the competition for front end positions only becomes greater. On top of that, there's also a new push to increase wire costs. And rising IPO costs are another concern.
"In addition, newsstand promotion costs generally tick up year after year. It makes good promotion even more important," Serafin says.
"So whether we're looking at investment in checkout or promotions or retailer incentives or the print order, we have to be careful as publishers to do it in a responsible way. Mistakes hurt the industry's bottom line, not just the magazine that makes the bad investment."
"Wire costs are projected to increase and installation fees are being assessed at the front end. For a magazine with a lot of pockets, that can be a big expense. Front end costs will increase for most titles, but many titles will not see any sales increase." he says.
"There are many layers of merchandising, carried out by both the wholesalers and the national distributors. But retailers may actually be in the position to help as much as anyone-they're in their stores every day. By encouraging retailers to assist in merchandising their own stores, it can only make things better."
CHALLENGE NO. 9: FALLING RESPONSE RATES
"Everyone's struggling with response rates," says Barry Green, VP circulation, Hearst Business Media, "especially controlled circulation-and direct mail in many markets is almost useless. The return on investment [for direct mail] is extremely costly.
"There once was a formula followed by most circulators to achieve audience goals, but now it's extra difficult to meet them. You used to get a 33 to 35 percent response rate on cover wraps-maybe more. That was 10 years ago; now you get maybe 15 percent on a qual wrap-that's a fairly general rate.
"So what's my choice?" Green asks. "Either tell management the budget must go up, or lower the audience goals (like maybe you can't have 100 percent in the one year column).
"We are spending more to get new people who are served subscriptions but never respond. People are just busy. It doesn't mean they don't want the magazine. But what do you tell them [to get them to renew], and how do you force them?
"It's hard to get people on the phone and talk to them these days," he says. "It used to be easier when there was no voicemail. You had to either answer the phone, or it went to the switchboard, where they would put it through to your line.
"That's not true anymore. You look at the number and if you don't know who it is, you let it go to voicemail. It's an enormous problem and it's basically confined to the controlled b-to-b arena. More overall calls and more repeat calls equals higher costs just to stand in place."
CHALLENGE NO. 10: STRETCHED TOO THIN
"In general," says Green, "there's also a challenge with circulation being stretched into many other areas of the business-like the Web, audience development, email marketing, list rental, online advertising, bonus distribution (anything and everything we can do as participants in creating the overall advertising environment and adding to revenue generation).
"On any given day, you can get hit from left field, with new requests and figuring out ways to meet them. I'm glad we have such a good fulfillment house that can maneuver anything into the existing framework. The funny thing is that 'technology' creates the difficult problems that need unique solutions but it also helps solve them."
CHALLENGE NO. 11: FINDING EXPERIENCED STAFF
It appears that many b-to-b's are very attuned to the Web, especially in markets where readers are searching for online business information. "In b-to-b, there's lots of product online and there has to be support for it," says Oldenbrook, who has just hired a Web analyst. "You can adjust the Web design to drive traffic and Web services, do search engine optimization-the publishing disciplines are more interdependent on the Web. And they need to know how to work together."
"The biggest challenge we are facing is finding junior people," says Masterson. "It's been very surprising over the last two years. We generally don't use recruiters for upper management or mid level positions. We use the online resume sites [and that's working].
"But it's hard to find people with one to two years experience," he says. "You have to bring them in from outside of the industry. And we've found one or two from the Web side. Mid and senior levels we can find-they're applying for jobs.
"Magazine titles have been cut in the industry," he says. "There used to be big departments, but now there aren't the same number of young people. In the last six months, people have been stolen away. The head counts are so tight-there's no more big staff at Ziff Davis or Times Mirror, or even at Primedia."
CHALLENGE NO. 12: CUSTOMER SERVICE
"It's the old 'plus/minus'," says Green, speaking of today's circulation climate. "All that's happened has made circ become audience development and it's become a greater mix of the 'publishing/ media' operation (plus), but there are so many more intricate and confusing bits of minutiae to deal with (minus).
"The difficulty is how do you handle all the customer service, privacy, unsubscribes, complaints, etc.?," he says. "These are minor problems, but they add up. Think of all the time consumered dealing with correspondence/email due to just a few questions.
"And then there's the people [staffing] problem," he says. "Do you have the time and the people to answer this stuff?
You'd like to keep it inhouse, because it's tricky, and if you have multiple products, it's not just a simple case they can handle at the supplier. What do you offer them when they complain? Do you say 'tell us what you want?' Or 'tell us what you don't want?' and watch out for 'Big Brother' if we're not careful."
On Controlled Circulation..."It's easy to look smart when the market is booming," says Hanley-Woood's Cavnar. "The proof of [your value] is how you will manage the business and how you will weather the downturns. For circulation people in the market, some parts of the economy are in recession and others are doing well.
"The big challenge is keeping [your programs] going. You can't stop doing things, like working on your expires and developing online as well as the print channels. You need to grow and invest-do more with less money," he says. "Is it a challenge or an opportunity? Can you build and develop things with your audience through electronic communications for less cost? Do your audience development electronically and save money?
"One of the things that's surprising is that list revenue is increasing and branded custom emails are getting more interest. By building the email database and email capabilities, you can make more contribution from circulation. It enhances what you can bring to the table for new revenue opportunities, which is great. A small contribution from circulation doesn't mean it isn't attractive: in a downturn, even small savings look good."
On Newsstand Sales... "The distribution channel needs to be streamlined," says Michalopoulos, "and now Wal-Mart is trying to eliminate titles from distribution and some wholesalers are talking about it. As an industry, we have to do a better job of cutting costs.
"It's a long term role," he says, "and the responsibilities of some of the players in the chain have to change, so that there's still enough pie to cut up for everyone. The distribution models have to change to enable a focus on merchandising and execution.
"I'm cautiously optimistic, but there's going to have to be some pain before things start to turn around. Magazines still have a part and can be very successful. We just need to get the right product in the right place where it can sell. I'm hopeful we will figure it out."
Seeing the Larger Picture..."It's hard to talk in a smaller context about audience development, when everything that we do is impacted by the larger context of the world," says Eric Rutter, VP audience development, Reed Business Information.
"The fact that it's changing all the time is part of the challenge, but the primary purpose remains the same: to deliver to our advertisers the targeted and relevant audience with penetration into the right companies and to the right people who will be engaged with the product."
Tuesday, January 8, 2008
Optimism Declines Among Ad Execs, All Media Impacted, Even Online
by Joe Mandese
ADVERTISING EXECUTIVES HAVE GROWN SOMEWHAT more pessimistic about their plans for increasing the shares of their advertising budget for all media, but some media - especially online - seem to be holding up better than others. The finding, which comes from the latest wave of Advertiser Perceptions twice annual survey of advertisers and agency media buying executives, indicates a marked drop in the percentage of ad executives who expect their share of ad budgets to increase over the next six months for all the media measured. The worst hit of all the media, not surprisingly, were broadcast media outlets. Only 16% of ad executives expect radio's share of spending to increase over the next six months, down from 26% when Advertiser Perceptions conducted a similar study last spring, and down from 19% when it conducted it last year. Optimism for broadcast TV, meanwhile, dropped to dropped 22% in this survey from 29% in each of the last two surveys.
The most recent study is based on the results of 2,047 ad executives who completed an online survey in October and November 2007. The last study was conducted in April and May of 2007, and the previous wave was conducted in October and November of 2006.
While the optimism for online media fell slightly from the spring 2007 results, it has actually improved from the year ago sentiment (see table below).
Other notable declines in optimism appear to be impacting newspapers and mobile media.
Joe Mandese is Editor of MediaPost.