Chapter 10 Using Newspapers Chapter Objectives After reading this chapter you will understand: 1. 2. 3. 4. 5. 6. The changing character and role of newspapers in the marketing mix Challenges to newspaper advertising from other media The marketing of newspapers to readers and advertisers. The many categories of newspaper advertising The newspaper advertising planning and buying process The role of weeklies and ethnic-oriented newspapers Chapter Overview Newspapers are the leaders in terms of local advertising revenue and trail only television in terms of total advertising revenues. Each day approximately 53.5 million newspapers are distributed, providing a large segment of the population with news, entertainment, and advertising. Newspapers also enjoy a reputation for credibility that creates a positive advertising environment. Lecture Outline 1. Introduction A. The pros of using newspapers include: 1) Newspapers appeal primarily to an upscale audience, especially those adults 35 years of age and older. 2) Newspaper advertising is extremely flexible with opportunities for color, large and small space ads, timely insertion schedules, coupons, and some selectivity through special sections and targeted editions. 3) With coupons and sophisticated tracking methodology, it is much easier to measure newspaper response rates than response rates of many other media. 4) Newspapers have high credibility with their readers, which creates a positive environment for advertisers. B. The cons of using newspapers include: 1) Many newspapers have about 60 percent advertising content. This high ratio of advertising, combined with an average reading time of less than 30 minutes, means few ads are read. 2) Overall newspaper circulation has fallen far behind population and household growth. a. In addition, readership among a number of key demographics such as teens and young adults has not kept pace with population growth. 3) Advertising costs have risen much more sharply than circulation in recent years. C. Newspapers are read by over 50 percent of the population. 1) Newspaper readers have a higher than average income and education level. 2) Advertising revenues are about $50 billion annually. 3) 84 percent of the revenue comes from local advertising. 4) National advertisers are increasingly looking to local and regional advertising strategies to communicate with target consumers in the most effective way. D. Advantages to small businesses and large corporations (important features) of newspaper advertising include: 1) Flexibility of advertising formats and audience coverage. 2) Newspapers are especially useful in reaching upscale households and opinion leaders. 3) Newspapers offer advertisers a number of creative options including preprinted inserts, advertising in their Internet edition, and the ability to deliver product samples. 4) Newspapers provide an environment of credibility and immediacy unmatched by most media. a. Viewed as a reliable source of both information and advertising. E. Trends that cause concern for newspapers include: 1) Circulation. a. Newspaper circulation was 77 million in 1976 and dropped to 53.5 million by 2005. b. Throughout the ’90s, circulation dropped about 1 percent per year. c. Reasons for the decline include changing demographics, lack of youth readership, and the encroachment by other media such as television and the Internet. d. Some newspapers have had aggressive subscription drives, set up programs to give young readers experience with the medium, and attempted to appeal to an upscale readership. *****NOTES: Use Exhibit 10.1 Here***** 2) Advertising revenues. a. Revenue percentage of the total media pie was 28 percent in the 1980s; however, currently this figure is at 18 percent. b. Problems can be summarized as: 1. Retail chains have turned to other media forms such as direct mail and inserts through newspaper distribution. 2. Lack of support from national advertisers. 3. Even local advertising support is being challenged by other targeted media forms: local television and cable TV cut-ins, free niche advertising books, city and regional magazine editions, and radio. 3) Changing technology. a. Newspapers face challenges from new media technology. b. Significant improvements in instantaneous delivery, clarity, and reliability of content and portability of technology over the next 20 years are expected and will change dramatically the methods of reaching customers. c. Many newspapers have their own Web sites for their readers and their advertisers. d. The immediacy of newspapers is being replaced by electronic formats. e. Traditional newspaper strongholds such as newspaper-classified advertising are being challenged by dozens of online websites. F. The newspaper industry faces both problems and opportunities as they enter the next century; however this industry will face growing competition from other media and information sources as it attempts to maintain its media leadership position. G. Despite declines in readership, however, newspapers remain one of the most effective means of reaching a broad, heterogeneous audience. 2. The National Newspaper A. Historically, the United States, unlike other countries, has not had a national newspaper; however, now there are a number with national circulation, or national stature, or both. 1) To be a national newspaper, the newspaper would need: a. To be published at least five days per week. b. To print copies that are sold, distributed and available nationwide. 2) Using the above criteria, national newspapers in the United States would be: a. The Wall Street Journal. 1. With 1.7 million in circulation, it is the second highest circulation newspaper in the country. 2. Emphasis is on financial news. 3. It is among the most respected newspapers in the world, appealing to the most elite demographics. b. USA Today (Gannett Company publication). 1. A general-readership national newspaper. 2. Popular because of its bright colors and graphics, short articles and extensive business and sport coverage. 3. The paper has a circulation of over 2.2 million. 4. The problem facing all nationally circulated newspapers is finding a profitable market niche. 5. USA Today, along with other national papers depend upon much of their revenue coming from automobile, computer, communication, and financial services companies, that want to appeal to a national audience. c. The New York Times. 1. Like the Washington Post and the Chicago Tribune, until recently, the Times was considered a regional newspaper. 3) The success of national newspapers is how readers and advertisers define them. Widespread distribution and upscale audiences are needed to be considered anything but a local vehicle with occasional national advertising opportunities. 4) The Internet now offers newspaper publishers an opportunity to reach a national and even an international audience. *****NOTES: Use Exhibits 10.2 Here***** 3. Marketing the Newspaper A. Newspapers are a product in need of extensive marketing to both readers and advertisers. 1) Newspapers are being challenged by many new and traditional competitors while at the same time finding it more difficult to maintain the broad base of readership that has made them such a powerful medium for over 200 years. 2) The quality (versus the quantity) of newspaper readership is very good. 3) Newspapers are very strong among college graduates and households with incomes in excess of $100,000. a. Unfortunately, this tends to skew toward the older population. 4) Extensive marketing research studies have been undertaken by newspapers to find out about current facts and interests of readers. The general conclusions are: a. Readers obtain their information from a number of sources (including television, the Internet, etc.). b. Advertisers, especially at the local level, are adopting strategies that replace newspaper advertising with direct mail and other forms of promotion. c. Newspapers have a high degree of integrity and prestige as sources of both advertising and editorial information, according to studies. d. Newspapers need to adopt a marketing mentality. Seeking to protect their franchise by attracting readers and advertisers. B. Marketing to readers. 1) Falling readership trends must be reversed; the quality of the audience must be improved if advertisers are to be attracted. 2) Most newspapers depend on a broadly based audience and high household penetration for financial success. 3) Steps that newspapers should take to reverse the decline of this trend include: a. Maintaining good circulation numbers should be a high priority. 1. Get newspapers into the hands of young readers. b. Editors and reporters should be free of control by marketing departments. 1. Understand, however, that the newspaper is a business enterprise that requires market research. c. Go after the opportunities in national advertising. 1. Move aggressively to get these dollars. d. Newspapers should consider their Web sites as a distinctive product rather than a mere spin-off from the printed paper. e. Give readers a choice and market to new audience segments. 1. Some papers have added youth sections. f. Invest in research and explore ways to make their Internet site complement the information provided in the newspaper. 4) Most newspaper readers see value in a newspaper with local news and information with relevance to their lives. a. Appealing to diverse interests, however, is extremely difficult. b. To maintain their position, newspapers will have to find ways to address the heterogeneous population. C. Marketing to advertisers. 1) Advertising constitutes more than 70 percent of all newspaper revenues and more than 50 percent of total newspaper space is devoted to advertising. a. In a fragmented market, newspapers are finding it difficult to get their share of the advertising. *****NOTES: Use Exhibit 10.3 Here***** 2) One of the problems facing newspapers is the dramatic increase in advertising rates and CPM caused by rising fixed costs that are generally higher than that faced by other media. 3) Newspapers must continue to convince advertisers that newspapers are an efficient means of meeting a variety of marketing and advertising objectives. 4) The marketing task for newspapers is a twofold undertaking: a. To deliver the audience. b. To compete for advertisers. 5) Newspaper advertising is considered high on believability and trustworthiness relative to other major media types. *****NOTES: Use Exhibit 10.4 Here***** 6) It is essential that newspapers retain local retailers that traditionally comprise the bulk of newspaper revenues and must gain more support from national advertisers. 7) To better position themselves favorably with advertisers’ desires, newspapers have taken a number of positive steps: a. Provide readership as well as paid circulation data, because total readership includes pass-along readers that can nearly double the newspaper audience. b. Develop a client-oriented perspective. 1. Train the salespeople in relationship marketing. 2. Develop a team approach between newspapers and advertisers to solve problems. c. Approach agency media buyers on a personal basis to demonstrate the utility of newspaper advertising. 1. Develop information centers to make it easier for national or regional advertisers to know about services and products. 2. The Newspaper Association of America (NAA), in cooperation with Editor & Publisher magazine, provides advertisers with a database of which newspapers provide special editions, targeted inserts, and other advertising options to make it easier to plan multi-newspaper media buys. 4. Newspaper Inserts, Zoning, and Total Market Coverage A. Newspaper advertising executives must provide service to a number of advertisers, many with distinctly different marketing and advertising problems. 1) Four approaches include: a. Full coverage of a newspaper’s circulation. 1. Some waste circulation was accepted by smaller advertisers. 2. Large department stores, grocery stores, and some national businesses benefited from the paper’s entire circulation. b. Zoned preprints. 1. Newspapers countered the threat from targeted direct mail with advertising circulars and preprinted inserts delivered with the paper. 2. These preprints have become a major mechanism for delivering coupons. 3. Zoned distribution preprints followed. a) Preprints could be delivered to specific ZIP Codes. b) Today, any ZIP Code within a newspaper’s primary circulation area is possible; even to sub-ZIP Code circulation clusters called microzones. c) Preprints are now the primary source of revenue for many papers, replacing traditional advertising as a revenue leader. *****NOTES: Use Exhibit 10.5 Here***** d) Preprints have surpassed run-of-paper (ROP) as a source of revenue. *****NOTES: Use Exhibit 10.6 Here***** e) Problems that occur with zoned preprints include: i. Inserts are less profitable than ROP advertising. ii. The newspaper insert has just become a form of direct mail considering that one of its primary functions is to deliver preprints. iii. As ROP decreases, so does the space for traditional news and editorial matter (called news hole). f) Zoning has offered newspapers a compelling weapon against direct mail and other forms of targeted media and holds the potential for bringing an increased number of national advertisers to newspapers. i. The zoned newspaper. This service answers the demand for information about particular suburbs of a city. Zoned editions have rewarded newspapers with higher readership and advertising increases. The zoned newspaper overcomes the problem of clutter because inserts can be targeted to more specific groups. ii. Total market coverage. Some advertisers are seeking total market penetration of specific markets. Total market coverage (TMC) may be accomplished in the following ways:(a) Weekly delivery of a non-subscriber supplement carrying mostly advertisements, (b) Using newspaper-supported direct mail to non-subscribers, (c) Delivering the newspapers free to all households once a week. 5. Categories of Newspaper Advertising A. Newspaper advertising is divided into two categories: 1) Display—all the non-classified advertising in a newspaper. a. Local (retail), (44.9 percent of total). b. National (16 percent of total). 2) Classified advertising—carried in a special section; comprises of a variety of advertisements from small yard sale notices to those for the largest automobile dealers and real estate firms (35 percent of total). B. Classified advertising. 1) Commonly called the “want ads,” also known as classified display ads when accompanied by illustrations. 2) Has its own rate card and operates as a separate department within the newspaper. 3) Revenues approach $16 billion annually; the most profitable of the newspaper departments. 4) Competition for classified ads one of the most serious financial threats to the newspaper industry. 5) Classified ads are concentrated in three major areas (80 percent of all such ads): a. Employment. b. Real estate. c. Automotive. 6) Online services have begun to compete in these areas. 7) Online services introduced two new concepts of aggregation (compiled classifieds from across the country) and vertical (single category) sites. 8) Newspapers have met these challenges with their own Web sites and aggregate Web sites of their own. 9) In order for newspapers to preserve their dominance in classified advertising, they must embrace online technology and become an innovative leader in this area. a. In the future, newspapers could become a directory of Web sites. 10) Most newspapers have positioned themselves to take advantages of future changes. C. Display advertising (divided into two categories, local and national). 1) Local advertising. a. Newspapers have an overwhelming local focus. b. The financial structure is built on local retailer support and is the most popular medium for both advertisers and consumers. *****NOTES: Use Exhibit 10.7 Here***** c. Major trends affecting local advertising are: 1. General consolidation of merchandising and discount retailers, the number of retailers and amount spent on advertising is expected to drop. 2. Services will also be concentrated, including such businesses as auto repairs, banking, and services that are part of large mega-stores. 3. As store names, brands, and images become the core retail strategy (rather than price), we may see a diversion of advertising dollars to television or upscale magazines. 4. Retailers will add their shopping options to cater to changing consumer preferences which may shirt advertising dollars to other media. 5. Retail private and store brand emphasis might cause a decline in advertising. d. The concept of relationship marketing is critical between newspapers and their retail advertising customers. 2) National advertising. a. National advertising is increasing in newspapers. 1. In 2005, national newspaper advertising represented nearly 16 percent of all newspaper advertising revenue. 2. National advertising is still a very small percentage of overall newspaper advertising. b. National advertising has increased because: 1. Newer categories of national advertisers need newspapers to successfully target high potential markets. 2. The success of the Newspaper National Network (NNN). a) The NAA made it possible (starting in 1994) for national advertisers to have easy access to a national network of newspapers for buys. b) The NAA provides advertisers with Standard Advertising Units (SAUs) from one newspaper to another, allowing national advertisers to buy space in virtually every major U.S. newspaper and prepare one advertisement that will be accepted by all of them. *****NOTES: Use Exhibit 10.8 Here***** c) A serious point of disagreement, however, still exists over the continuing local/national rate differential debate; ranging from 40-60 percent. c. Newspapers must continue to find ways to make it easier for national advertisers to buy the medium and some accommodation must be made in the rate differential. D. Cooperative advertising. 1) Cooperative advertising (co-op) is a joint promotion of a national advertiser (manufacturer) and local retailer on behalf of the manufacturer’s product on sale in the store. a. It is an outgrowth of the newspaper local/national rate differential. 2) Co-op advertising is placed by a local advertiser but paid for, all or in part, by a national advertiser. 3) The national manufacturer usually provides the ad, allowing space for the retailer’s logo. 4) The original reason for developing this form was that it allowed the national advertiser to place the ad at the local rate. 5) There are huge funds spent in this area and for national advertisers co-op advertising can additionally be a source of building goodwill with distributors and retailers and exercising some creative control over local advertising. 6) National advertisers pay anywhere from 50 to 100 percent of the cost of the co-op ad placed locally. 7) It stretches the local retailer’s ad budget and saves money for national firms. 8) Newspapers receive over half of all co-op dollars placed. E. The rate structure. 1) The rate structure for newspaper advertisements represent a dichotomy. a. Local advertisers find the rate structure and discounts to be straight forward and easy to use when buying space. b. National advertisers have a more difficult time buying space because of the complexity of buying options, price, and discount structures. 2) Discounts - Newspapers are divided into two categories of discounts: a. Flat rate is a uniform charge for space in a medium offering no discounts. 1. When flat rates do not prevail, time discounts or quantity discounts are offered. b. Open rate is the highest advertising rate at which all discounts are placed. c. The most common discounts are based on frequency or bulk purchases of space. 1. Bulk discount means there is a sliding scale so the advertiser is charged proportionally less as more advertising is purchased. 2. Frequency discount requires some unit or pattern of purchase in addition to total amount of space. 3) ROP and preferred-position rates are the most basic rates in the newspaper. a. ROP (run-of-paper) positions the ad anywhere in the paper that the publisher chooses to place it; although the paper will be mindful of giving the advertiser the best position possible. b. Preferred position means you get to pick where the ad will appear. 4) Combination rate usually means that the advertising dollar is split between different editions of the paper (such as morning and evening). a. This type of combination may involve as few as a single city market or as many papers as bought on a national basis. b. The advertisers deals with only one group and pays a single bill. F. The Rate Card. 1) The rate card is simply a starting place for negotiation. 2) Today, newspapers are among the few media, which maintain rate integrity by offering all advertisers the same rates and discounts. a. Newspapers can adjust quickly to whatever advertising space is needed. 3) Rate card flexibility can occur in the following ways: a. Multiple rate cards—cards for different categories of advertisers. b. Newspaper merchandising programs—these are also known as value-added programs, which offer other types of merchandising concessions in lieu of negotiating rates. c. Offer pickup rates—re-run ads at lower rates. G. Comparing Newspaper Advertising Costs. 1) National advertisers compare newspaper advertising costs when faced with considering hundreds of newspapers in a single media plan. 2) Advertisers use CPM for purposes of making comparisons between advertising cost and audience delivery. 3) The CPM for newspaper rate comparisons has two advantages: a. It reflects the move to page and fractional-page space buys. b. Comparisons among media are more easily calculated using this standard benchmark. *****NOTES: For calculations of CPM, see page 329 of text***** H. The Space Contract, the Short Rate. 1) Space contracts in open-rate papers must have flexibility to allow advertisers to use more or less space than originally contracted. a. Such a space contract is not a guarantee of the amount of space an advertiser will run, but rather an agreement on the rate the advertiser will finally pay for any space run during the year in question. 2) The space contract involves two steps: a. Advertisers estimate the amount of space they think they will run and confer with the newspaper on how to handle any rate adjustments needed at the end of the year. They are then billed during the year at the selected rate. b. At the end of the year, the total lineage is added, and if advertisers ran the amount of space they had estimated, no adjustment is necessary; but if they failed to run enough space to earn that rate, they have to pay at the higher rate charged for the number of lines they actually ran. That amount is called the short rate. Example: A national advertiser plans to run advertising in a newspaper with the following rates: Open rate, $5.00/column inch 1,000 column inches, $4.50/column inch 5,000 column inches, $4.00/column inch 10,000 column inches, $3.50/column inch Situation: The advertiser expects to run at least 5,000 column inches and signs the contract at the $4.00 rate (subject to end-of-year adjustment). At the end of 12 months, however, only 4,100 column inches have been run, therefore, the bill at the end of the contract period is as follows: Earned rate: 4,100 column inches @ $4.50/column inch = $18,450 Paid rate: 4,100 column inches @ $4.00/column inch = $16,400 Short rate due =$ 2,050 OR Column inches run x difference in earned and billed rates 54,000 column inches x .50 = $2,050 3) A rebate is the amount owed to an advertiser by a medium when the advertiser qualifies for a higher space discount. Newspapers usually credit a rebate against future advertising. Example: In our previous example, if the space was purchased for the 10,000 inch rate ($3.50), the advertiser would have received a rebate of $5,000. The calculation would be: Paid rate: 10,000 column inches @ $4.00/column inch = $40,000 Earned rate: 10,000 column inches @ $3.50/column inch = $35,000 Rebate due = $ 5,000 *****NOTES: for calculations & 330 in the text***** explaining the CPM, short rate, and rebate, see page 329 6. Circulation Analysis A. The Audit Bureau of Circulations (ABC) is the organization sponsored by publishers, agencies, and advertisers for securing accurate circulation statements. The organization serves advertisers, agencies, and publishers. 1) The organization aids in preventing gross overstatement of circulation. 2) It is self-regulating and self-supporting. 3) The Audit Bureau’s report contains: a. Total paid circulation. b. Amount of circulation in the city zone, retail trading zone, and all other areas. c. The number of papers sold at newsstands. *****NOTES: Use Exhibit 10.9 Here***** 4) The reports have nothing to do with a newspaper’s rates; they deal only with circulation statistics. 5) Verification still causes concern. Two areas of controversy standout: a. Discounted circulation and bulk sales; guarding against too liberal an interpretation of circulation by publishers. b. Readership versus paid circulation. Measuring reading audiences is a problem and most major papers commission market research to determine readership to supplement circulation figures. B. Technology and the future of newspapers. 1) The Internet has the potential to significantly change the way in which readers’ search and respond to classified advertising. 2) New technology must be a factor in any media company marketing plan. 3) Newspapers may need to switch to being information providers instead of editors and publishers. 4) People need to think beyond the newspaper as a print-on-paper product and consider alternative delivery systems as well as the type of information that is provided. 5) Hundreds of daily newspapers have websites. *****NOTES: Use Exhibit 10.10 Here***** 6) In spite of the potential threat, the daily printed paper has advantages to the Internet including convenience and portability. a. Cell phones and other mobile devices that provide access to the Web will likely become a decided threat to traditional newspapers. b. Aggressive moves by newspapers are being made to combat the new media threat. 7. Newspaper-Distributed Magazine Supplements A. Few of the Sunday magazine supplements survive today, except in major newspaper markets like New York, Los Angeles, and Chicago. 1) National supplements appeal to advertisers that gain network buying efficiency, broad-based circulation, and quality magazine format at a lower CPM than either magazines or newspapers. 2) The two leading syndicated national publications are USA Today (23.4 million circulation in 612 newspapers) and Parade (32.7 million circulation in 340 papers). 3) Other supplements, such as Vista (Hispanic publication), reach ethnic markets. B. Comics. 1) The comics supplement began in 1889 in the New York World. 2) The comics were used as a way to draw readers, as far back as Joseph Pulitzer and William Randolph Hearst’s time. 3) In 1897, The Katzenjammer Kids was introduced as the first modern comic strip with separate panels and speech balloons. 4) From the 1920s on with the introduction of Blondie, The Phantom, Beetle Bailey, and Peanuts comics became a major source of readership. 5) Although not a major advertising vehicle, comics are used by a number of advertisers to reach millions of readers 6) For those advertisers that want to use the comic sections, there are networks that sell the comic sections in a variety of combinations so that advertisers can place an advertisement simultaneously in a number of papers. 8. The Ethnic and Foreign Language Press A. The U.S. population is changing and becoming dramatically more diverse. 1) Newspapers are reaching these audiences with information, entertainment, and advertising, and the role newspapers play varies among the major ethnic markets. 2) The fastest growing group of ethnic newspapers is the Spanish-language press. B. The Hispanic press facts: 1) Hundreds of Hispanic newspapers are available in the United States. 2) Many major newspaper companies have Hispanic sections or sister publications in Spanish. 3) Problems faced by the Hispanic press: a. Many fragmented cultural backgrounds because of Hispanic diversity. b. Disparity in language preference. *****NOTES: Use Exhibit 10.11 Here***** C. The African American press facts: 1) This press has not shown the economic vitality of the Hispanic press. 2) The peak occurred between the 1930s and 1960s, with almost 300 papers with a 4 million circulation. 3) Ironically, as opportunities for African Americans have risen, it became less and less important to have separate newspapers to cover news of African American readers. 4) Mergers and consolidations have also influenced the African American press. 5) There is a continuing problem with the preference among the African American population for television and a few selected magazines. a. Some national companies have shifted significant advertising dollars from newspapers to the broadcast media and magazines. D. The Asian press facts: 1) This press faces many of the same problems of both the Hispanic and African American press (perhaps even more so). 2) The Asian culture is also very diverse, coming from many countries in Southeast Asia. 3) This group, though growing, is not as large as the Hispanic population, to support a national Asian press system. 4) Still, a number of newspapers serve the Asian population. E. The increasing multicultural nature of the United States is reflected in a growing number of newspapers available in more than 40 languages. F. Ultimately, the success of the ethnic press is determined by the same formula used by mainstream media—advertising support. 9. Weekly Newspapers A. Weekly newspapers fall into the categories of: 1) Suburban papers covering events within some portion of a larger metropolitan area. 2) Traditional rural weeklies providing local coverage. 3) Specialty weeklies covering politics or the arts. 4) Free shoppers with little editorial material. B. According to the NAA, there are almost 6,700 weekly newspapers in the United States with a total circulation of over 50 million. C. Weeklies now tend to be located in growing suburbs and focus upon coverage of zoning disputes, overcrowded schools, crime and how to control future growth while increasing the county’s tax base, rather than covering weddings and family reunions. D. More and more weeklies are part of networks, which also include major local daily papers. 1) Retailers, in particular, depend on this media to reach targeted markets in their trade areas. 2) From an advertising standpoint, the strength of suburban weekly newspaper networks is that they can serve equally well small, local advertisers and national advertisers or major retailers. E. Growth will be primarily in suburban and urban areas, where niches can be identified.