PROTECTING AND GROWING
SUNDAY PREPRINT BUSINESS
An NTMC Webinar
10/10/12
PHILIP BROWN
Executive Director
Newspaper Target Marketing Coalition
Only panelists audible today
 Type questions into the right-hand panel

 indicate who your question is for
Brief survey following webinar
 Recording will be posted on NTMC website

DUFF HEYL
TMC Sales and Operations Manager
Arizona Republic

Four 10-minute segments followed by Q&A:
 Valassis NSA motivations and weaknesses
 Newspaper strengths and strategies
 What newspapers are doing protect their Sunday insert
business
JIM HART, President
Integrated Advertising Solutions
KEITH GILPIN,
Direct Marketing Consultant
SILVIA SCHENCKER, G. M. - Direct Marketing
Miami Herald
STEVE TEMPLETON, Managing Director
Los Angeles Times
The Valassis NSA
motivations and weaknesses
NTMC Webinar
10/10/2012
Copyright 2012 Jim Hart
Agenda
•
•
•
•
•
Financial Overview- What’s driving this?
How Markets will likely be selected
What will the program look like
The Bigger Threat
Tactics
Copyright 2012 Jim Hart
Motivation
Copyright 2012 Jim Hart
USPS
Copyright 2012 Jim Hart
Valassis
• Four components to their business;
– Shared Mail
– FSI Coupon Book
– Neighborhood Targeted
– Other (International, digital, etc.)
Copyright 2012 Jim Hart
Shared Mail Revenue/Profit
$250,000
$1,400,000
$1,200,000
$200,000
$1,000,000
$150,000
$800,000
$600,000
$100,000
$400,000
$50,000
$200,000
$0
$0
2005
2006
Copyright 2012 Jim Hart
2007
2008
2009
2010
2011
From 2006 (ADVO) to 2011 (Valassis)
• Revenue down 7%
• Profits up 506%
• Margin up 540%
Copyright 2012 Jim Hart
Neighborhood Targeted
• An agency/placement service that uses:
– Newspaper ROP
– Newspaper Polybag and Sampling
– Newspaper Inserts
• This segment of their business is the conduit
to moving advertisers to shared mail
• They establish their analytics can improve ROI
• Then move the retailer to Shared Mail
Copyright 2012 Jim Hart
Neighborhood Targeted Rev/Profit
$600,000
$70,000
$60,000
$500,000
$50,000
$400,000
$40,000
$300,000
$30,000
$200,000
$20,000
$100,000
$10,000
$0
$0
2005
2006
Copyright 2012 Jim Hart
2007
2008
2009
2010
2011
Implications
• This segment is a strong predictor of future
Shared Mail revenue growth
• After a revenue jump in 2007, it had been
relatively flat, dropped 22% in 2011
• Margins reflect significant pressure from other
agency/analyst/placement firms
• Other agencies will not place pure shared mail
at anywhere near the same rate as Valassis
Copyright 2012 Jim Hart
FSI- Coupon Book
• Was Valassis core product prior to ADVO
acquisition
• Was inserted 100% into Sunday newspapers
prior to acquisition
• Have shifted 8MM insertion to Red Plum
Shared Mail
• Newspapers relationships with Valassis are
often framed by fear of losing the FSI
Copyright 2012 Jim Hart
FSI Revenue and Profit
$600,000
$80,000
$70,000
$500,000
$60,000
$400,000
$50,000
$300,000
$40,000
$30,000
$200,000
$20,000
$100,000
$10,000
$0
$0
2005
2006
Copyright 2012 Jim Hart
2007
2008
2009
2010
2011
Implications
•
•
•
•
Revenue has fallen steadily since 2005
Down 36.4% from 2005-2011
Margins are off 70% during same period
These compound to a drop in profit of 81%
Copyright 2012 Jim Hart
Valassis Q2 Profit ($millions)
Shared Mail
$52.3
NT
-$2.4
FSI
$7.3
Other
$2.3
Total Segment Profit
Copyright 2012 Jim Hart
$59.5
This is the strategy that
created the current
shared mail cash flow
Copyright 2012 Jim Hart
SM
C
B
Copyright 2012 Jim Hart
N
T
SM
C
B
Copyright 2012 Jim Hart
N
T
SM
C
B
Copyright 2012 Jim Hart
N
T
This is the strategy could
enable Valassis to
establish a second
package
Copyright 2012 Jim Hart
SM
NSA
C
B
Copyright 2012 Jim Hart
N
T
Change your perception
• Disconnect the three main components of
Valassis
• They leverage CB and NT to gain shared mail
advantage
• Treat NT no differently than Vertis, Novus,
ACG, etc.
• Treat the CB like an insert, certainly no
differently than News America
Copyright 2012 Jim Hart
Market Selection
•
•
•
•
•
HH penetration below 40%
Rates above ???
Mid-sized markets
Poor zoning
PIA Factor
– Is your FSI rate an outlier?
• Isolated broadcast markets
Copyright 2012 Jim Hart
What will the program look like?
• Saturation mail in select zips and CR’s
• 50 to 60% HH penetration
• Demographic profile
– Women 35 to 54
– HH income above 50 to 75K
• More vertical than horizontal
– Must get 5 or 6 per market to work
Copyright 2012 Jim Hart
4.1 Ounces
•
•
•
•
•
•
•
Kmart
Sears
Walmart
Target
Bedmart
Michaels
……and it’s limited to 10 pieces
Copyright 2012 Jim Hart
The BIGGER threat
• Rate brokering using the NSA as leverage
• Can make a lot of money by leveraging the CB,
NT and the NSA without ever mailing a thing.
Copyright 2012 Jim Hart
Tactics
Communicate with the NAA and NTMC:
• Monitor late-week RedPlum packages
– Who is in them? Do they qualify for discount?
• Are you converting from postal to alternate
delivery to reduce delivery expense?
• Is USPS giving preferential treatment in your
market to Valassis deliveries?
Copyright 2012 Jim Hart
Leveraging and Building on
Newspaper Strengths
to be the Best Distribution Solution
for our Customers
Subscribers

Still drives a special connection with readers and a
higher value with advertisers
Opt-ins


As valuable as subscribers to many advertisers
A commitment without a required reader investment
Sunday delivery


For decades the preferred day to receive inserts
Advertisers marketing plans built around Sunday
Product and solution diversity

Red Plum remains essentially a one dimensional
solution
Content
Delivery costs

Subscriber / opt-in delivery should still trump NSA
costs for Valassis
Compete by lowering TMC costs


Replace or reduce USPS deliveries
Alternate delivery advantages
Valassis saturation might require more inserts



Most Sunday inserters don’t want saturation
Even ATZ’s may not solve the problem
Newspapers focus on quality and accuracy vs. quantity
Develop strategies to maintain or grow Sunday paid
delivery
Review and improve your opt-in program

Consider expanding the distribution footprint or
penetration target as warranted
Evaluate your insert program rates



Many papers may not have adjusted rates or structures
in months or years
Are page count rates still relevant?
How do your rates stack up against Valassis?
Expand integrated product solutions


Digital, ROP, Community Newspapers
Improved performance and value for clients
Ensure insert distribution meets client’s needs


Zips not zones for home delivery and single copy
Sub-zip code targeting options on Sunday
Talk to your Sunday insert clients and agencies


What is their read on the Valassis NSA? Would they
consider a move?
What can your paper do to enhance your relationship
with these clients?
Valassis still makes it simpler to buy multiple
markets
Possible ways to get newspapers on the same page:
Standardized distribution units, zips/subzips
 Standardized rate structures, volume vs frequency
based
 Centralized data warehouse
 Regional or national insert networks

OR SOMEONE ELSE
WILL!”
-- Jack Welch
At-Risk Assessment:
 Established at-risk account list
o
sorted by high risk, medium risk and low risk
 Most high risk are McClatchy corporate
accounts
o
target accounts must operate in at least 30 states
 Working with McClatchy on ways to prevent
these accounts from going to Valassis
Locally, what Miami is doing:
 Grow Sunday Select Opt-In Product
o
increases planned in 2013
 Re-analyzing current TMC product
o
o
do we move more out of mail and into alternate?
should we add more content?
 light news?
 and shopper-type advertising?
 build more local engagement?
 Focus on local P&D growth
o
build better marketplace for TMC and Sunday Select
products
Perform client-centered risk assessment

real vs. perceived threats
Adopt “insight selling” as new approach

rebuilding value proposition
Shift focus from distribution to attention
management

play offense not defense
panelist comments?
You will receive very brief survey
following the webinar
Your feedback is useful and appreciated!
THANKS to all
attendees and
panelists!!