Daily News from the Conference
WAN is expanding its conference reporting service to provide more complete summaries of conference presentations to its members and to subscribers to the Shaping the Future of the Newspaper project.
WAN is expanding its conference reporting service to provide more complete summaries of conference presentations to its members and to subscribers to the Shaping the Future of the Newspaper project.
Below you will find the summaries from the Thursday sessions.
Click here for the summaries from the Friday sessions.
The Future of Advertising Revenues
Miel Bakker, Head of Media Research, Goldman Sachs International, Europe
Global advertising spend will increase 2.78 percent this year and 4.46 percent in 2004 following two years of negative growth, according to forecasts by the Golden Sachs investment bank, which warned that a second Gulf War would change the picture for the worst.
Mr Bakker kicked off the Newspaper Advertising Conference with these projections for geographical advertising spend:
In the United States, an estimated growth rate of 2.16 percent in 2003 and 4.69 percent in 2004;
In Europe, advertising will grow 1.99 percent this year and 3.5 percent in 2004:
Asia will see growth of 3.68 percent in 2003 and 3.43 percent next year:
Forecasts for Latin American advertising show the largest rebounds, with 8.54 percent this year and 10.66 percent the next.
But these growth rates could be seriously hit if there is a second Gulf War, said Mr Bakker.
"As we saw in the 1991 Gulf crisis, we think a similar event could occur and it could be devastating," he said. "What you see is, everybody watches CNN but the advertisers pull back because it is seen as unethical to advertise your Big Macs during a war. That’s just broadcasting, but we think there will be spillover to other media."
In general, advertising growth is driven by growth in Gross Domestic Product and in the Leading Indicators, said Mr Bakker -- but the period following the 1991 war was an exception as advertising remained sluggish as economies rebounded. The same thing could happen again, he said.
The forecast presented today for a modest advertising rebound follows two poor years for advertising spending, which fell -4.1 percent globally in 2001 and -0.86 percent globally last year, according to Goldman Sachs figures.
In light of current conditions, Mr Bakker suggested that publishers continue to keep a tight rain on expenditures and to cut costs. "There is always room for more cost cutting. You don’t want to cut costs to the extent that you lose your better editors, you have to be selective where you cut costs."
It’s All About Conversion
David Hoath, Director of Marketing, Newspaper Society, UK
The Newspaper Society’s Newspaper Advertising Effectiveness Study is to be released in London next week, but Mr Hoath provided a sneak preview into one of the largest studies of its kind.
It is called the Conversion Report. "Local press is all about conversion," says Mr Hoath. "Converting customers into buyers. Conversion. That’s what we think is the unique position of the local press as an advertising vehicle."
The study, in which more than 9,000 people were interviewed at a cost of more than 400,000 pounds, found that local press pushes consumers along the buying process, delivering significant increases in awareness, familiarity and consideration, which lead to increased sales.
"This proves that used in the right way, local press can drive customers from awareness to action," said Mr Hoath.
Here are some details from the study, in which 26 brands were monitored for the effectiveness of their advertising in the local press between September 2001 and February 2002:
The average level of awareness at the start of the study across all brands was 13 percent. The average peak level of awareness was 23 percent -- an increase of ten percentage points, or a 77 percent increase. This is second only to TV in terms of responsiveness.
Local press can reach some consumers that other media cannot. The study found it contributed 9 percent, on average, additional consumers.
For a specific "fast moving consumer goods" product launch, the study found that local press generated higher awareness and maintained that awareness better than what was generated in an area that had no regional press (44 percent increase in media awareness initially, compared to 38 percent in the non-test area, and a 25 percent decrease in awareness when the campaign stopped, compared with a sharp 37 percent decline in the non-test area).
"And for FMCG brands, historically fixated on TV, this sort of evidence is crucial to successfully persuade them to re-deploy money to local press," said Mr Hoath. "As you would expect, local press can be even more effective in the area of retail, with traditional users."
Colour and advertising formats both had major impact on advertising performance. But while colour and size are definitely worth their premiums, evidence suggests that specific guaranteed positions, or left versus right hand pages do not have such a marked effect.
The study confirmed previous studies showing that the vast majority of readers eye flow was from the top centre down through the centre and then out of the bottom left of the page. Those advertisements that followed this classic layout - using a strong headline with body copy and an offer on the bottom left hand corner -- were consistently the most effective.
"The effectiveness study has achieved most what it set out to do," said Mr Hoath. "It clearly demonstrates local press is effective. That it can work for a whole range of campaigns and brands and campaign objectives. That it can be effective for the non-tradition FMCG brand as well as the major retailers who traditionally use the medium. It can improve brand health as well as deliver awareness. For some client, we have made the clear link to sales effect."
Simple Math: Targeting Broadcast Advertisers
Scott Whitley, Advertising Director, The San Diego Union-Tribune, USA
| |
 Scott Whitley, the Advertising Director of the San Diego Union, addresses
the conference on how newspaper advertising compares with broadcast media
|
It makes sense for newspapers to target their largest media competitors, because that is where the money is.
In the United States, for example, television takes the largest slice of the media pie, commanding a 23 percent share of overall media expenditures, followed by direct mail and newspapers at 19 percent.
"When you combine radio with TV to look at total broadcast share, it grows to a staggering 31 percent of the total media pie, or more than 73 billion dollars. Simple math suggests that if US newspapers shifted merely 1 percent of those combined broadcast dollars to print, the revenue shift would be more than 730 million dollars for newspapers," says Mr Whitley.
The National Newspaper Network (NNN) is the sales arm for newspapers at a national level in the United States and it sells advertising in categories where newspaper share is particularly low -- pharmaceutical and package goods manufacturers, for example.
"When the NNN goes after a national broadcast advertiser on behalf of newspapers, they use a ’value of integration’ approach in their sales efforts. That is to say that they try to compare the relative strengths and weaknesses such as reach, cost per point, etc., of broadcast versus newspapers, and in almost every case, as you analyse these, print consistently come out as the winner," says Mr Whitley.
Some examples:
In demographic terms, the best and most desirable audiences are reached most efficiently by print. One-third of daily newspaper readership is comprised of the most affluent households in the US, versus prime-time TV’s less than 30 percent. "We also outperform TV when targeting the best educated audiences as nearly 40 percent of newspaper readers are college graduates, compared to TV at less than 32 percent."
Consumers turn to newspapers for advertising information. About two-thirds of consumers who are in the market for a car turn to newspapers for shopping information, compared with only 1 in 7 who look for shopping information on TV. The same is true in other retail categories.
Overwhelmingly, consumers say that newspapers are the most believable medium, compared to TV. The same is true of their views on trustworthiness and being informative.
Newspapers are less expensive on a per-cost basis. Viewed on a cost per thousand basis, the cost to reach the adult population is merely $6.10 per thousand using newspapers versus more than $10 when using TV. And while television routinely claims its superiority in reaching the coveted 18- to 34-year old market, newspapers are, in fact, the most efficient by a wide margin.
Television does have its advantages, however, and NNN is careful to avoid making TV advertisers feel as if they have made the wrong decision. TV is personal and entertaining; it has a quick impact on consumers; it is easy to target key audiences, particularly by age and gender; it is easy to extend reach and frequency; television develops loyal audience and allows advertisers to create memorable campaigns.
"In the end, a media mix is always better," says Mr Whitley. "And helping an advertiser understand each medium’s pros and cons ultimately helps them create a stronger message across several media."
Training is the key to this process, Mr Whitley said. "We spent a full year teaching our staff to use research data sources prior to launching our campaigns to sell against TV and radio. Before the first sales call, they have to become accustomed to speaking in terms of ’reach and frequency’, target and gross rating points, and so on."
Newspapers have had success with this approach. Two examples: Proctor and Gamble, which had only one brand in newspapers five years ago, now has 25; and Ikea more than doubled their newspaper budget at the expense of broadcast TV in the San Diego market.
Potential vs. Current Advertising Revenue: A Benchmarking Model
Giorgio Marchegiani & Vincenzo Santelia, Vice Presidents, Bain & Company, Italy
Bain & Company have developed a quantitative model to predict the effect of a number of variables on total advertising revenues.
Advertising itself depends on such things as circulation, the kind of audience, the newspaper focus, and the frequency, says Mr Marchegiani. "But what are the numbers behind it? Which of these four things is most important to work on to improve revenues?
The Bain Predictive Model of Advertising Revenues for Newspapers and Magazines measures seven variables -- segment leadership, readership, circulation, target advertising segment focus, readers target (the percentage of readers with mid- to high-incomes), editorial flexibility (does it appeal to advertising investors?) and frequency.
Bain collected data on these variables from 120 Italian titles and then wrote an equation to try to find the parameters that link all the variables to advertising revenues.
"What came out was a very high level of correlation," said Mr Santelia. "Ninety-two percent of the variance in advertising revenues at any Italian title is fully explained by the variance in these values. There is just 8 percent that is due to other factors.
"Advertising revenue for any title can be quite accurately predicted and you can weigh the importance of each variable," he said.
The researchers found that the target audience and the leadership position of the title were the most important factors in predicting potential advertising revenue in the Italian market. Less important were circulation, readership and frequency. Editorial flexibility was the least important of all.
Mr Marchegiani and Mr Santelia presented several case studies to demonstrate the value of this tool.
In one first case, an Italian newspaper used it to evaluate the revenue potential of two strategic options -- to either reach national coverage by aligning with other titles, or to focus on two or three regions where leadership could be gained.
"By measuring the ’value of leadership’, the model supported the local leadership option," said Mr Santelia.
In another, the model was used to determine which titles in an advertising sales package were strong and which were the weak ones that were being supported simply because they were being sold together with the others.
"All the titles appeared to be making money because they were being sold as a group, but when you calculate the same profit and loss, substituting the actual figure of ad revenues versus the predicted figure from the model, you get a much clearer picture and you find that the contribution of the last four or five titles would actually be negative."
Mr Santelia said the model could be tailored for use in other markets. "You try to collect all you know and all that is available in your market and try to correlate it with the variable that you are interested in," he said. "It gives you an idea of what works in your market and what doesn’t -- you get better strategic decisions, better food for thought."
Is Newspaper Advertising Easy to Buy and Is the Price Right?
Hans-Hendrik Puvogel, General Manager, Klausmeier Marketing Consultants, Germany
The answer to the above questions is a resounding no, says Dr Puvogel.
"For me, it is too difficult to buy today. And, it isn’t a question of, ’is the level of price right,’ but the process of pricing is the problem and there is a lot that can be done about that."
Dr Puvogel acknowledges that the pricing question has been around forever. "Although it is an old issue, not a lot has happened. But if you want to move along into an IT-driven industry, you need a pricing system that is compatible with IT."
Any way you look at it, newspapers are behind other media in terms of the ease of buying and the transparency of pricing, says Dr Puvogel.
"In terms of reducing operating costs, the balance is tilted to the other media," he says. "Standardised formats -- they’re ahead of newspapers. Reducing price complexity -- the other media are ahead. Support of the planning and buying process through administrative systems -- the other media are ahead.
"Newspapers maintain their diverse formats, for a variety of reasons, they often have a number of complex and untransparent pricing systems, and there is hardly any support for process integration," he says.
So what can be done about it?
Creating a new relationship with media agencies is step one, he says. "Media agencies are considered the enemy, they are not seen as a sales channel. Are there ways to improve the relationship with the agency?"
Reducing their costs would be one way. "Planning, buying, administration, training and employees are far more expensive for newspaper than for broadcast. There is a major issue there when agencies compare newspapers to other media."
Reducing the complexity of the pricing system and making it more transparent is another step, though Dr Puvogel acknowledges this would be counter-productive in the short-term. Instead, he counsels a long-term strategy to get rid of the current pricing system, which because of its complexity, relies on well-train, older -- and more expensive -- staff.
Following the lead of other media to find industry-wide solutions for on-line booking systems and other efficient administrative systems is also among his suggestions.
And reducing the reliance on the agencies is another step. "Develop new channels," he says. "There are ideas, they may be crazy, they may not be applicable everywhere, but some newspapers are already considering them. "Create regional specialist service providers to agencies and/or advertisers for all media. Develop the internet as an automated sales channel. Co-operate with a strong regional partner to offer specific services to retailers in terms of using the system."
