February 2001

Knowing and Growing Customers
Customer Relationship Management in the Newspaper Industry
Scott Stines - IDEAS Magazine - February 2001

Profit is always top-of-mind in the newspaper industry. As newsprint costs soar and pundits predict a slowdown in the economy, newspapers around the world are intensifying their focus on increasing revenue and reducing costs. Profit is all about maximizing return on assets, whether the asset is a printing press, a brand name, or a customer relationship. While short-term gains can be realized by cutting an inch off the newspaper or reducing staff, neither action impacts the potential long-term return on a newspaper's greatest asset – its customers.

Enter Customer Relationship Management or CRM. At first it might be easy to discard CRM as yet another "buzz phrase" concocted by software vendors to sell a new wave of applications to newspapers. But a closer look reveals an evolving discipline that cuts to the heart of maximizing the value and return derived from current and future customer relationships. Newspapers understand the value of retaining subscribers and advertisers. CRM not only holds the promise of increasing customer retention, it also provides the opportunity to maximize the value of customer relationships. This discipline cuts across departments and requires participation from every area of the newspaper to reach its full potential.

A number of newspaper executives were asked to provide their definition of Customer Relationship Management (see sidebar). In an industry where gaining agreement on the definition of "subscriber churn" can launch a multi-year debate, the similarities of CRM definitions is revealing.

CRM is to increasing customer value as Kaizen is to continuous quality improvement. While Kaizen focuses on quality, CRM focuses on customers. Our panel of newspaper marketers agreed that CRM is customer centric or customer focused. They also agreed that CRM is a process, not a project. David Morel, Director/Circulation Consumer Services at The Dallas Morning News, describes CRM as an educational process and John Maher, Director of Database and Circulation Marketing at the Kansas City Star, also identifies CRM as a process of understanding a customer's evolving station in life relative to their experience with the newspaper. It is clear from the definitions from inside and outside our industry that CRM is not a destination, but a journey focused on increasing the value of customer relationships over time.

So what separates CRM from past initiatives that have focused on customers and customer satisfaction? CRM is more than an internal campaign (project) to improve customer service or satisfaction. CRM is a way of doing business that impacts finances, functions, organization structure, and the culture of a newspaper. Think about your personal and professional relationships for a minute. Name a company that you have done business with that you believe delivers exceptional customer service. The companies that come to mind will probably have a couple of things in common. First, they will be aware of you as a customer and go out of their way to recognize and reinforce the value of your relationship with their company. Second, they will likely take a proactive stance to your business: not just responding to your requests, but anticipating your needs and providing products or services based on what they know about you and your business.

CRM takes a proactive approach to maximizing customer value. Tom Ratkovich, President, ASTECH-Intermedia, views CRM as a process in which a newspaper proactively and ethically seeks to leverage customer interactions to enhance the quality and profitability of relationships. Don Poepping, Director/ General Manager of Direct Marketing at the Minneapolis Star Tribune, describes CRM as creating "just in time" marketing that demonstrates to customers a concern for their time and an appreciation of their relationship with the newspaper.

While our newspaper panel shares a common vision for CRM, several members point out what CRM is not about. Eric Rossi, Director of Database Marketing at the Fort Worth Star-Telegram, believes that CRM is not a system, although CRM applications utilize database and Internet technology to maximize customer relationships. Chuck Farraj, Marketing Information Manager at the Orlando Sentinel, indicates that CRM is more than technology, and goes on to say that CRM requires significant change within newspapers to become more customer centric. CRM industry leaders reinforce these thoughts. A contributor to an online forum on CRM in the hospitality industry pointed out that "CRM is not about technology any more than hospitality is about throwing a welcome mat on your front porch." Another CRM forum participant indicated, "at its core, CRM has everything to do with customer satisfaction and nothing to do with technology, except insofar as technology furthers that end."

CRM is about change. Change in the way we build an understanding of customer needs, change in the way we serve customer needs, and change in the way we organize our efforts to meet ongoing customer needs. A CRM online forum participant summed it up as follows: "CRM is about an entire change of mindset to become customer oriented; it is not simply a piece of technology that will solve all your needs." For a newspaper that has embraced the CRM discipline, staff coming to work on Monday aren't thinking about what the lunch special will be in the cafeteria, but rather are worrying about whether the Jones family's newspaper was delivered on time, or whether the Smiths were able to sell their used car over the weekend.

A key requirement for the successful adoption of CRM disciplines is a thorough understanding of current customers and their needs. To acquire an understanding of customers requires newspapers to not only be able to aggregate customer information, but also translate that information into knowledge. Knowledge that changes the way they do business. Don Poepping points out that knowledge of customer transactions, demographics, and media preferences should be used to target offers, information, and services. Tom Ratkovich also talks about leveraging customer interactions to acquire, analyze, and assert relevant data for the purpose of enhancing customer relationships. CRM requires more than knowledge of customer segments, but knowledge and understanding of individual customers. Stop for a minute and think about what you know about your newspaper's customers. If everything you know about customers is derived from readership or market potential studies, then a significant information gap exists that could impede your newspaper's ability to adopt CRM disciplines.

CRM is about maximizing the return on assets. Tom Ratkovich believes CRM is about creating win-win scenarios with your customers- customers win with value, newspapers win with profit. David Morel builds on this idea with his belief that CRM is about understanding customer needs and expanding the newspaper's influence. Chuck Farraj believes that CRM should enable newspapers to optimize revenue and increase shareholder value. CRM is about making money not just today, but tomorrow. As newspapers search for ways to maintain traditional profit margins, CRM disciplines provide a path for maximizing the return on customer assets.

Where the newspaper industry is today has a lot more to with where we've been, than where we are going. Over the past 20 years the number of markets with competing newspapers has declined to a handful and as our advertisers and readers often remind us, we are the "only newspaper in town. This doesn't mean newspapers don't face increasing competition from other media channels, it does suggest that we haven't had the direct newspaper-to-newspaper competition that would have forced us to hone our products and improve our level of service. As an industry we have adopted a "if it isn't broke, don't fix it" attitude about our business. We occasionally have a wake-up call, like newsprint prices, but then things improve and we shelve the changes we had in mind when things weren't going so well.

The newspaper business tends to be dominated by one-way communications. We print and distribute the news. Yes, a reader or advertiser can respond via our editorial pages, but only after an editorial board decides what is printed. On the business side we provide advertising opportunities. Advertisers are invited to meet a deadline, conform to production specifications, and pay on time. If you think this assessment is a little too harsh, consider how we as an industry have responded to retailer requests for more targeted distribution options for their advertising. Thirty years ago major retailers insisted that we provide them with more distribution options. Today, most newspapers in North America still do not offer advertising distribution by ZIP Code, or lower levels of geography. As an industry we are not big on change. And as we've seen, CRM is all about change.

Our business, by its very nature, tends to be reactive, rather than proactive. We go to work when something happens. And when we are proactive, the activity tends to serve our own needs (rate increase), rather than the needs of our customers. The newspaper industry is product-driven, rather than customer driven. There are some publishers, thankfully few, that believe the customer relationship is fulfilled with the timely delivery of the daily product and that customers should expect no more from their relationships with the newspaper.

Newspapers have organized themselves by function to ensure the delivery of the "daily miracle". This has led to functional areas that operate autonomously as well as the creation of silos that impede information sharing, speed to market, and problem resolution. If you don't agree, try calling your newspaper and see how many times you are transferred before having your question answered or your issue resolved.

As an industry we focus on short-term tasks rather than long-term processes. We are masters at completing thousands of tasks each day that result in the production of a daily newspaper. Day-to-day focus on product, combined with the transition from private to public ownership, serves to reinforce our focus on daily or quarterly results, rather than long-term gains.

The final barrier to the adoption of CRM in the newspaper industry relates to management buy-in. Although the CRM journey promises significant long-term benefits for newspapers, we will fall well short of our destination without publishers or owners serving as the champions for increasing return on customer assets. Think of other initiatives at your newspaper and why they failed. Lack of management buy-in and constant, visible reinforcement has led to the demise of excellent ideas, programs, and plans. As Chuck Farraj points out in his definition of CRM, the discipline requires a sea change within newspapers to make us customer centric. And that change must come from newspaper leadership, and be reinforced at every level of the newspaper organization.

To seriously consider CRM we must reassess our values as an industry. We must recognize that customer relationships are our most valuable asset. And we must focus our efforts each day on the small and large steps required to maximize customer assets and long-term profitability.

BEFORE

Product Driven

Task Oriented

Reactive

Silo Functions

Short-Term Focus

Lack of Management Buy-In

AFTER

Customer Driven

Process Oriented

Proactive

Integrated Functions

Long-Term Focus

Top Management Champions

What is Customer Relationship Management?

A number of newspaper marketing executives were asked to provide their definition of CRM. Those definitions, along with a couple from outside the newspaper industry, are provided below:

"CRM is the business strategy and culture that enables organizations to optimize revenue and increase shareholder value through a better understanding of their customers. It (CRM) is more than technology. It requires a sea change within newspapers that makes us customer centric."

"CRM is about knowing and growing customers. Everything we do should be filtered through those two objectives. CRM is an educational process that constantly reinforces the relevancy and value of the newspaper to the consumer. It's about understanding needs and expanding influence."

"CRM maximizes the use of customer knowledge (transactions, demographics, media preference) to target offers, information, and service in a manner which creates "just in time" marketing and demonstrates to the customer a concern for their time and the value of the relationship to the business."

Don Poepping, General Manager of Direct Marketing Operations, Minneapolis Star Tribune

"CRM is a process in which a marketer proactively and ethically seeks to leverage customer interactions to acquire, analyze, and assert relevant data for the purpose of enhancing the quality and profitability of the marketer's relationship with its customers. It is about creating win-win scenarios – they win with value, you win with profit."

"Customer Relationship Management is not a system, but rather an approach that provides coordination of all efforts to communicate with a customer including customer service, marketing, and any other customer-centric function. CRM increasingly utilizes database and Internet technology to seamlessly maximize the relationship with the customer."

"CRM is the process of understanding a customer's evolving station in life relative to their experience with your product or service and then acting on that information to profitably bring more value to them through your relationship over time."

"CRM means using technology to develop market-oriented strategies rather than product-focused strategies. That means identifying key customer segments, what they look like and what they want and need from us. Once we understand those things, we must innovate products and services and improve and automate our business processes in a way that delivers value to customers."

"The key word in CRM is "relationship" and if we recognize that, then we can focus our product and services on creating a long term consumer. By creating a database and better understanding of the individual we will have much more success keeping them. Treat them like a "special individual" instead of a number and you will see the tremendous benefits"

Dennis Skulsky, Vice President of Readers Sales and Service, Pacific Press/Southam, Inc.

"CRM is a business strategy to select and manage customers to optimize long-term value. CRM requires a customer-centric business philosophy and culture to support effective marketing, sales, and service processes. CRM applications can enable effective Customer Relationship Management, provided that an enterprise has the right leadership, strategy, and culture."

"CRM extends the concept of selling from a discrete act performed by a salesperson to a continual process involving every person in the company. It is the art/science of gathering and using information about your customers to build customer loyalty and increase customer value."

Every industry, including newspapers, has its own special language or acronyms. CRM is no different. Following are some common terms and their meanings:

CAPM – Customer Asset Portfolio Management CRM - Customer Relationship Management

For more information on Customer Relationship Management, check out the following books:

Scott Stines is President of mass2one, an e-marketing software and consulting company serving the newspaper industry, and is president of the INMA North American Division. He can be reached by telephone at +1 319 247-5874 or by e-mail at sstines@mass2one.com URL: www.mass2one.com