Circulation at the Crossroads
Paula Rattray, V.P. Strategic Marketing, Atlanta Journal - Constitution and Scott Stines, President, mass2one – IDEAS Magazine - July/August 2000

Once upon a time the newspaper industry could have an intelligent conversation about circulation that included – well, circulation.

This article is addressed to circulation, marketing, news, advertising professionals, and especially general managers and publishers. Because today, a meaningful conversation about circulation must include everyone and everything: the product, consumer lifestyles, price, promotion budgets, advertiser demands, distribution channels, human resources, technology – and marketing.

The newspaper industry is at a crossroads for maintaining and growing circulation. Circulation marketing is one of three critical issues impacting the future of the newspaper industry. While there are differences based on region or market size, overall household growth has outpaced subscribers and penetration has declined over the past two decades. Advertising and subscription rates have increased while alternative news, information and entertainment sources have exploded.

Consumer lifestyles and behavior have undergone significant changes while dual income and single-parent household growth have increased the pace of life and the value of time. The Annenberg Public Policy Center's fifth-annual Media in the Home 2000 survey of parents and children reveals the family media environment is undergoing a drastic change. For the first time, more families have an Internet subscription (52 percent) than a newspaper subscription (42 percent).

The newspaper, as a product, has reached the mature stage of its product life cycle. The oft-talked about symptoms we are experiencing today are what happens in other mature product and market segments.

Newspaper circulation marketing is at a crossroads. Our future success depends on our ability to cut across departmental silos and focus our efforts on four key factors impacting future circulation maintenance and growth: product, organisation, promotion budgets, and pricing.

PRODUCT

In the past, our focus has been on which sales tactics would drive the numbers required to maintain, let alone increase, newspaper circulation. Today, the focus has shifted to our daily newspaper product and the role it plays in attracting and retaining subscribers.

Great journalism doesn't always equal great sales, but neither are they mutually exclusive. While most editors understand this, at many newspapers, the step from recognizing the value of routine consumer and reader feedback hasn't translated to product development. Circulators and marketers plead for an interactive relationship with editorial, "bribing" their way in with promises of single-copy sales figures, readership data and qualitative product information, while promising to avoid journalistic collisions.

Along with editors, marketers hold the keys to circulation growth. In part, the issue is whether marketing has credibility within their newspapers to deliver solutions in cooperation with circulators and editors. Together, the three create the newspaper consumer triad – each has a piece of the responsibility for growing market share, but most of the time, only circulators have responsibility for delivering the numbers. Advertising – particularly in its role as providing valuable consumer content – is the fourth leg of the circulation table required to build market share.

While each area must work together, the final product ultimately stands alone to capture a share of the consumer's time and money. An editorial department that works closely with circulation, advertising, and marketing shares responsibility for circulation results. We are not talking about eroding the integrity of newspaper journalism. We are talking about our future survival in a world that has changed and will continue to change at an ever-increasing pace. While newspapers have always played an important role as providers of news and information, the deck has been shuffled, and we find ourselves at a crowded table with a new hand of cards – a phrase popular with John Lavine, director of Northwestern University's Readership Institute which is conducting the U.S. readership Impact study.

It's about being relevant and understanding the changing role of newspapers in the lives of heavy, moderate, and light readers. While journalists are not paid to write to the interests and needs of a specific target audience, much of our daily product is not news but subjective content that should address the needs of our communities. Any serious discussion of circulation must begin and end with our daily newspaper product. How well is it aligned with the composition of the market? What points of view does it consistently reflect? How well does it understand its role as a piece of the media portfolio? What guides daily content and display decisions?

ORGANISATION

Newspapers have operated successfully for well over 100 years. Some of the same processes that were developed 50 years ago are still in place at most newspapers. Functional containment was necessary to focus resources on delivering the daily miracle. Today¹s newspaper organisation still contains stand-alone departments or divisions focusing on their specific role in the process. This silo structure is perhaps one of the biggest barriers to maintaining and growing circulation.

What can circulation, as a department, control? What can't circulation control? What percent of time is spent on sales versus distribution and on starts versus retention? How do we target attractive audiences? Should we, and how do we, reward editors for circulation increases? Each of these questions ­ raised repeatedly at recent industry conferences ­ call attention to issues that challenge current newspaper organisation and structure.

Let's assume for a moment that circulation, by itself, can control acquisition using the traditional promotions, discounting, and sales channels. Can circulation control retention, or is it an interdepartmental challenge? If so, who is accountable for increasing the average subscription length? Is information about stops available to all and discussed among departments? Do we track voluntary starts as an indicator of product relevance or external media impact on the growing segment of light and infrequent readers?

What organisational structure provides an incentive for circulation, editorial, marketing, and advertising departments to cooperate and grow youth, female or minority readership? Determining what each discipline is responsible for contributing to creative newspaper selling is critical to our future success. We will no doubt struggle with the issue of fair measures of performance given all the other influences a market can bring to bear.

While the industry ponders these tough issues, circulators still bear the lonely job of building consumer sales. Perhaps we should take another look at the way we are organised and how we share responsibility for maintaining and growing circulation. Our goal should be to create a synergy of effort that leads to products, programmes, and processes that support circulation growth. The barriers and turf battles are obvious. Future circulation marketing success depends on our ability to break down the walls and develop circulation "shareholders" that transcend organisational structure.

Without a sea change in the way newspapers are organised, significant improvements in product and circulation will not be achieved.

PROMOTION BUDGETS

Newspapers are one of the oldest media channels – but not necessarily the wisest when it comes to investing in self-promotion. As reinforced at this year's INMA Circulation Summit, we have a long history of prospering with minimal investments in circulation marketing and promotion, understandably because we were the only game in town. Our own product was a convenient and effective channel for reminding readers of our value and reaching out to infrequent readers and non-subscribers. Today, newspapers continue to spend less than any other media channel for self-promotion. INMA will soon release a study that reinforces this.

There has never been a greater need to increase marketing budgets than there is today. If only 42 percent of U.S. households have a newspaper subscription, then it's safe to assume that traditional in-newspaper promotion fails to reach 50 percent of potential newspaper readers. At the same time, the incentives for newspapers to increase marketing spending are few. More and more newspapers are owned by public companies that are driven by quarterly financial results. Money invested in marketing directly impacts the bottom line in the short-term but generally pays few short-term dividends.

Beyond the financial implications of increasing marketing spending, newspaper owners and publishers lack experience and perhaps confidence in marketing's ability to use increased funding wisely to drive long-term results. A recent study by Editor & Publisher magazine in the United States revealed that more than 25 percent of publishers were unhappy with the way their newspapers were being marketed. Newspaper marketing professionals must be willing to demonstrate sophisticated fiscal responsibility and a return on marketing investments to publishers and owners. Owners and publishers want to see results first, while marketers claim they need more funding to deliver those results. Unfortunately, as an industry, we do not have time to sort out this "chicken or egg" situation as we face today's very tough choices.

The choice for owners and publishers should be clear. If they lack the confidence in marketing required to increase the funding required to compete and survive in today's market, then they should change marketing leadership or staffing. On the other hand, newspaper marketers must be willing to assume responsibility for circulation and readership results and be able to justify any potential return from an increase in marketing spending.

PRICING

Our dependence on price-based promotions has delivered short-term circulation results but at the same time created high subscriber churn and eroded the value of our daily newspaper product. Over the past three decades, we have conditioned consumers to expect a "deal" on the newspaper. In fact, in many markets, the percentage of full-price subscribers has declined to the point where only the most loyal customers pay the full subscription rate.

Our business model in the United States has always been based on charging for our daily product. A study conducted by the Newspaper Association of America more than two years ago indicated that circulation revenue, on average, accounted for 20 percent of total newspaper revenue. Over the past few years we have seen major market newspapers like the Los Angeles Times drop their single-copy prices to 10 cents to drive daily readership. In Europe and North America, we have seen the introduction of free commuter newspapers, like Metro, enter the market and disrupt traditional pricing models.

As we stand at the crossroads of marketing circulation, we must take a hard look at the limitations of price discounting, beyond driving short-term numbers. We know that price discounting is a short-term tactic that won't serve the best interests of the customer or the newspaper over the long run. The issue is the viability of the alternative.

Consider the possibility of moving to a free daily newspaper. Imagine the changes that would be required internally to maintain current profit margins with a free product. The truth is we would not be able to maintain anything close to current profit performance. Now speculate how many households would even be willing to accept a free product into their home each day. We may be surprised how many would be disinterested in receiving our product, even if it were free. Put another way, we may also be surprised how many consumers perceive our value as declining if it were free.

As an industry we must find the middle ground between offering a free product and continually discounting the price of our product to drive short-term circulation results. All roads lead back to the product and its relevance. Discounting is easy. Selling the value of our daily product requires us to understand why consumers subscribe or buy a single copy on their way to work. Consider this: If you add up price discounting and subscriber churn, we're essentially paying a household to subscribe over the course of a year. It's past time to take a hard look at our core readers and where we have an opportunity to build circulation that will result in sustained subscription revenue and create incremental advertising revenue.

AT THE CROSSROADS

Editors, circulators and marketers stand together at the crossroads of circulation marketing, in service of quality newspapers and advertising revenue growth. We must make a choice as to our direction in the future. Given declining circulation, readership, and increased competition for a share of the consumer's time and an advertiser's budget, should we really stay on the same road?

A traditional newspaper marketing department with no influence over customer service, pricing or product development will not show results – either short-or long-term. Editors without a continuous external perspective shaping the newspaper to the market will be handicapped. Circulators pushing single copy and home delivery using traditional tools will become frustrated.

As newspaper marketers we must be willing to focus on the right choices for circulation marketing – even if those choices change the world as we know it. It is better to act while we still have choices than delay difficult decisions until our options are limited. Here's to making the right choice at your newspaper.

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