Wednesday, July 29, 2015
When I worked as a newspaper executive we had a special sales group called print specialists. This group typically was comprised of the more senior and gifted sales personnel. These specialists had knowledge of ROP (in-paper) advertising, preprints, commercial printing, direct mail and production processes.
This group sold the more complicated products and assisted sales people selling more traditional lines of newspaper products in broadening the scope of sales opportunities.
A print specialist was able to set down with an advertiser and develop an advertising program that best suited the customer’s needs. The program could include ROP ads coupled with a direct mail campaign with customized brochures reaching targeted audiences.
Sales commission programs encouraged all sales groups to use the expertise of the print specialist. Using this approach all sales personnel had an opportunity to increase their income while improving the newspaper’s profits and providing real value to the advertiser.
The newspaper was ideally suited to serve the customer since the newspaper was a key element of the marketing mix. The print specialist was trained to create packages to meet the advertiser’s needs and develop bundled pricing packages that encouraged use of the newspaper’s products as part of the mix. Newspapers were also able to sell third party products and services as part of the bundled package that provided additional revenue and profit streams.
I was once asked if selling products in this fashion cannibalized the core newspaper products. Since I didn’t really know, I asked our accounting department to conduct a study of ad revenues and the effect of the sales approach on our core products.
The audit showed that 100% of the advertisers using the expanded product offerings spent more in the core product lines than before starting the new programs. This was due primarily to providing real value to advertiser as well as having a carefully thought out pricing and commission program.
It was evident that advertisers viewed the program favorably because the relationship between the newspaper and the advertisers improved to the point that advertisers routinely called the newspaper staff for advice on production techniques and ad campaign ideas. One of our key advertisers even called me to ask about the advantages of digital photography. I told him that I was no expert but that I would have an expert from one of our strategic alliances give him a presentation. The result was an even more robust ad program that resulted from the savings gained through the new photo process.
Today, as in the past, the winner in ad sales will be the organization that can best provide value to advertisers. It will not be the organization that is focused on selling one or two products, even if the products are the latest social media craze
In this age of the Internet and digital products, there appears to be an opportunity to return to the advertising specialist sales person.
Advertisers today are finding that developing a successful ad campaign is increasingly difficult. While many of the traditional sales tools continue to provide reach to a strong audience, new ad vehicles are finding ways to find new audiences and better target an advertiser’s key customers. Social media, search engine optimization and data analytics have provided new opportunities for all advertisers.
In earlier blogs I have said that creating a symbiotic relationship between print and digital editions of a newspaper and the website was strategically important for the survival of the newspaper industry.
Just as critical is having a sales team that can piece together customized ad campaigns that incorporate all of the capabilities offered by print, digital, direct mail and broadcast platforms.
Having sales leaders that can structure alliances and pricing with third party providers will be critical to piecing together an array of products that can be used to fit any advertiser’s needs.
Imagine a sales professional, developing an ad campaign with elements in the newspaper (print and online), on cable television, on YouTube, supported by Facebook and a targeted direct mail campaign. That is considerably different from a newspaper sales person selling the newspaper website and digital products.
For success today an organization must embrace the idea of value creation for the customer, the company and the collaborators. For media organizations, having a sales team that can combine products and content in a manner that provides real results for advertisers and new revenue and profit streams for the company and the strategic allies will be absolutely essential.
Thursday, July 9, 2015
Disruptive Innovation theory holds that disruptive innovations result from a new industry entrant finding a way to better serve the industry leader’s least profitable customers. After the new entrant has captured the least profitable customers from the industry leader it begins to pursue the next level of customers that are underserved by the industry leader. This process continues until the new market entrant displaces the industry leader.
This is well researched and there is a large body of evidence to support this theory of market disruptions. It does not, however, explain disruptions that seem to take place at the top of the customer value chain.
For example the disruption of the nylon tire business by the steel belted radial tire was not due to unprofitable customers being underserved by the industry leader (DuPont). Rather it was the need for a superior tire that was sought by the most profitable customers.
For newspapers, the first segment of business to be lost was classified advertising. This group of advertisers found that the advanced search capabilities of the Internet helped match buyers and sellers with greater efficacy than the print model. This segment of business was one of the most profitable revenue streams for the newspaper industry.
Consider now the taxicab industry. New market entrants such as Uber and Lyft are attracting the core customers of that industry. The new market entrants provide speedier service, convenient pay methods, ability to choose vehicle type and other advantages not offered by taxis.
Finally, the hospitality industry is being challenged by the like of Airbnb. This service allows individuals to stay at private residences, condos and apartments instead of hotels. Airbnb provides individuals with the ability to customize their travel accommodations according to their needs. The process is highly efficient and provides exceptional value. Here too, the customer attracted is the most desired by the hotel industry.
In all of the cases above it appears that the disruptive innovation theories regarding underserved low profit customers might not be valid in certain instances.
What is certain with the underserved low profit customer is that there is a need for a “good enough” product that doesn’t have all of the “bells and whistles” or the pricing of the products the industry leader is selling to its most profitable customers.
In the case of the more profitable customers, it is likely that the market leading companies are aware of the new market approaches but are not able to respond due to the nature of their structure. It might be that the financial focus and current capital structure won’t allow changing market approaches without heavy financial loss. This encourages managers to focus on improving existing technologies to keep their profitable customers. This strategy can fail since the new technology is superior and using pricing and guarantees on the older technologies won’t stop consumer adoption.
In some instances the industry leaders just choose to keep the current business structure with some modifications to fend off the new market entrants. In the newspaper business this proved disastrous.
For the taxicab industry, it is a combination of financial structure and government regulations that are preventing a competitive response to Uber and Lyft.
For the hotel industry there may be a sense that the old model will survive entrants like Airbnb coupled with the financial investment in the current model that may prevent a successful defense of market share by the industry leaders.
Interestingly, a strategy suggested by Clayton Christensen works for protecting the lower and higher profit customer segments. Clay suggests that the market leader should invest in or develop a company to compete in the new technology arena.
This approach allows the industry leader to manage the output of the current technology while developing the potential of the new technology. For industries like newspapers and hotels it allows the ability for the current business model to continue to serve its loyal customers while developing a new model for changing customers needs.
For industries like taxicabs it provides a realistic way to develop a new market and sidestep regulations and bureaucracies that impede accommodating needed market changes.