It doesn't seem to be enough anymore to just be digitally savvy, or even completely focused on digital. For you to be fully on board, you need to have adopted a disdain for print. About a year ago, I was chatting with the CEO of a company that was gobbling up newspaper properties left and right. He asked me how I helped newspapers. I responded that there's still a lot of profitable volume to be had by including print in the sales conversation.
His response was, "So, you'd double down on print" For those of you that don't play poker, you double down when the odds of you having a winning hand are significantly higher than average. I responded, "No, I just don't think print is a hand we should fold quite yet." I wanted to ask why he was buying newspapers instead of just launching web sites, but he clearly didn't want to discuss print.
A recent gift from the U.S. Postal Service really hammered home how widespread this sentiment is getting. Even if you don't mail, this creates the context for my main point, which has little to do with postage, and more to do with mindset.
The USPS has decided to issue a challenge of sorts. On January 22, the rate for TMC-type products changed dramatically. These rates are based mostly on the weight of the product. You can now deliver 4 ounces for the price of 3.3 ounces--21% more capacity at zero cost. In a large market, this can be a gift of a half million dollars of 'FREE' capacity to go out and sell more at zero incremental cost.
The reactions I'm getting in conversations about this windfall speaks volumes about where many newspaper companies are headed. In a conversation with the person running the TMC at a sizeable market, I was told, "If I were to push this as something we should focus on, I would be included in the next reduction of force. Print is a dirty word. I'd be someone that just doesn't get where we're heading. Besides, most of the people that would go out and sell that are gone."
In another conversation, we discussed killing a profitable TMC program. The edict had come down to reduce expenses by a certain amount and there just weren't enough people left to cut to get to that number. The only place they could find that much expense was the TMC distribution. Adding fuel to the fire was the fact that the local sales staff had been reduced to the level where it was unlikely they could pursue revenue for this audience and have any chance of hitting their digital goals.
So they killed it.
In the past couple of years, I've seen several papers increase their TMC revenue by well over 50%. One large property improved their net by $1.5 million. This took three things; 1) a willingness to focus, 2) they still had enough reps selling print to move the needle and 3) they followed a high-volume strategy. The money is out there. Too many papers are turning their backs on it in the name of digital progress.
There are significant parallels between newspapers and the big box stores that have supported us--and us them--for decades. While it took a lot longer than the destruction of newspaper classifieds, online sales of about 9% was all it took to start tipping retail stores into the red. When your business model is 12 brick and mortar Best Buy stores in Phoenix, that's a lot of overhead to cover. That requires a high revenue volume to cover it and produce a profit.
As the big boxes looked at the ROI of their various media, print jumped out as having the lowest return. Of course it does. If you look at things like email and social as essentially free, the cost of printing and distributing a physical circular is going to look bad in comparison. But, if you're getting about a 3 or 3.5 times return--on by far the largest scale of all your efforts--it's hardly wise to kill it.
You can't survive at low volumes unless you close all the stores and go completely online. But about 91% of your revenue is still offline.
Newspapers have the same challenge. Newspapers have high overhead that requires a high-volume revenue mindset to work. Reduce the overhead as much as reasonably possible.
When you start cutting or moving offline resources and/or focus that are cash flow positive and directly related to driving volume into the offline side of your business--you're reducing positive cash flow and triggering a death spiral. There is no low-volume position in a high-overhead industry. Use the offline cash flow to fund online.
Newspaper direct marketing strategist Jim Hart is a partner in Phoenix-based DM for Newspapers (dmfornewspapers.com) and a partner at Integrated Advertising Solutions. He can be reached at firstname.lastname@example.org.