Dangling A $500 Million Ad Budget p. 13

By: M.L. Stein

Tandy Corp. chairman tells newspaper publishers he expects
more attentive ad policies and editorial support if they want
a chunk of his chain’s ad dollars in the next four years sp.

Tandy Corp. CHAIRMAN and CEO John Roach dangled a $500 million advertising budget before publishers along with some stiff demands for getting their share of it.
Roach, whose company operates the nationwide chain of Radio Shack stores and its rapidly expanding Computer City and Incredible Universe outlets, made it plain that he not only expects more attentive advertising policies but editorial support as well from newspapers.
In a no-holds-barred speech at the Newspaper Association of America convention in San Francisco, Roach ticked off a list of concessions he wants if publishers are to compete successfully with direct mail, television, radio and on-line services for Tandy business.
The company’s current ad budget is over $225 million and is expected to climb to $500 million in 1998 to keep pace with its anticipated $12 billion to $15 billion in sales by that time, Roach predicted.
“The question is, where will this $500 million be spent?” Roach asked rhetorically. The answer regarding newspapers depends on the kind of service they provide to Tandy and their level of community boosterism, he said.
“Some newspapers are highly focused on economic development, the success of their customer and the service they provide,” he observed. “At the other extreme, are newspapers that just want to make sure you live by all their rules, figure there will be another customer when you go away ? and you hear from them every time they increase your rates.”
Before Tandy decides on a site for a new store it checks out several factors, including the ad rates and editorial practices of the local newspaper, he disclosed.
Roach said he seeks the newspaper’s financial support of grand opening benefits as well as news coverage of such events.
“If I’m the customer, I’m entitled to equity,” he said. “I don’t expect the advertising department to write the copy, but I do expect the newspaper to give significant coverage to new store openings and important news releases.”
For ads, he wants newspapers to “offer us deals” for grand openings as its other vendors do and to come up with special advertising breaks, such as placement in the center of the stock market listing.
Roach cited the Portland Oregonian as giving Tandy “good support” when it opened its first Incredible Universe in that city. At the time, he said, he met with the paper’s publisher, editors, writers and advertising staff.
“We’ve duplicated that experience in other cities, but it’s not the case everywhere,” Roach said. “In some places you’re lucky to get to see the ad salesman.”
But Roach praised the Oregonian, Miami Herald, Fort Worth Star-Telegram and Sacramento Bee as newspapers that are “customer sensitive.”
Newspapers also should support the “good” in their communities ? their institutions, traditions and businesses,” he asserted.
“It’s fine to be critic where there are significant problems ? although some editors go a little crazy in their zeal for balance ? but you impact the morale, the pride and the spirit of your community,” Roach contended.
“There are a number of people on the editorial side of journalism that do not accept this unless the publisher demands it ? emphatically.”
On the advertising side, Roach complained about newspapers that he said put Tandy ads on “Page 55-A,” although the company is paying more than other volume customers who get better placement. Such practice causes company store managers to brand newspapers as wasted advertising, he said.
Tandy also looks askance at newspaper advertising because it feels it isn’t getting sufficient value for its money, he pointed out. For example, he said, the top 150 Radio Shack markets account for 75% of that division’s business and 60% of its newspaper ad budget.
To reach the other 900 papers in which the company advertises and which account for 25% of the business, Tandy allots 40% of its ad budget, he said.
“That’s why you are more and more frequently being left out of our ROP plans,” Roach told publishers.
Tandy managers also complain about the varied invoices of different newspapers, thereby increasing the administrative cost of paying bills, Roach said.
“But I’m sure it’s convenient for your accountant ? and besides, you’ve always done it that way,” he added dryly.
Roach further inveighed against varied insertion costs and delivery modes. Different insertion prices among newspapers have driven Tandy to use Advo and other alternative delivery systems for some of its divisions, he said.
“Why can Time magazine be delivered to my home by an alternative delivery system but I can’t target my newspaper advertising delivery?” he asked.
“My sense is that someone will do it even if newspapers don’t. You may say zoning is as close as I can come. Well, try zoning an ROP ad and see where you end up ? in most papers, not where you want to be.”
Roach said it was not clear whether newspapers will be relevant as Tandy more than doubles its advertising in the next four years.
“Will you offer adequate coverage of the market and can you meet evolving highly selective distribution?” he inquired.
“I fear some will sit back, increase rates, reduce service and coverage, and then increase rates again and drive customers like me into other media.”
In the question-and-answer period, Shelly Simonds, a Stanford University graduate student in journalism working for the student-produced convention newspaper, NAA News, asked Roach his opinion of the traditional separation of the news and advertising departments on newspapers.
He replied that he didn’t believe the ad department should dictate news coverage, but “the newspaper should report on what’s important to it.”
Another convention speaker, Postmaster General Marvin Runyon, called newspapers some of the Postal Service’s largest and most important customers.
Besides relying on First Class mail for billing and collecting payments, newspapers are increasing service to their customers and growing beyond their subscriber base by using advertising mail, “one of our fastest growing products,” he said.
“Bottom line, we appreciate your business and and we’re committed to earning more of it by delivering quality services at the right price,” he added.
Runyon said there will be only a modest increase in postal rates in 1995, but he conceded that even that will be hard on small newspapers.
He noted that he has discussed the problem with NAA and the National Newspaper Association and will meet with other industry representatives to “review underlying cost data.
“We value the grassroots press and we’re sympathetic to this small but important part of your industry,” Runyon said.

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