Competing on Analytics: The Future of Newspapers

By: Larry Sackett U.S. newspaper publishers are leaving hundreds of millions of dollars in value on the table because they haven't equipped their newspapers to compete in the 21st century.

The tools of business intelligence and process management -- smarter, more scientific methods of selling and management -- are used with great success in other industries, but relatively few newspapers have adopted them.

Predictive marketing, also known as data mining, is highly profitable in industries ranging from gambling (Harrah's), to financial services (Capital One and GE) to consumer packaged goods (P&G, Clorox) and online retailers (Amazon, Best Buy).

Relatively few newspapers, however, use predictive marketing techniques to target customer segments most likely to subscribe and stay loyal. Even fewer use predictive models to pinpoint potential churners and do something before a subscriber quits.

Finance departments don't have the tools to give managers the numbers they need -- when they need them. Traditional reporting of income statements, balances, and cash flow is after the fact, too late to help managers make a difference in the current period.

Advertising departments watch advertiser dollars flow into other media, and don't have access to the information that could show potential advertisers the true value of newspaper advertising -- print and online.


Facing the Future -- Successfully

Competing in the years to come will require competing on analytics, using tools such as predictive marketing and database analysis. But that's only part of the story.

Successful competitors in other industries work relentlessly to improve core business and marketing processes. Honeywell (AlliedSignal) refined its internal processes to cut costs more than $800 million annually. And Harrah's retooled its marketing processes to focus on high-value customers, more than doubling revenues from $3.3 billion in 2001 to $7.1 billion in 2005.

What sets companies like these apart is their ability to define and measure core processes, from sales and marketing, to operations, distribution, and finance. They use business intelligence, dashboards, key performance indicators (KPIs), and predictive marketing to wring all the value they can from how they conduct business.

Their goal is sustainable, profitable growth. They're achieving it. And newspapers can, too.


Take Back Advertising Market Share

With smarter and more scientific selling, the opportunities in advertising can be eye-opening. The broad perception of newspapers among potential advertisers is only that total circulation is in decline. But the bigger picture shows that when newspaper subscriber databases are matched to advertiser customer databases, the results are often startling. Frequently we see the duplication, or "reach," at 50 percent or more.

No other local medium can come close to that kind of reach. If you add your online subscribers, the combined reach hits the stratosphere.

We recently presented the results of a database analysis to a newspaper's biggest furniture advertiser. The facts were impressive: more than 50 percent overlap between the store's customers and the newspaper's subscribers. When we defined the store's five best-customer segments (spending more than $1,000 in the past 12 months), the newspaper's reach of the segments ranged from 60 percent to 70 percent.

The store owner's reaction: "Wow! We had no idea so many of your subscribers are also our customers."

The payoff: The store committed to nearly doubling its newspaper advertising spending, including a big chunk of what had been budgeted for direct marketing.

The message is clear: Use data and analytics, not net paid circulation, to sell the value of your print and online audiences.

As major retailers shift advertising dollars to online (or, as in the case of Federated, move local print dollars into national TV), more revenue must be generated locally from smaller and smaller accounts, often with smaller sales staffs.

This shift in the advertising terrain means we need to raise sales force productivity dramatically, as much as 30 to 50 percent. The only way to achieve these increases is business process improvement -- revamping the sales process itself -- which can include:

-- Improve the quality of sales leads by finding non-advertising prospects that have similar characteristics to existing accounts, using business demographics.

-- Further penetrate advertising categories by offering category-specific packages of print, online, and direct marketing.

-- Better manage sales pipelines by tracking the number of sales calls, new business presentations, active accounts, and forecasts. Each phase of the selling process should be well defined, with specific metrics for advancing to the next phase.

-- Give advertisers information that will make them more successful, ranging from survey research (syndicated and proprietary), to geographic information systems (GIS), to database analysis, to predictive marketing.

-- Provide timely information to managers and sales reps. Each sales rep should know exactly where he or she stands every day against sales goals and prior-year performance. They should know which of their accounts are falling behind contract commitments, are showing declines, or have recently stopped advertising.

That's just a quick tour of how analytics and process improvement can yield results in advertising. The same approach can be applied across the newspaper to reclaim lost readership and circulation, cut newsprint and distribution costs by optimizing grace periods, trim expensive single-copy returns without increasing sellouts, and provide weekly or even daily revenue and expense data so that managers can react quickly to problems.


Choosing to Thrive

Improving core internal business and marketing processes is hard work, but it's the only path to sustainable, profitable growth. A publisher's mandate must be to re-examine every core editorial, circulation and advertising process to see how it can be improved. It's critical that you have accurate and timely metrics that tell you how well core processes are performing.

The choice is stark. Newspapers that work hard to reinvent themselves, equip themselves with the right data, technology and analytical tools, and improve their core business processes will survive, even thrive, in the years to come.

Newspapers that maintain the status quo will continue their slow downward spiral. They will continue to cut costs beyond the bone and thereby damage their businesses irreparably. Wall Street will not reward them, however many employees they terminate. We've seen too much of this in recent history.

The time to change is now.