Third Party Service Providers p. 6

By: Mark Fitzgerald A THIRD PARTY has insinuated itself between newspapers and the retailers who last year bought $17 billion worth of advertising ? and papers have only themselves to blame, consultants Jim Currow and Phil deMontmollin say.
"I need to tell you up front, it's not a pretty picture," Currow told the recent annual meeting of the Inland Press Association. "There's an honest feeling out there among retailers of dissatisfaction with newspapers."
Retailers are increasingly turning to so-called third party service providers who take over all advertising analysis, placement and billing. But these service providers do even more: Armed with the knowledge of the real rates a broad range of retailers are paying, they negotiate rates hard, cut out unnecessary circulation, pore over the notoriously sloppy billing retailers get from newspapers, and audit insert waste assiduously.
Last year, third party service providers placed more than $700 million in newspaper advertising, including $150 million in ROP ads, and "influenced" another $700 million worth of advertising, say Currow and deMontmollin, who studied third party providers for the Newspaper Association of America.
"Third party service providers will continue to grow at an astounding rate and they will continue to grow in influence," Currow said.
Just one company alone, Newspaper Services of America, accounted for $500 million in the third party ad placements, Currow said.
NSA, he added, has 20 major clients that include some of the biggest newspaper buyers in retailing. Among them: Sears, Kmart, AT&T, BMW, True Value, Kohls department stores and Levitz furniture stores.
Clients like these permit NSA and others to develop a database that tells them exactly what rates ? on and off the card ? retailers are paying to newspapers. Third party providers also open retailers' eyes to billing and circulation abuses that remain standard operating procedure at too many papers, the consultants say.
"This is not an indictment of all newspapers," deMontmollin said, "but neither are these isolated instances."
Retailers discover that they are sometimes paying for "10%, 15%, 18% more inserts than [the newspapers] have total circulation," he said.
Retailers are also realizing big ad expense savings just because third party providers rigorously analyze billing.
"Sears told us approximately 30% of all bills from newspapers are inaccurate," said Currow, a former president of the Milwaukee Journal Sentinel.
"One retailer says if the bills are within 5% either way, they go ahead and pay it," he added. "They figure below that it costs them more to figure out the bill."
All this goes to show that the much ballyhooed newspaper industry adoption of the Standard Advertising Invoice was just so much hype, said deMontmollin, former president and general manager of the Miami Herald.
"Ninety-nine percent of newspapers say they [bill with the SAI]. We found about half of newspapers really do," he said.
Newspapers need to understand that retailers are going through the same kind of fundamental change that newspapers are, the consultant say.
"The retail business is not healthy ? and has not been for several years," deMontmollin said. "Retailers must look to other sources for greater efficiency." They find that efficiency with service providers, the consultants say.
Hills department store chain is a good example, they say. The chain's top advertising and marketing executive told them that their third party provider cut the stores' orders for more than 1 million copies of inserts just through waste and inefficiency.
"She told us, 'Our sales didn't have a hiccup,' " Currow said.
The Hills executive told Currow and deMontmollin that she has not once had an unsolicited call from newspapers ? even though Hills is the number one or two advertiser in the papers they buy.
Third party providers do have some positives for newspapers, the consultants told Inland. For one thing, they often convert direct mail business to newspapers. NSA, for instance, says it has converted more than $45 million from Advo to newspaper.
"One of the real positives in all of this is that retailers want to continue to work with newspapers," deMontmollin said.
Nevertheless, the consultants say, the growth of third party providers should be a wake-up call to papers spurring them to adopt ? really adopt ? the measures that have been discussed for so long in industry meetings: zoning by ZIP code; total market coverage product auditing; electronic ad placing, ordering and billing; elimination of waste inserts; and insert advertising that bypasses single copies.
The consultants, who last year formed the management consulting firm Currow & deMontmollin, also urged Inland member papers to consider the possibility of zoning ROP.
?("I need to tell you up front, it's not a pretty picture. There's an honest feeling out there among retailers of dissatisfaction with newspapers.") [Caption]
?(-Consultant Jim Currow, former president of the Milwaukee Journal Sentinel) [Photo & Caption]