Could a different advertising strategy have saved Newsweek’s print edition?
BOSTON, October 25, 2012 – Newsweek may have been able to capture more ad revenue from its print edition, according to an analysis by Simon-Kucher & Partners, the world's leading pricing consulting firm.
When comparing Newsweek to one of its main competitors, Time, the analysis found that the latter publication earns 36% more ad revenue per copy. If Newsweek had closed this gap, it would have taken in $50 million more revenue in 2011 and likely earned a modest profit.
“It is critical for magazine publishers to realize that closing the ad revenue gap between them and their competitors could be the key to keeping them alive as digital distribution becomes more popular,” said Andre Weber, a partner based in Simon-Kucher’s New York office and head of the firm’s U.S. media and telecommunications competence center. “Had Newsweek managed to resolve this, they may not be in the position they are currently in.”
This ad revenue disparity is also apparent among several other popular titles. The most staggering difference comes from the entertainment industry magazines. Simon-Kucher’s analysis found that People has a 155% ad revenue per copy premium over the comparable Entertainment Weekly.
“Magazines need to look at a few key areas to help solve the mystery of prices for print advertisements: perceived value, segmentation options and bundling solutions,” Weber said.
The first question they must ask is how well do they know their perceived value relative to competitors? To answer this, they must look at it from the advertiser’s perspective.
When looking at segmentation, how well do they understand their customer segments and their specific needs? This will allow the magazines to better target their offers, hone their marketing messages and figure out where they do and do not have room to adjust prices.
Similarly, how well do they differentiate ad prices based on a segment’s willingness-to-pay? Some options worth considering include: time (i.e. how far in advance the advertiser commits), content (i.e. what the ad says), relationship to the customer (i.e. new versus existing customer), amount of exclusivity, or industry.
Weber stresses that the point is to stimulate more discussion around segmentation. Magazines may need to break away from the factors (like size, color, placement, volume commitment, etc.) that they have traditionally used to differentiate prices.
Lastly, how can they switch from selling products to selling solutions with better bundles? Magazines need to reorient their portfolios toward selling ad solutions.
Magazine publishers may still wonder how they can protect their print ad revenue amidst digital disruption. After all, digital ad prices are generally lower.
Kyle Poyar, a consultant at Simon-Kucher, warns that this does not mean magazines should abandon print – it is still a viable source of revenue.
“An ongoing analysis of their perceived value, segmentation options and bundling solutions, in addition to looking at their competitors’ offerings, will be the key to success in the print format going forward,” said Poyar.
To read the entire study, click here.
Simon-Kucher & Partners, Strategy & Marketing Consultants
Simon-Kucher & Partners is a global consulting firm with 650 professionals in 25 offices worldwide focusing on Smart Profit GrowthSM. Founded in 1985, the company has over 25 years of experience providing strategy and marketing consulting, and is regarded as the world’s leading pricing advisor.
Source: Press Release