Publisher's Paradox: Increased Buys Lead to Lower Profits
A Plethora of Media Options
In the "old" days our sales staff had it "easy." We offered a limited set of opportunities that fit into a few basic buckets that made the media buyer or chief marketing officer's decision simple. Essentially, a marketer could buy access to our audience through advertising (in print or online,) maybe they could also tack on an event sponsorship, or even a display ad in our email newsletter.
Today, we present our media buyers and marketing executives with a plethora of options. Sure, you can still buy a print ad or a display opportunity, but we also offer video ads, placement in our podcast, social media inclusion, promotional campaigns, contests, native advertising, lead-gen campaigns...the list goes on and on.
With every new opportunity to spend money with our media brand we create a confusing landscape that doesn't necessarily drive new revenue, it just splits the pie more ways.
The Sales Call
Here's how the sales call plays out:
"I have a $100K budget to spend with your magazine brand this year and I'm excited about it," says the CMO.
"That's great," says the sales person. "In the past you've spent that $100K on ads, which we really appreciate, but I'd like to share with you some new opportunities to reach your audience that we think would make a big impact with your target audience," she continues.
"Wow, I'd love to hear them," says the CMO.
"Perfect, for an additional $10K we have a great podcast you can sponsor. We also have a new video series, at $20K, where you'll be the title sponsor on YouTube. Finally, I'd like to offer you an opportunity to get more engaged with your audience on social media. If you give us some prizes each month, we'll run a Facebook contest for an additional $10K where you'll get a mention with our 10,000 fans each week! How does that sound, Ms. CMO?"
Now, the sales person is looking at this as an upsell. They're all smiles believing that the CMO is now considering a total of $140K spend with the magazine. ($100K in print ads, plus $40K in new 'stuff.') Here's the hitch:
"That sounds great, sales person. I'd like to do all of those things. But remember, I only have a $100K budget, so what can I get in the print magazine for $60K if I also do the podcast, the Facebook contest and the YouTube videos?" says the CMO
Do you see what just happened there? Now we have to produce a bunch of videos, a podcast, and a Facebook contest for the exact same revenue we would have generated if we'd sold the CMO the same stuff as last year.
More media. Less Profit.
The result of this kind of sales and operations strategy is an increase in costs - now we have to produce all this stuff - while we maintain the same (or less) revenue. Obviously, this isn't a sustainable model. Something has to give.
As a result we've had to cut costs in other areas (print magazine editorial staff for example) while we ramp up our staff in other areas. From the publisher's perspective, what we end up seeing is a decline in print revenue while these new revenue streams appear to be growing. At the end of the day, it's just money switching pockets, not new money in the wallet. We're cannibalizing our revenue streams, increasing our costs and confusing our media buyers and CMOs.
The Publisher's Challenge
If you're going to be successful in the long run, we must stop doing the things that aren't driving new revenues. This week in your staff meeting, I want you to consider what opportunities you see to drive new, more meaningful revenue from your most valuable media buyers. Stop offering them more revenue streams and start offering only the most effective opportunities.
Steal These Slides
I invite you to steal these slides (http://www.slideshare.net/tpldrew/publishers-paradox) and present this paradox to your team.
About Publisher's Paradox
Your publishing world has been turned upside down in the last decade. Call it digital disruption or the death of print -- it doesn't matter. You're still challenged with driving reliable revenue for a thriving market. The problem is you need your entire staff -- from editorial to audience development -- to think differently and try new things. You need new ways to drive new revenue.
Each week, best-selling author Andrew Davis will help you get the most out of your weekly staff meeting. He'll uncover another of the puzzling paradoxes in the publishing world and arm you with a Powerpoint slide you can use to inspire your team to rethink the ways you drive revenue, build audience, and can ultimately succeed in a challenging environment.