How to keep ad revenues flowing without cutting ad rates: 8 negotiation strategies - Folio: Special Source Book Issue 1993

I used to think telling publishers that rate-cutting isn't in their best interests wasn't necessary advice. Didn't they already know that?

After all, relatively few players were dealing off the rate card, and they kept their under-the-table tactics to themselves. But recently, rate-cutters have started coming out of the closet. They've proclaimed, with some bravado, that they are "market driven," and that those of us who wish to survive in the nineties must also be "realists," acceding to requests for negotiated discounts.

A rate-cutting disaster

Unfortunately, the out-of-the-closet trade publishers have included at least one big name, Sal Marino, president of Penton Publishing. And when an industry leader says there's nothing wrong with walking over a cliff, others may think seriously about taking the plunge.

Combine that with a tougher advertising environment, and we may have a rate-cutting disaster on our hands.

So it's highly appropriate to remind ourselves of two things: that the channel of negotiated rates is loaded with hidden, deadly mines; and that there are ways to keep ad revenues flowing without cutting rates.

Get beyond the symptom

Rate cutting is only a symptom. On the whole, magazines that sell off the rate card have less to offer than their competition. An objective audit of your magazine may reveal that it doesn't match up well with product marketing concepts of the nineties. You may be offering a dinosaur to advertisers--and that's why reduced prices are the only way to compete.

The solution? Instead of working at rate negotiations, work on the fundamentals of publishing and marketing: Make your magazine an indispensable sales tool for advertisers.

Scheming doesn't pay

Rate cutting is flim-flam. It's been suggested that the best strategy for cutting rates is first to raise them--then you're in a position to negotiate down to a level you can live with. Sounds pretty clever, doesn't it?

The only problem is that it paints your staff as no better than the scheming salesman in The Flim-Flam Man. (Better hold on to your wallets, ladies and gentlemen!) And this approach absolutely guarantees the end of your rate card: It will be distrusted, forevermore.

Worse, it sends a message to advertisers that they are simpletons if they don't demand discounts. And it leaves a nasty question in their minds: "How much less did my competitors pay?"

Who loses?

Advertisers are also big losers. What types of books are likely to offer the biggest discounts? Those that are the weakest performers, of course. And what kind of sales results will the weakest books generate for advertisers? Certainly far less than advertisers need to keep a product growing.

So who loses when magazines cut rates? Our customers! And that's just what we don't need--more suppliers who tell us that "advertising doesn't work"!

Rate cutters are often the ones who talk about the need for investing in "great editors" and "great editorial." But you don't have to be a great bean-counter to figure out that less revenue per page means less profit. And less profit always means less of everything else--people, quality, flexibility, new ideas.

A great product and rate cutting simply can't be part of the same game plan.

What market driven really means

Rate cutters tell us they're market driven, that they're only reacting to what advertisers want. But you and I know that being market driven doesn't mean handing over the tiller to advertisers. It doesn't mean giving in to every request for a make-good or special position, or every demand for custom services.

Market driven, in a truly productive sense, means understanding how the market is changing and how you can best help your customer sell more products. And that's the secret to selling more ads--at full rate.

Why bother being unique?

When you are marketing commodity items, price is usually the only factor. Until recently, selling magazine space was far different from selling paper clips, since each publication was marketed on its distinct position, its editorial, its circulation, and so on. however, rate negotiating has become a great equalizer. It's pushed distinctions among magazines into the background and focused most of the attention on cost.

If this trend continues, why bother making your magazine unique? Just copy your competition and generate the same readership. Don't even bother to promote your magazine's advantages. Just offer it at a lower rate.

Staying on the rate card

Selling against rate cutters has never been easy. But it is possible to resist the temptation to join them and still have a successful magazine.

Here are eight suggestions.

1. Develop a more compelling market position

Too many publishers fail to position their magazines for maximum impact with advertisers. They rely instead on their editorial position--the one they've developed for readers--to persuade advertisers. Or they position the magazine as the top book--a position that says nothing about why an advertiser should feel compelled to advertise in it.

An effective marketing position should make advertisers uncomfortable about their current situation. It should refer to or create a specific marketing problem--and then demonstrate why your magazine is the best solution to the predicament. This approach forces you to be totally customer-oriented, to address the client's sales and marketing situation. It builds more respect for your publication and makes it more valuable to the advertiser.

And it also makes the question of rates a secondary matter.

2. Strengthen your sales and management staffs

When was the last time your staff was trained in fundamental sales techniques? In how to sell ad space? In how to sell in today's environment? How skilled are they in communicating why advertising works? In uncovering a client's objectives? In positioning your magazine? In making proposals for campaigns? Or in building client relationships?

And don't forget about your ad managers or publishers. Do they know how to keep their staffs motivated? How to monitor a salesperson's activities? How to manage budgets to reach financial goals? How to identify problems properly? How to make the best decisions? Are they truly managing their properties or just filling in the numbers?

When the answers to all the above are yes, cutting rates won't even be on your list of options.

3. Adapt to change

It's possible that your publication hasn't changed with its market. So take the time to reassess your marketing approaches. Determine the following: if you're taking advantage of shifts in the market; if you know what advertisers really need today; if your publication is accountable to advertisers--if it delivers a meaningful, specific ROI.

If any of the answers are no, then cutting you rates isn't the solution.

4. Ask why you've been successful

Athletes in a slump are told to reenact the things they did when they were performing well. So should you. Ask yourself:

* why your magazine survived after its launch

* why advertisers are doing business with you or your competitors--at full rate

* why your magazine survived other down periods in the market

* how your magazine has played a role in helping sell your advertisers' products--and how you can improve on that critical function

5. Develop meaningful marketing services

Put some real guts into your marketing services. Go beyond offering reprint mailings or plaques at trade shows. Determine how and to whom your advertisers are selling products--then help them identify more prospects, faster, more efficiently.

Focus greater attention on helping them build sales, not on lowering their cost of advertising.

6. Offer packages of issues and services

For those who are willing to commit to a series of issues (for example, pre-show, show and post-show issues), offer a special package of services. This could include magazine space plus participation in direct response cards or other ancillary properties. But be sure to offer the same package to all comers.

7. Develop network rates

If you haven't already done so, assemble a net work that includes many or all of your properties. Again, put it in writing--and make the same offer to everyone.

8. Trim the excess from your budget

Consider zero-based budgeting. Let your staff know what your mission and goals are--then ask them to justify their expenditures against those objectives. The better shape your bottom line is in, the less pressure you'll have to cut rates.

The late Kenneth M. Nelson was president of Elsevier Business Press, and served on the executive board of Elsevier N.V.

COPYRIGHT 1992 Copyright by Media Central Inc., A PRIMEDIA Company. All rights reserved.
COPYRIGHT 2004 Gale Group