Are you really making money on your special sections?
Like most newspapers, the dailies and weeklies in the Sun Coast Media Group print many special sections on standard subjects such as progress, "best of" reader votes, health care and public events. Until this year, though, it had been decades since the Dunn-Rankin family, which owns the chain, and their executives had studied how they priced ads.
"We noticed that a few of our special sections had rates that felt low," said Jeff Dunn-Rankin, a board member who had served various roles in the Charlotte County, Fla.,-based chain and currently handles special projects while also serving as vice president of consulting for the national group Ministry Architects.
Dunn-Rankin researched pricing. As it turned out, the rates were low – in some cases, as much as 50 percent below the normal rate card. "What had happened over time is that we had lowered and lowered and lowered our price on special sections, so that most of our special sections were not at a premium, they were at a pretty deep discount. The question was were we doing that on purpose? The answer was not really."
And when Dunn-Rankin gathered advertising sales managers for a workshop early this year, they stumbled over questions such as, "Is 10 inches in a special section worth more or less than a 10-inch ROP in the newspaper of the same distribution?" and "How much more expensive is it to print a special section on 50-pound glossy white instead of regular ROP?"
"Their answers were all over the map," Dunn-Rankin said. What we discovered was no one really knew the costs. They were setting the prices without even knowing the costs. We were guessing."
Most rates didn't take into account costs such as glossy paper, process color and overruns, but they were substantially lower than the standard ROP rates. And when the sales managers were asked what they would charge if they were pricing special sections from the scratch, no one said they would charge half price even though, in many cases, that's what they were doing.
"So we all kind of looked each other in the eye in that meeting and went, 'Uh oh,'" Dunn-Rankin recalled. "We are pricing things way lower than we would if we thought about it."
The managers were expected to increase revenues by selling more ads, and that's what they were doing. But they weren't necessarily increasing profit. Everyone realized that something had to change.
Dunn-Rankin credits his brother, group publisher David Dunn-Rankin, with asking the sales managers to solve the problem rather than directing local publishers to simply raise rates. Everyone involved also had to accept that special sections had to at least cover their costs and generate more revenue, not necessarily more ads.
The ensuing discussion included defining why the papers did special sections and whether the goal should be to offer discounts to get more ads. It moved on to how the rates should be set.
"What we ended up with when we got done was a formula that we created together that said, 'This is how we do special sections,'" Dunn-Rankin said.
The formula includes the extra costs, positioning and also what Dunn-Rankin called an "X-factor" based in part on how established a section already was. Rates still vary from paper to paper, but the basic change in philosophy is that discounts won't be given in most cases.
However, local publishers still have some flexibility. For example, if the new formula requires rates to go up 50 percent, a publisher might choose to go up 25 percent this year and 25 percent next year rather than all at once.
Dunn-Rankin said it's too soon to tell how the change in sales philosophy will affect overall revenue. But one weekly publisher has told him there has been little protest among advertisers. "They're really paying attention to the sale that you're making right now," Dunn-Rankin said.
Dunn-Rankin advised other newspaper executives in such situations to do research before instituting major changes, and to create a conversation among sales managers about what should be done rather than issuing edicts.
"I think one of the things we have to all look at is how much of our ad volume is being sold at deep discounts. I think we'll be surprised when we start poking around at how much of what we're selling is not being sold at the rate we have on our rate card."
For more information, contact Jeff Dunn-Rankin at Jeff@dunn-rankin.com.
Jane Nicholes, a regular contributor to the eBulletin, is a freelance writer and editor based in coastal Alabama. She is an award-winning veteran of more than 30 years in the newspaper business. Reach her at firstname.lastname@example.org. Suggestions for future stories and comments on this piece are welcomed.