November 7, 2005

If the media is hurting, what does it mean to trade promo?

Well, I finally did it - after months (years) of intending to, but not quite being able to actually do it, I cancelled my subscription to the Chicago Tribune .

For those of you who think this is no big deal, I point out that this is the first time in my adult life (and I've been an adult for a long time) that I have not been a subscriber to my local paper.

I am of a generation that grew up with newspapers. When I was a kid, my parents subscribed to both the morning and evening paper (remember evening papers?). So it was not an easy thing to do. But as I prepared to write another check to the Trib, and looked over at the pile of papers in a corner of the kitchen, waiting to be taken to the recycling bin in the high school parking lot, and contemplated the fact that most of them had been thrown, unread, directly into the pile, I finally decided I'd had enough.

There's just no reason to read a newspaper anymore, when everything in the paper is something I read on the Web yesterday.

I can imagine that any readers who managed to get this far are saying, "Gee, Bob, it's utterly fascinating (yawn) to hear that you dumped your local paper in order to save twenty-five bucks a month, but why are you telling us?"

The point that gives this some significance is that I'm far from alone.

"For the six-month reporting period ended March 31, 2005, Chicago Tribune is reporting Monday-Friday average circulation of 573,743, down 6.9 percent from the same period last year; and Sunday circulation of 953,815, down 4.7 percent." ( Tribune press release, 5/2/05)

And the Trib isn't the worst. It isn't even the worst in the Tribune Company. Its sister, the Los Angeles Times, dropped from 971,000 to 908,000 daily, and from 1.36 million to 1.25 million on Sunday. At that rate, the last subscriber to the Sunday Times will cancel in November 2016.

Most papers aren't doing quite so badly, of course, but overall circulation for US daily and Sunday papers has been dropping, slowly but steadily, for twenty years now. And not just US papers - Canada's papers dropped about 15% in the 1990-2003 period. And in Europe:

"Over the five years 2000-2004, circulation declined in: Belgium -5.21 percent; Czech Republic -2.52 percent; Denmark -10.53 percent; Estonia -1.91 percent; Finland -2.12 percent; France -5.81 percent; Germany -7.73 percent; Greece -9.25 percent; Hungary -9.48 percent; Italy -5.53 percent; Luxembourg -4.27 percent; Netherlands -8.54 percent; Slovakia -11.28 percent; Spain -0.49 percent; Sweden -1;29 percent and the United Kingdom -11.41 percent." (Finfacts Ireland, 5/30/05)

And the next point is that retailers and manufacturers either haven't figured this out, or (much more likely) haven't figured out what to do about it. Even as circulation has been dropping, retail advertising expenditures (most of them paid, one way or another, from manufacturer trade promotion budgets) have been steadily climbing.

As circulation (the black line and the right axis) has dropped five million over the past fourteen years, ad spending (the red line and the left axis) has climbed 32%. You're paying a whole lot more today than you were in 1990 - and getting much, much less.

Why are you doing something so stupid? Mostly because you don't have a lot of choice. Even if newspaper circulation is dropping like a rock, the papers are doing no worse than their major competitors.

This chart compares the number of people reading a paper on a given day, with those watching prime-time TV or cable (average half-hour), or listening to morning-drive radio (average quarter-hour). Cable is up, but represents a relatively small group, while radio and broadcast TV are down about as badly as newspapers.

A point of interest here is that the decline of newspapers as a mass medium parallels the decline of network TV. For fifty years, network TV has been the primary national mass medium - the medium used by manufacturers to reach their audience. Today, TV is rapidly fragmenting, making it an outstanding medium for targeted marketing, but forcing national advertisers to scramble to find a new way to do mass advertising (we've dealt with this topic in previous issues of TPM Update ). For even longer, newspapers have played the same role on the local level - they have been the primary medium by which retailers reach the local mass audience.

And newspapers may, like TV, turn into an excellent target medium. My friend Deb Kuhns of the TPMA pointed out to me that women are less likely than men to cancel their newspaper subscription because they use it to shop. It's also a given that younger people are less likely to read newspapers. Thus, the local paper may be morphing into a vehicle for reaching an older and more female audience.

The meaning of this to trade promotion managers is clear (and, from the viewpoint of manufacturers, frightening). If all media are declining in their ability to reach a mass audience, then manufacturers are even more dependent upon in-store promotion (something we've been seeing for a long time in CPG, and increasingly in other categories) to move merchandise, and retailers are increasingly in control of the manufacturers' communications with consumers.

This in turn means that manufacturers will have an ever-harder time controlling their brand message, since that message will be funneled through their retailers. It will also mean that another trade promotion spending category - pricing - will have another impetus to grow, which will in turn give trade promotion managers further worry about their brand message. If the primary way you reach your audience is through in-store promotion, and that promotion is primarily price-centric, what is likely to be the effect on your brand image?

Rob Hand and I will be doing a session at next week's TPMA meeting in Phoenix: Finding the Hot Spots . The decline of media, pricing, and controlling the brand message will be three of the "hot topics" we'll be addressing

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