An ASTECH InterMedia Reference Article

The Business Case for Targeted Delivery

by Jim Hart

Editor's note: This is the introduction to a group of related articles covering the most important success factors when selling targeted delivery capabilities. In this article, Jim discusses return on investment.

Over the past few years, newspaper executives have been forced to decide how many capital dollars to devote to markets that didn't even exist yet. Competitive threats have forced the industry to invest many millions of dollars into areas where there may not be significant revenue streams for years to come. Such is not the case for targeted delivery, especially in print.

By targeted delivery, we are referring to delivery below the zip code level, whether in paper, shared mail, solo mail or email. Ideally, all of these distribution capabilities can be combined into an optimized solution for the advertiser. And the ability to drive targeted delivery revenue assumes you have the capability to combine and analyze data and to incorporate it into the selling process.

To get an idea of the revenue stream available in your market today for direct mail alone, it is conservatively equal to 30 percent of the newspaper ad dollars being spent. How conservative? Nationally, direct mail advertising spending is 90 percent that of newspapers (in 1980, it was just 51 percent). This 30 percent estimate takes into account spending on credit cards, catalogues, retailers using mail nationally and other non-local efforts that would be very difficult for a local newspaper to pursue.

Many newspaper executives downplay the direct mail revenues in their market because they are hard to track. The targeting that makes direct mail cost effective is the very reason it is hard to measure. Again, 30 percent is a very conservative number – there is money in your market today – a lot of money. The question is, how do you attract some of these dollars profitably?

There are three main goals that should drive your efforts to pursue this revenue. You should be trying to:

Some newspapers have positioned such efforts outside of the franchise with very mixed results, mostly poor. Solo direct mail is a commodity. As a standalone business, this should hold no appeal to newspapers whatsoever. In the Phoenix market, for example, there are 88 mail houses ready and willing to clean or purchase data, get a piece printed and mail it out. Each would like to think that they provide a unique service. A difference of one cent per piece is often the difference between getting the business and losing it. Your reputation in the community often works against you in this arena. This is not the business people perceive you to be in.

The cost per impression for an ROP ad in the newspaper will run somewhere around a tenth of a cent, give or take a few tenths. A newspaper insert will cost somewhere between four to twelve cents per household for printing and delivery. A piece of solo direct mail, on the other hand, will cost somewhere between twenty cents to a dollar per impression.

With a much higher cost per impression, why has ad mail spending grown so much over the past twenty years? Advertisers are now trying to reach more finite targets. Often the goal is simply to hit a tighter radius around their store. Sometimes they are also trying to reach a specific demographic group. Increasingly, they are communicating directly with past customers. Unfortunately, the perception that newspapers are not a player in this equation has been growing for some twenty years.

There is an opportunity to bring the cost efficiency of newspaper advertising back into the equation and create great value for the advertiser, while increasing the newspaper's revenue and profit. Newspapers are the only medium that knows the names and addresses of the people consuming their product — single copy purchasers excluded, of course. Conversely, they know (or can know) who is not consuming their product.

When we combine the cost efficiency of newspaper advertising with our knowledge of the market and advanced delivery capabilities, we create an opportunity to provide powerful solutions to advertisers. Newspapers are the only entity that can create these solutions, with themselves at the center. No one else has (or should have) the information necessary to craft this quality of solution on behalf of the advertiser.

The ability to combine the appropriate data and deliver targeted messages based on the analysis of this data allows us to:

If you haven't already done so, please take out a calculator. What is 30 percent of the estimated total newspaper advertising spending in your market?

This article was written exclusively for ASTECH InterMedia's web site. Jim Hart is vice president of ASTECH InterMedia. For help in getting your share of this revenue, he can be reached at 623.875.3000.

© 2005 ASTECH InterMedia, Inc.