On March 14, Jim Hart presented one of his most provocative Inland webinars yet, a challenge to newspapers to strengthen their total market coverage programs—something that the U.S. Postal Service is just about begging newspapers to do with a rare and substantial postage discount—or think about exiting the business.
The partner at DM for Newspapers made the case that newspapers are leaving real money on the table by not fattening up their TMC products. And he showed how big direct mailer competitors aren’t making the same mistake. It’s not just their mailings that are getting fatter—it’s their bottom lines.
Inland has posted the detailed charts that show the specific of the effect this new postage rate structure for High Density mailing can have on newspapers, whether or not they are in the mail. You can find them at http://bit.ly/2mEhiD2.
The Inland Key Takeaways
A bottom-line fact about TMCs right up front: Major accounts will only support one player in a market. If you’re charging high preprint rates, you can expect that direct mailers such as Mspark, Red Plum or Clipper Magazine will be coming to your town.
Going where the growth is. Direct mail giants such as Valassis are buying local products to sell to local advertisers. Jim Hart: “The growth is local—and they’re going after it.”
Understanding the TMC business model: “Postage really is the core of this conversation, whether it’s your postage (rate) or your competition’s…This whole field is a math-driven strategy, and the better you understand the math, the better you will do.”
The U.S. Postal Service’s game-changing rate structure. For decades, USPS set a 3.3-ounce package at flat rate of $178 per thousand pieces for High Density mailers. This year the base rate is $165—and the USPS says you now can go up to 4 ounces before paying anything extra.
What that means to newspapers: If your TMC product is underweight, not only are you not using the postage you’re paying for—you’re paying more if you’re mailing at less than High Density.
And newspapers are the target of these new rates. The USPS wants to get back the newspapers that took themselves out of the mail and began carrier delivery when the Postal Service implemented an “exigent” rate increase on the flawed premise they would gain revenue they lost during the Great Recession.
But are newspapers looking this gift horse in the mouth? TMC is a high-volume business, but many newspapers are running anemic packages and cutting back on volumes. They are looking at it as an expense reduction, when it’s actually an opportunity. What they should be doing is pumping up volume since they can make a 100% profit on the free weight between 3.3 and 4 ounces.
Jim Hart said it: “It’s mind-boggling to me that newspapers are cutting TMCs that are profitable in the name of cutting print expense. If you don’t believe print can be a viable part of a vigorous marketing strategy, then get out.”
Jim Hart also said: “We’re trying to break even against high fixed cost on low volume—and the market won’t let you do that.”
Putting on weight. The big direct mailers see the opportunity. In a market used as an example for this webinar, Valassis is inserting its Red Plum product into its recently purchased Clipper Magazine to get a mailing that’s at or slightly above the 4-ounce level.
Newspaper TMCs at the crossroads. Option one: As noted before, major accounts are going to only one player in any market. You have to be that player or not deliver a product anymore. So consider finding a new distribution partner.
Red Plum takes a flier on The Flyer. The direct mailers are doing that. Red Plum has taken FSIs out of newspapers in many markets in favor of a local distributor. In Florida, it’s even partnering with a fierce rival, The Flyer, for distribution. Jim Hart: “Two people that would have poisoned each other a few years ago are now partnering and making probably a million a year.”
More on option one: The overlap in advertisers with any future distribution partner is probably not as much as you fear. Consider home improvement books. Jim Hart: “We hate them, right? But they sell better than we do. If you have unused postage (partner with them).” Anyone who delivers large volumes of advertising should be a target for partnering.
Newspaper TMCs at the crossroads. Option two: Focus on local business. Don’t turn your nose up at single-sheets that drive traffic online that drive traffic in stores.
Newspaper TMCs at the crossroads. Option Three: Not a happy choice. It’s look for the exit sign. Jim Hart: “If you can’t get your head around getting distribution partner or really don’t see yourself focusing on local business to fill the void, and putting print in sales proposals—then you really need to say to yourself if it’s going to be a lot better if I engineer an exit in the next two or three years than white-knuckling it out.”
Slimming down reach and frequency, rather than product weight. Newspaper TMCs go out every week to every house primarily because of supermarket advertising. It might be time to cut back to one or twice a month, and reign in penetration to, say, 70%. Jim Hart: “Red Plum isn’t stuck on (the model of) every house every week 52 times a year. And maybe we shouldn’t be, either.”
A special offer: A free health check for your TMC. Email Jim Hart at email@example.com with the subject line “Checklist,” and he’ll provide a TMC Viability Checklist. To see how your strategic marketing is doing, go to MarketingByHart.com/audit. There’s no charge for the audit.
You asked Jim Hart: So if I can’t get my TMC to 4 ounces, do I kill it? His response: Well, it’s not quite as cut and dried as that, buuuuut, if you’re just putting out a product that’s 1 or 2 ounces and not making much money, well, check off one of those options. The unfortunate truth is the average newspaper TMC weighs in the mid-2 ounce range.
Again, here’s how to direct (e) mail Jim Hart: firstname.lastname@example.org