The Case for Modular Advertising

Len Kubas spoke about modular advertising at SNA's 2009 Fall Publishers’ & Advertising Directors’ conference.
Len Kubas spoke about modular advertising at SNA’s 2009 Fall Publishers’ & Advertising Directors’ conference.

Editors Note — Len Kubas is President of Kubas Consultants, Toronto, revenue growth and publishing strategy advisors to newspapers and was a panelist at the SNA Fall Publishers’ & Advertising Directors’ Conference earlier this year. In a session devoted to Emerging Business Models for Community Newspapers and Web Sites, Kubas talked about a conversion to modular advertising which involves overhauling traditional newspaper rates away from charging by the column inch or agate line.

In a follow up to that presentation, Kubas answered a series of questions about modular advertising. The initial part of this article is printed in the November issue of Suburban Publisher. I asked the questions. The answers are straight from Len Kubas.

#1 You recently spoke at the SNA Fall Conference on the panel concerning Emerging Business Models and in particular, about the need for pricing reform in the arena of print advertising rates. What’s the basis for your call for reform?

This will surprise your readers, but NAA numbers prove that daily newspapers have been losing ad revenues since Q2, 2000 (“the tipping point”). The decline has been going on for nearly a decade. It’s not something that began three or four years ago.

The soft economy (recession) and structural dislocations caused by digital media have simply ratcheted the vise.

Newspaper managers’ response has been to contain costs: fewer staff, fewer pages, smaller distribution zones, even fewer days of the week. It’s imperative that newspapers adopt new and better ways to package, price and sell advertising if they want to survive. The only way ahead is by growing top line. It can be done.

My team and I believe in newspapers, both print and digital.

#2 You advocate modular advertising and pricing as a plan to move forward. Please explain the concept.

Modular advertising is actually just one part of a bigger program that’s proven to get results, from Eugene, OR to West Palm Beach, FL and points in between. The program is called “Modular, Plus!” The “Plus” elements are just as important as modular.

Modular by itself involves packaging and pricing ads based on a selected number of standard units, rather than allowing advertisers to buy an infinite number of ad sizes using variable space measures such as column inches or agate lines. A group of three dailies that we helped offered 712 different display ad sizes. We reduced that to a simple menu of 37 choices.

All other media: TV, radio, magazines, the Internet currently use the equivalent of standard or modular ad units. Why not newspapers?

Now, there are secrets to get more out of modular. It’s not just slapping together a grid. For one thing, the math behind the prices of the modular ads serves to drive advertiser behavior. The mathematical model is the key to success. There are other secrets, too, to generate more dollars from modular ads.

#3 How should a newspaper evaluate if they should consider such a change?

As Chris Doyle, Publisher of Naples (FL) News Media Group says, “Make change an I.Q. test — in other words, you’d have to be stupid not to do it.”

Chris’ group adopted “Modular, Plus!” as part of an initiative to simplify in order to grow ad revenues. According to Chris, it worked extremely well. Remember, Florida was devastated by mortgage foreclosures in 2008, so Chris’ Naples group faced a crisis of almost Biblical proportions. On October 12, 2009, he presented the results of his experience at the WAN-Ifra Expo conference in Vienna, Austria to an international audience.

We feel that newspapers managers will know it’s time to implement modular ad units when their ad revenues, frequency, and average ad size continue to shrink over time, despite offering advertisers many deals and discounts.

Adopting “Modular, Plus!” is an opportunity for newspapers to press the reset button, to change the rules of the game. For too long, newspapers have been beaten up by advertisers seeking deals, negotiating hard, and treating the service, the audience, the results that newspapers provide as a commodity — when they most certainly are not.

“Modular, Plus!” is win-win. When we say that it changes the rules of the game, newspapers do not win at the expense of their customers. Yes, it means more revenue for the newspaper and it also means better results, better exposure for advertisers through bigger ads, ads that appear more often, and ads that appear in multiple publications at an affordable price.

#4 If a newspaper isn’t selling by the inch or ad size anymore, what are they selling?

Newspapers are in the business of delivering results for their advertisers. Advertisers do not want to buy so many column inches or agate lines of space. What they want is to produce is results: higher awareness and more sales.

With modular, newspapers are selling impact — page impact — not inches. Selling inches (and lines) is a commodity game. Nobody buys, or wants to buy, 10 column inches. Selling ad modules, portions of a page, increases the value of the advertisement. It’s no longer a commodity (no. columns x depth), it becomes part of a continuum, a menu of choices, that allows the advertiser to get results at a price that he can afford.

#5 What are the benefits of modular advertising?

Wow. There are so many. I want to use a bullet list:

  • Easier page make-up: Ads stack and fit together;
  • Paper looks better, is easier to read, and paid ads look better because they fit together better;
  • Fewer filler or “house” ads to compete with the paid ones;
  • Less wasted white space = less unproductive newsprint;
  • Pricing simplicity: ads are charged on the “whole ad price” – no more rates per inch. Makes it easier for reps to sell and for advertisers to buy: a simple menu of ad sizes with prices for each;
  • More ad revenue per page when combined with some of the other “Plus” elements of “Modular, Plus!”;
  • Portability: since modular ads represent portions of a page, the ad sizes for tab and broadsheet correspond since they occupy the same percentage of the page. Only the mechanical specs differ. It becomes easy to sell a one-sixth page in the broadsheet and a one-sixth page ad in a tab sister paper. This improves cross-selling (upselling).
  • Proven by international research so you can demonstrate to advertisers that modular works better;
  • Important for format change and to protect ad revenues per page.

#6 How should a newspaper execute a successful conversion to modular advertising?

Any conversion to modular should be undertaken carefully, systematically and using expert help, whenever possible. Because modular represents a major change in how newspaper ads are packaged and priced, as well as how ads are sold, a modest investment in expert assistance can pay huge dividends. It’s similar to the reasons why family dentists refer you to an endodontist for root canal treatments rather than attempt the procedure themselves. Specialized expertise and proven know-how make all the difference.

Be aware that the biggest resistance to modular and “Modular, Plus!” comes not from customers, but from the newspaper itself. Staff and managers are used to selling advertising a certain way because it’s all they ever done and all they’ve ever known. Sure, that might have been fine when our industry was in its heyday, but this is the 21st Century. Newspapers have been losing ad revenues at an alarming rate. It’s not all the economy. It’s also the single-minded pursuit of ever higher yields that are driving business out of the newspaper.

Barney the pressman, who taught me how to run a press at the training center in Oklahoma said something profound: “Thick, ad-packed newspapers don’t go out of business.” I’d add that we make money on the volume not on the margin. We should be like Wal-Mart: sell a lot for a low price. Consider: if you make advertising affordable and economical, wouldn’t that attract new and/or more business? How has cranking rates and Costs per Thou. worked out so far?

#7 Please give us some examples of modular programs that are working?

Some newspapers that have successfully implemented “Modular, Plus!” are The West Palm Beach (FL) Post, The Sarasota (FL) Herald-Tribune, The Middletown (NY)Times Herald-Record, and The Stockton (CA) Record. There are many more in America.

#8 What kind of results can a newspaper expect from such a conversion?

While the actual results from converting to “Modular, Plus!” will vary by individual newspaper and by local economic conditions, they are always positive. This program can be the catalyst for making it easier to buy and sell advertising. Expect higher revenues, lower operating costs, and a more professional sales force once “Modular, Plus!” is functioning properly.

Another significant boost to sales performance comes from combining the new pricing programs with automated selling, that is with an Ad Cost Calculator (ACC). The ACC places the strategy and tactics of the new pricing programs in the hands of the sales reps. An easy-to-use computer program allows reps to conduct “what if” scenarios, show different options and price them in real time. Most importantly, it’s a great way to upsell, since adding a larger ad size, or color, or Internet, or sister pubs is just a click away. The Calculator handles all the number crunching in less than a second. Many of the newspapers mentioned in Question 7 use the Kubas ACC, as does Chris Doyle’s Naples group.

#9 What lessons have you learned as you’ve assisted newspapers in the conversion to modular advertising? Specifically, what pitfalls or mindsets should newspapers avoid? What successes should they emulate?

It’s not a Do-It-Yourself job. We’ve seen some American dailies try this on their own. They get parts of it right but not all of it — and that means a suboptimal result and money left on the table. I can think of one daily in particular in California that recently introduced a tab edition, Monday-Friday. I looked at their new rate card: so-so.

Some lessons come from newspapers overseas. We’ve made contacts in Europe that have helped us to improve what we do for our customers. Be open to new ideas.