Impressed by Tribune’s ‘new sheriff‘

A great future for newspapers rests on an effectiveness-versus-efficiency mindset

By Bob Davis

I was very impressed last month when I read about how real estate mogul Sam Zell (photo - Kellogg School of Management, Northwestern University) rode in like the new sheriff in town as the new Chairman and CEO—and new majority shareholder—of Tribune Company in Chicago.

One of his statements in particular got my attention. “I’m sick and tired of listening to everyone talk about and commiserate over the end of newspapers,” he was quoted as saying in a recent story from the Associated Press. “They ain't ended and they're not going to end. I think they have a great future," he said.

His confident statement is backed up by a philosophy I agree with wholeheartedly. Unlike in some recent media buyouts, the conversation wasn’t about exerting wide editorial control, slashing costs or pushing major asset sell-offs. It was about rebuilding the media conglomerate from the bottom up to facilitate faster decisions and innovative, pragmatic thinking about how to increase revenue and reverse the effects of industry-wide decline.

The AP story continued in its coverage of a news conference at Tribune Tower, quoting Zell as saying, “I believe this company has spent a significant amount of time in the last five years cutting costs, and maybe not enough time on increasing revenue," he said. "Our focus, and our bet, is that we can significantly increase the revenue of this company and dramatically increase its profitability going forward.”

In August 2007 I wrote an article that made the same point applied to the entire industry. I think it bears repeating here.

By putting effectiveness before efficiency, I wrote, newspapers grow top-line revenue. Let me give you a few examples.

Call abandon rates versus top-line revenue
For newspaper classified call centers everywhere, the call abandon rate is a key measure. However, managing the call abandon rate with head count alone is too efficiency-minded.

A better approach is to examine call center effectiveness by asking what the call center can do to grow top-line revenue. Find out how many outbound calls your people are making in their extra time. In my experience working with classified departments across the country, the problem is that reps often cherry-pick instead of calling all current prospects and advertisers. Nationwide, I see tremendous room for improvement in this regard.

Cost of winning new customers
At most newspapers, the number of subscribers who call in to quit each year represents at least 20 percent of circulation. That number climbs to 30 percent or more at some newspapers. At the same time, the industry saves only 17 percent of these subscribers from canceling. When it was cheaper to win a new customer than to keep an existing one, maybe these numbers were OK. Today we can and must do a better job retaining subscribers.

Significant improvement is well within reach for virtually any newspaper. After all, other subscription-based industries achieve 50-percent and even 60-percent saves rates regularly. And by focusing on effectiveness instead of efficiency, top-performing newspapers are earning 40-percent saves rates.

Say you have a circulation of 300,000 and receive 100,000 cancellation calls in your call center each year, and that you save the industry average of 17 percent of these calls. The efficiency-based measure would be talk time, and our work has shown that it takes an extra 30 seconds on the phone have a quality saves attempt.

Yes, spending 30 seconds more costs the paper around 50 cents. However, the extra effort will drive your saves rate up by 23 points. This means 23,000 fewer subscribers you will need to replace at $40 or more apiece, adding up to almost a million dollars per year. It’s a great example of how effectiveness beats efficiency hands down.

Online advertising expertise
Here is another example. Most newspapers have only a handful of online advertising experts. The sales force relies heavily on these experts to help them sell online ads. This is an efficient way to handle it, but is it the most effective? To answer that question, look at the amount of online revenue you receive today from existing advertisers. If it is not as much as it should be, maybe the efficiency model is not working well for you. To boost effectiveness, train all your sales reps to sell online ads effectively so you can maximize this revenue source.

When market conditions present challenges such as circulation decline and technological changes, the natural result is pressure to be more efficient. But in my experience in the newspaper industry, organizations that resist the pressure and focus instead on effectiveness see dramatic improvement in customer service, customer retention and sales. The return far exceeds the investment.

The key place to add top-line revenue
Lastly, many advertising sales people spend so much of their time servicing their accounts that they do not have enough time for prospecting new accounts. The solution we have found in consulting with our clients is to drive top-line revenue by building sales teams with two types of players. First, have top-notch production and service personnel who will serve advertisers in a world-class way. Second, have high-performance prospectors who can win new business from non-advertisers and additional business from existing customers.

In the current environment, business is not coming to the newspapers as strongly as in years past, but it is still there for those who go out and get it!

Bob Davis is President of Robert C. Davis and Associates (www.robertcdavis.net), a consulting firm in Alpharetta, Georgia, that specializes in improving sales, customer service and retention results in media customer contact centers. He is also Co-Founder and Managing Partner of Surpass (www.surpasscalls.com) in Bedford, New Hampshire, RCDA's specialized outsource call center serving newspapers and other media organizations. He can be reached at 678-455-6812 or bob@robertcdavis.net.