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| Do Magazine Publishers Really Believe That Advertising Works? CONSIDERING THE LOW INITIAL INVESTMENT and ongoing cost of operations, magazines produce extremely large gross revenues. Resulting profits can be quick and huge. The money that magazines bring in each year from advertising and circulation sales can range from a few hundred thousand dollars (small publications that you have probably never heard of) into the hundreds of millions of dollars for the consumer giants. On a typical, successful consumer magazine, most of the profits probably come from advertising sales. That's why publishers love the flow of cash that generated by their advertising departments. "Get out there and sell!" they exhort their ad sales staffs. They Sell It, But Do Challenge these same magazine executives, as the Magazine Doctor frequently does, to see if they believe advertising actually works. Even when targeted to precisely the right audience, does advertising result in the sale of products and services? Every magazine publisher will answer, "Yes, emphatically yes. Advertising works. It works for every one of our advertisers." This is the same story these publishers always tell their advertising clients and the agencies representing them. This is also a message they reinforce with their sales staffs. Advertising, after all, is also their means of building and maintaining their paid circulation numbers. But are they using it to build their own biggest profit center? Look again. The actions of most publishers overwhelmingly fly in the face of any contention that advertising works. Is it possible that publishers don't believe a word of what they tell their advertising clients? The evidence: Most companies selling products and services base their annual advertising spending on a percentage of their expected annual gross revenues. Sharp executives know what percentage of their gross revenues that they should be allocating for advertising and marketing. That figure can range up to an astonishing 50% for some sales operations that must generate a steady flow of new, one-time buyers. Such companies spend 50 cents to generate every dollar of sales. And that excludes the cost of the sales staff. Costs of goods and overhead--and any profits--must therefore come from the remaining 50 cents. A Target Client List Magazine publishers are lucky. Their list of target customers is usually both finite and entirely manageable. Instead of selling to thousands of faceless customers the way a department store or direct marketing organization would, a magazine’s sales staff often must reach no more than 500 to 1000 key businesses that have well funded advertising budgets. Any publisher should be able to compile a precise list of the magazine's most likely advertisers (the magazine's core advertising market). From that list the publisher typically can attach the names of the advertising agencies which produce and place advertising materials for the target clients. In addition to the core list, magazine publishers also need a method for ferreting out other companies, which may also belong in the magazine as advertisers, but may not be "core market." Examples: airline, credit-card, cigarette, or liquor advertisers in a movie-fan magazine. Magazine publishers fortunately do not need to plow 50% of their total revenues back into marketing. With the exception of the startup period, it’s unusual for a magazine publisher to spend 10% of ad revenues on ad marketing. The usual range is from about 4% to 8% of gross annual advertising sales. That is what a well operated magazine spends, which is much lower than the requirements of most businesses. Several factors usually dictate where a magazine falls within that spending range: A new publication in a highly competitive field, or a magazine with a goal of dramatic growth, might exceed 8% of anticipated gross revenues, sometimes by a wide margin. A mature magazine in a stable market, with a steady flow of ad marketing materials year after year, should be spending at the lower end--4% or 5%. Example: For a magazine doing $4-million a year in advertising sales, on-going marketing spending should, therefore, average $160,000 a year, or roughly 440,000 a quarter. If the competition is chewing away at the magazine's share of market, however, the publication should spend at least twice that amount. Some Publishers Forget Magazine publishers position themselves to advertisers and agency personnel as marketing experts in their specific industries or with their audiences. And their recommendations always include space advertising. So how do magazine publishers typically market their own product to their core market and second-tier prospects? They either (1) send out a salesperson to call on the client or the agency or (2) they instruct the salesperson to make a telephone call. Several times a year the publisher also arranges for the salespeople to run into many of the magazine’s advertisers at an industry convention. Meanwhile they send out lots of complimentary copies of the magazine. Every two to four years the typical magazine produces a new advertising sales kit, which is called a media kit in publishing jargon. When the media kit is new, salespeople either deliver it in person or mail copies to current advertisers and some of the prospects. Every year thereafter the magazine prints an updated rate card, and perhaps an updated editorial calendar, which is most frequently accompanied by a cover letter (blaming new, higher ad rates one year on the rising cost of paper and the next year on the increase in postage rates). And intermittently, the ad department will send out a postcard alerting advertisers to a special advertising section or important editorial coverage. That's not much of a marketing program, right? Would any of their advertising clients attempt to operate in their industries with such a lackluster effort? For most magazines, their ad-marketing budget falls closer to 1% than 4% of gross ad sales. Moreover, this level of spending apparently has no relationship to the magazine’s competitive environment or growth goals. Clients Use Agencies, The reality is that magazines of every type need their own advertising agencies and professional marketing firms to help them reach their customers. In this way they’re no different from any other multi-million-dollar business. The Magazine Doctor says that magazines can reap the same reward from a good marketing plan and dynamic advertising as other businesses with products and services to sell. Yes, you can sell advertising with advertising, as some of the great, legendary publishers have proved again and again. A healthy portion of every magazine's ad marketing budget should go into first-class advertising. That means straightforward business-to-business trade advertising to spell out the benefits of the magazine's readers (and their purchasing power) to existing and prospective advertisers. This advertising can, and probably should, take a number of forms: Trade ads. Think of SRDS, AdWeek, Advertising Age. These are some of the publications your advertisers and their agencies read. Use them to deliver your benefits message concisely and dramatically to your target customers at regular intervals. Often, these messages will reach the target media buyer precisely when she is making budget recommendations. Your ad will be on the scene at that critical moment, even if your salesperson can’t be. Direct mail. A magazine’s direct-to-client mailings should be clever, dramatic and compellingly written. Advertisers should receive something from you every month, or more frequently. The audience is not large, therefore much of the budget can go into creative instead of printing and postage. Dull and predictable direct mail doesn't work for magazine publishers any better than it does for other businesses. And if you think your editors, a salesperson with time on her hands, and the local instant printer can do it, just forget the whole thing. Instead, publishers should regularly put out highly customized and personalized direct mail that builds on the magazine's knowledge of its advertisers' marketing needs. First class collateral. A stunning media kit should have brochures, booklets and reports that tell the advertisers everything they need to know about their market, their buyers, their marketing problems and their good fortune in having a magazine that reaches and delivers their customers more effectively than anybody else. Advertising marketing works, or to phrase it differently, the marketing of advertising works. That's a principle the Magazine Doctor emphasizes with all of his clients. Ad marketing works in direct proportion to the effort and the investment the publisher makes in it.
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