Cost and Rate Analysis
Are your classified rate structures helping you or hurting you? Are they based on current local market conditions and cost factors, or is the basis of the rates lost in history?
Knowing what to charge is the hardest part of selling anything, including advertising. If your rates are based on a philosophy of best guess as to what the market will bear, you are likely not charging correctly. The same is true of rates that were copied from a newspaper of similar size in another market. Every market is different, regardless of the size of the newspaper.
There are several steps that go into proper rate structuring. One is the current order distribution pattern. The second is an examination of your cost factors. The last is your competitive and market situation. The following explains how the editorial costs and circulation profits affect classified rate structuring.
Circulation revenues offset some of the costs of publishing the newspaper. Because the number of advertising inches sold, without regard to pre-print volume, determines the size of the news hole, every inch of advertising has to pay its fair share of the news expense that isn’t covered by circulation profit. The method of determining this expense is straightforward.
1. Production and G&A expenses are combined, and then the total is divided by the number of columns published during the same time period.
2. The departmental expenses for each content-producing department are added to a fair share of the Production/G&A expenses, based on the space each product occupies in the newspaper.
3. The newsroom total expenses are then reduced by the amount of circulation’s profit.
4. This "adjusted" news expense is then assigned to the retail and classified departments based on the space they occupy in the newspaper.
Using the same methodology (occupied space) Classifieds can be readily broken out into Classified Display, Classified Line, and Legal.
Comparing the revenue for these products with the fully loaded share of allocated expenses yields the true profitability of each classified product.
Further analysis, combined with data from other studies, shows the cost of putting a classified line ad on the books, as well as the newspaper’s per-line per-day publishing cost for those ads.
With this cost and profitability data in hand, the rate structuring process has a firm foundation. When combined with data from the order distribution study and onsite observations during the week of analysis, the rate setting process becomes more science and less art.
The rates that result from this process provide incentives for larger ads, as well as for longer-running ads. They are straightforward and easy to explain. They generate better profits for the department by not pricing private party advertisers out of the paper, and by not leaving money on the table with business, real estate and employment advertisers.
The regular Classified Development services focuses on the line ad rates and inside sales staff training, but the same proven rate structuring principals can also be applied to display ad rate structuring.
Knowing what to charge is the hardest part of selling anything, including advertising. If your rates are based on a philosophy of best guess as to what the market will bear, you are likely not charging correctly. The same is true of rates that were copied from a newspaper of similar size in another market. Every market is different, regardless of the size of the newspaper.
There are several steps that go into proper rate structuring. One is the current order distribution pattern. The second is an examination of your cost factors. The last is your competitive and market situation. The following explains how the editorial costs and circulation profits affect classified rate structuring.
Circulation revenues offset some of the costs of publishing the newspaper. Because the number of advertising inches sold, without regard to pre-print volume, determines the size of the news hole, every inch of advertising has to pay its fair share of the news expense that isn’t covered by circulation profit. The method of determining this expense is straightforward.
1. Production and G&A expenses are combined, and then the total is divided by the number of columns published during the same time period.
2. The departmental expenses for each content-producing department are added to a fair share of the Production/G&A expenses, based on the space each product occupies in the newspaper.
3. The newsroom total expenses are then reduced by the amount of circulation’s profit.
4. This "adjusted" news expense is then assigned to the retail and classified departments based on the space they occupy in the newspaper.
Using the same methodology (occupied space) Classifieds can be readily broken out into Classified Display, Classified Line, and Legal.
Comparing the revenue for these products with the fully loaded share of allocated expenses yields the true profitability of each classified product.
Further analysis, combined with data from other studies, shows the cost of putting a classified line ad on the books, as well as the newspaper’s per-line per-day publishing cost for those ads.
With this cost and profitability data in hand, the rate structuring process has a firm foundation. When combined with data from the order distribution study and onsite observations during the week of analysis, the rate setting process becomes more science and less art.
The rates that result from this process provide incentives for larger ads, as well as for longer-running ads. They are straightforward and easy to explain. They generate better profits for the department by not pricing private party advertisers out of the paper, and by not leaving money on the table with business, real estate and employment advertisers.
The regular Classified Development services focuses on the line ad rates and inside sales staff training, but the same proven rate structuring principals can also be applied to display ad rate structuring.
Richard Clark -- Cost Analyst
Classified Display and Retail Rates
Classified Development's basic service only includes rate structuring for line ads. Classified Development offers Retail and Classified Display rate structuring that is based on the same sound principals as the line-ad rate work.
At the core of Classified Development's rate structuring method is the belief that larger ads should cost less than smaller ads, even for Open Rate or Transient advertisers. A full page advertiser should pay less per inch than a half page advertiser. The half page advertiser should pay less per inch than a quarter page advertiser, and so forth.
Advertisers that contract to spend more over the course of a year should get further price breaks. The price break should be expressed as a percentage discount from the Open rates, based on the contracted dollar volume. This reminds the advertiser that they are getting a deal, rather than letting the discounted price become the new starting point in any negotiations.
Pickup rates should not be below the newspaper's cost factors for publishing the space.
Rates and discounts should be simple. If a sales rep cannot quote a price with just a rate card and a calculator, the advertiser won't be able to understand the rates either.
At the core of Classified Development's rate structuring method is the belief that larger ads should cost less than smaller ads, even for Open Rate or Transient advertisers. A full page advertiser should pay less per inch than a half page advertiser. The half page advertiser should pay less per inch than a quarter page advertiser, and so forth.
Advertisers that contract to spend more over the course of a year should get further price breaks. The price break should be expressed as a percentage discount from the Open rates, based on the contracted dollar volume. This reminds the advertiser that they are getting a deal, rather than letting the discounted price become the new starting point in any negotiations.
Pickup rates should not be below the newspaper's cost factors for publishing the space.
Rates and discounts should be simple. If a sales rep cannot quote a price with just a rate card and a calculator, the advertiser won't be able to understand the rates either.
