Addressing Churn For Growth in the Media Industry

It’s no secret that traditional media advertisers, like newspapers, are facing increasing pressure from the conversion to a digital experience. While traditional advertisers have made leaps to quickly develop digital, mobile and video solutions to maintain and grow their customer base, the steady growth of digital advertising dollars is not offsetting the losses in print, resulting in a net 5-10 % decline in revenues. This annual decline in revenue newspapers face has been accepted as the new “reality.” However, based on some of the Alexander Group’s recent customer segmentation and opportunity identification work in media advertising, we have found there is growth to be captured at the Local level. How can traditional media companies unlock this growth? It begins by understanding the sources of revenue churn.

Time for a Reality Check

The median revenue churn for Local accounts in traditional media is about 35%. That means every year your sales force has to make up for over one-third of lost business by a) keeping more of the revenues they have, b) selling more product to their current accounts, and c) capturing new logos. And that’s a lot of work.

Chart 1: An example client experienced 10% revenue decline year-over-year, with a 35% churn in revenue.

Each market is different, but through detailed customer surveys and current account analyses across many of our clients, three common drivers have emerged:

1. Customers Don’t Understand Your Solution’s ROI: New products are introduced a mile a minute, and many times a holistic value proposition gets lost in translation. Management and sales reps alike feel the need to sell the shiny new product, and either don’t take the time or lack the tools needed (or both) to communicate the solution’s ROI to the customer. As a result, at the end of an advertisement’s run, reps conduct little follow up and your customers don’t really know what they got for their money. Customers often site the lack of a clear ROI as the main reason for leaving a publisher. With the advent of digital campaign tracking, it is often far easier to define campaign success, resulting in the need for traditional media products to better demonstrate return. In this rapidly changing marketplace, it is important to remember that post-sales follow up and ROI impact demonstration are critical to retaining customers.
2. Digital Overlays May Actually Be Hurting Your Retention: Many sales organizations have not yet been able to make the “Digital First” transition when it comes to their sales reps. As a result, Generalists are still relying heavily on their Digital Overlay Specialists to develop a solution and close a sale. However, the Digital pitch can be pie-in-the-sky, immediately setting unrealistic or even unclear expectations with your customers. And when your advertisement doesn’t deliver, your Generalist is usually left to communicate the results while the Digital Overlay has moved on to close more deals. Without a realistic approach to what Digital advertising can do, customers may feel like they have been cheated.
3. Basic Product Bundles Reduce Effectiveness of the Advertising Solution: To help make the transition to Digital easier, many sales organizations have started to emphasize “bundles” as a way to get their customers comfortable with the perceived complexities of Digital advertising. However, bundling a set of products together can water down the effectiveness of each solution and result in the customer not purchasing enough to create real value. When customers dip their toes into the water with a new product through a cheap bundle, they may be disappointed in the lack of results garnered by the placement. It is your sales rep’s job to create a solution that not only aligns with your customer’s needs, but also emphasizes the range of impact at various commitment levels. It’s a tough job, but selling through value can result only in upside.

Focus Drives Performance

If your sales organization can reduce its churn rate by 10% and increase its overall retention rate to 75%, you can start the year without facing the crushing deficit of replacing over one-third of your business.

By focusing sales reps on communicating an advertisement’s ROI, setting realistic success metrics and emphasizing the value of the advertising investment to their customers, we believe the high churn rates at Local accounts can be addressed. These sales effectiveness initiatives and more can be used to drive the value of your solutions, help sales reps sell more expansive campaigns, create a customer with a longer lifetime value and ultimately drive growth.

Revenue growth is a process. With the right tool set and management discipline, the new “reality” can actually be much brighter; and media companies, even hybrids, can get back to growing revenue.

Visit the Alexander Group to learn more about tools to turn your churn into growth, and read more about our perspective on the Media Advertising landscape.