Atlanta Journal-Constitution keeps tabs on its subscription start vendors

by Jim Fleigner        

Realising that not all vendors are created — or performing — equally, AJC uses a new tracking system to evaluate vendors and price commissions, working toward optimal impact.

Click the image to view a larger versionNewspapers often rely upon third-party vendors for a large percentage of their paid starts each year. Yet the methods used by newspapers to evaluate their performance rarely go beyond counting the number of starts generated. 

Further, newspapers often set the commissions they pay to vendors at levels based on best guesses, collective experience, gut instinct, or because “that is the way it has always been.”

Not content with the status quo, The Atlanta Journal-Constitution (AJC) has a well-earned reputation for always striving for improvement within its subscriber acquisition activities. One recent example has been the establishment of optimal commissions for its vendors who acquire new subscribers for AJC.

As explained in my report “Acquisition Optimization: Two Steps Newspapers Must Undertake,” written for the Newspaper Association of America (NAA), a fundamental tenet of strategy development is the “matching principle”: Allocate investment resources in those segments that are most attractive in their potential to generate a favourable rate of return, and avoid segments that are least likely to generate a favourable rate of return. 

Because rate of return is driven by three factors — acquisition investment, net margin per week, and weeks retained — those segments offering the lowest cost per start, highest weekly net margin, and/or highest weeks retained are the segments with the highest rate of return. And these are the segments that warrant the greatest emphasis per the matching principle.

With our help, AJC is tackling the question of how best to optimise subscriber acquisition investments. One tool being used quantifies the performance of AJC’s starts at a micro-targeted level (e.g., by channel, by delivery frequency, by subscription term, by ZIP code, etc.).

But the one dimension that most intrigued AJC was the ability to track performance by individual vendor, including unbundling each vendor’s starts by delivery frequency and subscription term. This was critical since the vendor’s commissions were paid differently on that basis.

The performance of each vendor’s collection of starts was striking. AJC was paying for starts that varied greatly in their rates of return. Some ZIP codes outperformed others by more than 100%, yet the commissions paid were identical across all ZIP codes. 

The discounts that AJC was offering for EZ Pay subscriptions were undercutting any ability to generate an adequate rate of return in lifetime net margin, relative to the upfront commission paid. Its investment in seven-day and four-day subscriptions also underperformed, especially compared to its two-day and Sunday subscriptions. 

Understanding the levers of this performance was sufficiently valuable to AJC to rethink what it might do differently. 

One obvious place to start is to simply direct the vendor to sell fewer starts in those ZIP codes and terms that are unlikely to generate an adequate rate of return. Another option is to re-price those terms that are underperforming to ensure that any new starts at least have a shot at breaking even. 

But a more complex option AJC is now pursuing is the re-pricing of its commission paid to existing and new vendors. 

We were able to quantify not only the actual performance of each bundle of starts, but also to specify how much each commission could be raised or lowered in order to motivate the optimal behaviours from the vendors. 

As AJC Audience Sales/Retention Manager Tad Kilgore explains: “I am bringing on a new kiosk contractor into market. I am using this re-priced commission information as the core of how I break up and assign unique commissions to ZIP codes. I am able to segment their sales against these metrics, as the choices they make will move the needle on our rate of return.”

Further, AJC recognises that by modifying its commissions in a way that improves the under-performers (by lowering commissions) and grows the over-performers (by raising commissions), it can modify the behaviour of the vendors in a way that aligns the vendors’ goal (generating the highest amount of total commission) with AJC’s goal. 

“I have begun educating my vendors of how rate-of-return metrics are impacted by their behaviour,” Kilgore says. “I am also going to have them compete for events based on how profitable their orders are. If they want the high-volume business, they had better sell good quality orders.”

This story doesn’t end here, as AJC can also now track the performance of any new starts through Impact Consultancy LLC’s ICAPTR™ (pronounced “I capture”) reporting system to see exactly how the new commissions are performing relative to the lifetime net margin. And with each passing month, it can further refine adjustments to AJC’s commissions.

In making these changes, AJC’s focus on rate of return and these tools is proof that newspapers have a much greater ability to improve performance than they realise, with active management of vendor commissions as an essential ingredient.

The report “Acquisition Optimization: Two Steps Newspapers Must Undertake” can be downloaded for free here.

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