Advertisers in many markets are spending less on print advertising than they are on other media. In the United States, for example, the growth of print advertising is being outstrip-ped by the growth of radio and television advertising, direct mail, and even the Yellow Pages. In Western countries as a whole, newspapers are losing almost half a percentage point of market share a year.

People in the newspaper industry are fully aware of certain realities. Consolidation and the effectiveness of television have reduced advertisers’ interest in print advertising. Such superstores as Wal-Mart and The Home Depot in the United States or Casino in France advertise less than traditional retailers do. Direct mail gets a great deal of the money that used to go to print. Those advertisers still committed to it have found that they can achieve the same effect by purchasing less space in a more focused fashion. And classified advertising in general now faces intensifying competition from specialized media and from the Internet.

Many people in the industry accept these conditions as unalterable macroeconomic laws dooming newspapers to a slow decline. This then becomes a self-fulfilling prophecy. Take the experience of one US daily newspaper, which we will call the Bellmore Gazette. When the Gazette’s advertisers were asked why they were cutting back on their advertising in the newspaper, some said that they were losing confidence in its effectiveness, and some felt the advantages of other media. When pressed, however, it became clear that these advertisers were not making careful decisions based on facts. Indeed, the facts generally suggested that the Gazette could often help advertisers reach more people more effectively than other media could.

Much of the fault for the Gazette’s problems thus lay with the newspaper, which was not aggressively offering incentives to advertising agencies to counter the carrots proffered by television stations. Nor was it communicating its willingness to collaborate with clients by staging promotional events in the way that some radio stations were doing. At times, the problem was depressingly simple. One car dealer observed: "I’d be happy to try new things with your paper, but your sales representatives rarely make new suggestions."

Advertising revenue continues to be the newspapers’ greatest potential source of growth. Recognizing this truth, the Gazette decided to reconfigure the way it dealt with advertising sales. Now, after years of flat-to-declining advertising revenues, it is looking at 12-15 percent annual growth, with every expectation that the upward trend will continue (Exhibit 1). This improvement comes at a time when circulation is either level or falling and when the gross domestic product of the region the paper serves is growing slowly.

The Gazette is not an isolated example; similar results can be demonstrated for other leading US dailies, some of which reach well over a million readers, as well as for some European newspapers. Of course, improvements of this magnitude are not easy to pull off. The Gazette had to rethink its advertising sales operation from end to end—a potentially energizing procedure but also a painful one. It did so by supplanting the standard way of organizing advertising sales teams, in which individual sales representatives cover geographic territories, with sales teams based on market segments. Then the newspaper did everything possible to mobilize all of its support functions in a way that maximized the effectiveness of the sales team. Third, because people were being asked to behave differently, the paper paid them differently.

Many managers in the industry will recognize these changes. They might already have implemented some in their own sales departments. But the key to redesigning advertising sales is not to do so in a piecemeal or partial fashion: the full benefit can be felt only when the whole structure is changed.

The wisdom of teams

Organizing a sales force into teams that correspond to customer segments is a basic marketing principle, and one that has been used by consumer product companies for years. Many newspapers do not organize themselves in this way, however. Instead, these papers assign advertising sales representatives on a geographic basis, because this minimizes their travel time and permits them to get to know their areas well. Salespeople, though, cannot understand the businesses of all the different advertisers in their markets. Nor can they understand all the value propositions that other media are selling. As a result, they sell the parts of their newspapers that make them feel comfortable. Instead of probing the different needs of advertisers, the salespeople push familiar products in familiar ways to each of them.

One disadvantage of the geographic approach is that whenever salespeople are outside their comfort zone, they are functioning merely as order takers. Another is the fact that it promotes individualistic behavior. In other words, it does not encourage representatives to share knowledge; it does not lend itself to the coordinated development of products targeted at groups of advertisers with similar needs; and it does not help newspapers present consistent, well-articulated statements of their advantages as compared with other options.

An organization based on market-segment sales teams, on the other hand, overcomes these drawbacks. Under this system one team might be formed to focus on banks, a second on automobile dealers, a third on retailers, and so forth until 10 to 20 segments were identified. The larger segments could be broken down: retailers, for instance, might be subdivided by size into national chains, regional companies, and small local stores. In addition, there are such classified segments as real estate and help-wanted job listings.

Strategies and tactics

Once the segments have been identified, all segment leaders must develop and continually revise strategies and tactics for their segments. First, the needs of each advertising segment must be determined. Segment leaders will probably believe they already know these needs, but their perceptions may not be correct; the internal view from a newspaper is often out of date, and sales representatives may never have fully understood the customers’ businesses.

The best way to find out customer requirements is simply to ask

In any event, the segment leader should start by compiling a list of the customers’ requirements. The best way to discover them is simply to ask. Each segment leader should schedule several weeks’ worth of interviews and meet a wide sample of customers. (Very senior executives often benefit by participating in these interviews.) The segment leaders should also research advertisement spending trends in their own and other newspapers—by looking at newspapers around the world, for instance, to see how similar customers use print advertising. The leaders will then be able to identify the barriers that keep their segments’ customers from buying more advertising. These leaders will also be in a position to develop overall strategies for each segment and to devise tactics that will make them work. Typically, each element of the strategy will then be implemented through tactics bearing upon three factors: product, price, and the sales process.

The approaches taken by two segment leaders from the Bellmore Gazette are instructive. The first segment leader worked on auto dealerships. To begin with, this segment leader interviewed customers and carried out data research. Straightaway, the most basic data revealed a possible barrier: two-thirds of dealership advertising ran in the Sunday sports section, with the rest spread thinly across the week. Might there be an opportunity for midweek advertising? Was something preventing this possibility from being realized? Interviews suggested that dealers did feel a need for a midweek newspaper section that readers looking for a car would know to turn to and might even take with them when they shopped for it on Saturday. Further barriers emerged: an unsophisticated sales approach, a shortage of new advertising products, and a related failure to try out fresh ideas.

Once all of the barriers had been pinpointed, the segment leader drew up the strategy. On the product front, it was decided to expand the paper’s offerings to correspond better with the timing and content of the advertising message auto dealers wanted to communicate. On pricing, the strategy aimed to encourage the testing and growth of unusual products through discounts and promotions. On the sales front, it undertook to divert sales representatives away from their former role as pure space sellers and toward one more akin to that of consultants. Today, when the Gazette’s representatives visit a dealer, they come armed with an analysis of the dealer’s advertising expense per car sold, typical car purchase demographics, and various "tailoring" options to help the dealer reach relevant demographic segments. The sales reps then suggest a monthly advertising program.

So much for strategy. Of the tactics the segment leader devised to implement it, one has already been mentioned: the creation of a pullout section, or tab, to give auto dealers a midweek advertising vehicle. The tab, called "Wheels," carried off-the-wire editorial matter to attract readers. The new space was immediately filled by advertisers and went on to generate $1.2 million in extra revenue per year without shrinking the volume of advertising on other days of the week. Further tactics focused on pricing. Newspapers typically offer customers volume-based discounts indiscriminately, without taking account of the different price sensitivities of each segment. But because auto dealerships often have no feasible alternative to advertising in a newspaper, it is not necessary to offer them such generous discounts. This is particularly true for Sunday papers, so the Gazette implemented price increases of 20-30 percent, with very little drop in volume.

Meanwhile, the Gazette’s second segment leader looked at independent retailers. In general, small local stores thought they could get more result for their ad spending elsewhere. One merchant said, "Radio gives me better value than the newspaper. I get 12 ads for $1,000." Did he have a factual basis for this conclusion? No. But he did have his perceptions, and this was enough to determine his choice of advertising medium.

Thus the new strategy focused on efforts to put across the argument that print media provided superior value for these retailers. Pricing was obviously critical, but rather than simply cut rates the segment leader extended additional value to advertisers in ways that cost the newspaper very little. When it had small unfilled spaces, for example, it offered them to the best advertisers as a bonus instead of filling them with house advertisements. Advertisers recognized that the newspaper had done something special for them that other media would not do. The segment leader also experimented with combination discounts for slow days or for special newspaper sections distributed in different geographic zones. For reasons connected with the mechanics of printing, all of these sections had to have the same number of pages, so less busy sections could exploit empty ad space in creative ways to create a perception of high value, at marginal cost to the newspaper. The concepts were simple, but effective.

Formulating strategy and tactics is not a one-off matter, of course. Although the overall strategy may continue to make sense for a year or two, new tactics should continually be implemented and old ones discarded.

Creating the teams

Once the segment strategy emerges, it is time to form the teams and to establish the new sales organization. By considering the strategy developed for the segment, its leader chooses the number and type of sales reps it requires, along with necessary administrative support. The leader of the Gazette’s Auto Segment chose four sales reps who could implement the consultative sales approach the new auto strategy demanded, as well as two office-based sales reps to function as contact points for larger advertisers (because the main reps would be spending most of their time on the road) and to manage smaller advertisers to be reached by phone. The leader also considered setting up one sales rep in another city, since most of the auto manufacturer’s key decision makers were located there.

One of the strengths of this system is the fact that all segment leaders are responsible for their own profit-and-loss statements. As a result, those leaders are now quite careful in determining how many people their teams need, and they continually review the teams’ composition. Upon realizing that a region could be covered without a sales rep, for instance, a segment leader asked to have the sales staff reduced.

Getting the support structure right

Advertising personnel interact directly with the departments and personnel of the newspaper’s support functions. On the Gazette they were organized into Creative, Promotions, Research, Administrative Support, and Financial and Pricing departments. In the past, advertising sales representatives made little use of these services, generally because they did not understand the full value each can provide. Under the new segmented organization, the services are more clearly defined, and segment leaders have an incentive to use them.

The Creative Department, for example, works hand-in-hand with advertising sales representatives to design advertisements for customers. The department’s personnel can attend planning meetings to create sales materials and samples of new products or to think of ways to apply ideas from other media to print. The Promotions Department works with each segment team to develop ideas about how the advertising of individual customers might be tied to local events and other promotions. As a result, the Gazette no longer loses auto business because only the local radio station is willing to plan joint promotional events with dealers. If a local auto show is mounted, the Promotions Department works with the Auto Segment to devise ways of exploiting the event to the advertisers’ advantage—for example, by giving dealers tickets to distribute to customers who come into showrooms with their advertisements in hand. The department might also manage a calendar of promotional events for each team.

In addition, the Research Department uncovers issues facing advertisers in each segment; provides teams with data on markets, industries, and competitors; identifies advertising leads; and generates information packages that representatives can take to clients. As a matter of course, the department provides information about a customer’s spending on other media—valuable data that typical sales representatives do not now have. Administrative Support assists representatives by assuming their administrative tasks, maintaining their accounts, or following up with other key support services. The Financial and Pricing Department helps to create budgets, to review annual contracts, and to explain new financial reporting methods.

Sales representatives must be persuaded to use support services extensively

Of course, it is no good merely announcing that these functions will play a bigger support role. Sales representatives must be persuaded that there is something in all this for them. The something is that, gradually, they will find how much more effective their sales approach can become. A quick way to convince them, if one is needed, is to show them how much more selling time becomes available under the new system. Surveys suggest that 75 percent of a typical sales representative’s day is spent, away from customers, on administrative tasks (Exhibit 2). Once these are eliminated, simplified, or passed on to the support functions, sales reps can become free to spend up to 60 percent of their time with customers.

The right way to measure performance

The most meaningful way to assess the performance of a sales team is to measure its actual contribution rather than revenue or line counts. For the usual practice of measuring inches sold or revenue earned gives advertising sales representatives incentives that are not necessarily aligned with a newspaper’s interests. It is more satisfactory to measure the sales reps’ contribution—that is, advertising revenue minus discounts and minus the cost per inch of advertising (which includes paper, ink, personnel, and assistance from support functions). This approach gives team leaders an incentive to optimize profitable sales rather than pure linage or revenue. All of a sudden, representatives and team leaders start to think about selling each inch of space for the highest possible price. We mentioned earlier a team that raised its prices because it felt, correctly, that advertisers would pay more for the same space. A senior vice president said later that this was the first time he could remember sales representatives lobbying to raise prices.

The best way to measure a sales rep’s contribution is to roll it all up into a profit-and-loss statement that tracks a team’s performance. The power of the system is that it gives segment leaders complete discretion over how they spend the budget. Some leaders may want to invest heavily in promotional support to launch a new product, on the theory that growth down the road will justify the investment. Others might want to cut costs. The team leader who decided to reduce staff was acting in a way that would have been inconceivable in the days when the newspaper relied upon measuring the total revenue brought in by its representatives. Under the system described here, team leaders become, in essence, business owners fully responsible for the success of their segments.

Once the new measurement system is in place, the incentive structure can be revised to reward strong performance. Historically, newspapers offered high fixed salaries with only a small element of merit-based compensation. Sales reps were thus rewarded as much for showing up as for working hard or smart. Exhibit 3 shows the typical payout curve of an advertising sales team in the new organization. It differs from conventional compensation systems in two ways. First, compensation for all team members varies a good deal, with the variations based on performance relative to a budget. Second, the payouts reflect team rather than individual performance, giving members an incentive to collaborate, to share ideas, and to pull up struggling colleagues.

It is a controversial approach. Sales representatives are used to working in relative isolation and at first dislike having their compensation tied to other people’s performance. But the concept of segment teams cannot be successful unless all members aim at a similar target, and team-based compensation is the best way to ensure that this happens. When a team begins to be successful, the representatives usually start to support each other and then find it natural that they should be compensated for their collective results.

Everybody wins

The results of market segmentation can be dramatic. Two years after the Bellmore Gazette reorganized, its success is visible both at the corporate and the individual team level (Exhibit 4). Several teams have increased their contribution at an extraordinary rate. A few have struggled. But senior managers now know precisely where they can count on results, where they want to focus their efforts, and where they may want to place additional talent.

And the advantage to an organization is more than just financial. Morale rises. So does productivity. The outcome is a model organization that other departments want to emulate.