Prepare to help your ad sales team handle average price issues

Circulation Management, Jan, 2002

For ABC tides, this month's publisher's statement features the first mandatory reporting of average price-per-copy, net of premiums, public place/sponsored copies and cancels.

While there are other new reporting angles that also need to be taken into account in circulation management strategies, average price may have the most significant impact on media buying decisions. Will it be a key factor in some media buying decisions? Will media buyers in search of elusive indicators of reader "wantedness" use this number as such an indicator? How much importance will be attached to differences in the average prices among competitors in a given market? Will even small ups and downs in a given title's average price draw scrutiny?

And perhaps most important, will media buyers focus on these numbers without fully understanding the many variables that are bound to make them fluctuate, at least moderately, from period to period? There are no clear answers to these questions at present.

"The one thing that publishers are most concerned about with the new ABC rules is average price," acknowledged David Leckey, VP, circulation, Hachette Filipacchi Magazines and an ABC board member, during a recent Fulfillment Managers Association panel. "Up to now, fewer than 10 percent of ABC publishing members have been voluntarily reporting average price--and that was on a gross basis, buried in the back of the statement Now it's on a net basis, and it will be on page one."

The inevitability of fluctuations in average price "was always our concern with media buyers who wanted this information," Leckey notes. "We always asked them, 'Will you understand that there will be fluctuation, and what a meaningful fluctuation is?"' Unless there's some major change in a tide's circulation source mix, a magazine's average price "isn't going to go from $15 to $8," he adds. "But it could go from $15.12 to $14.95 or $15.18. The question is, will advertisers see this as meaningful?"

Outside of rate base performance, circulation specifics on the ABC publisher's statement traditionally have come into play in the sales and buying process mainly when something on the statement is unusual enough to warrant media buyers' concern, or is considered a major positive for ad sales purposes. But while syndicated readership numbers will continue to drive the magazine buying process, it seems clear that the new reporting formats will result in more focus on publishers' statements, at least for a time. In fact, top executives for major media buying firms and advertisers have publicly stated as much (see Update, page 22).

"Now, things like average price are going to be in the forefront of a buy," Leckey predicts. "It's going to be like a grade. Any fluctuation in average price will be questioned." This factor is likely to deter most publishers from being too adventurous with pricing of offers, at least for a while. "We need to get one or two pink sheets under our belt to see what the real effect of these programs are," notes Leckey.

"In terms of doing premiums and combination deals to generate more volume, most publishers are very wary of lowering their average price per copy, at this point," agrees Craig Reynolds, VP, publisher relations, QSP.

Since all subs sold at less than 35 percent of average price must be broken out by volume and pricepoint, another concern is how these will be perceived by media buyers. "You may have a solid program that reaches a highly desirable audience, but if it's at a pricepoint below 35 percent of the average, the real question is whether our ad salespeople will be able to sell that as a positive and not a negative," sums up Leckey.

Moreover, as Reynolds points out, although credit cancels are excluded from the average price calculation, all subs sold at less than 35 percent of average price--including bill-me/ credit subs that may ultimately be cancels--must be broken out on the statement For example, if a tide ran a significantly discounted offer on the Web, which generated high response but had low pay-up, all of those cancels would have to be reported, though not factored into the average price for the period. "Even if only 10 percent of these prospects paid, you would have to disclose them," Reynolds stresses.

Of course, publishers can manage offers so that the 35 percent breakout threshold isn't triggered, or so that these volumes are minimal--and that's what many will do, at least for the time being. But while average price can also be managed, ad salespeople should be prepared to explain any fluctuations, minor or otherwise.

"I believe that circulation directors are going to need to provide ad salespeople with strategies to position those minor fluctuations," says Leckey. Specifically, salespeople will need to be able to explain how particular sources or programs may temporarily lower average price, but result in delivering audiences with desirable demographics and/or a strong commitment to the magazine. Each magazine will have its own set of source variables, but Leckey notes a few examples that might come into play in the ad sales training process: