An interesting article from the Wall St. Journal about the longevity of retail ad circulars. The subtitle of the article is “Inserts in newspapers draw more shoppers than digital ads, but cost a lot more.”
That doesn’t have to be the case! By working with NSA Media, clients can help keep circular costs down and deliver ROI… we’ve been doing that for over 20 years. We’ve also been helping clients address the digital transition, building locally relevant media plans that truly address local media usage habits and locally relevant data in every ZIP code across the U.S.
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Retailers Can’t Shake the Circular Habit
Inserts in newspapers draw more shoppers than digital ads, but cost a lot more
By SUZANNE KAPNER
March 11, 2015 6:42 p.m. ET
The world may be going digital, but the brightly colored advertising inserts that spill out of newspapers every Sunday somehow missed the memo about the decline of print.
Newspaper circulars are hanging on even though they draw fewer and fewer eyeballs as readership shrinks. And they are expensive to produce, costing up to $1 million for a single run.
Chain stores would love to be free of the expense and have tried dozens of experiments over the years to find an alternative, with little or no luck.
Aware that it can’t go cold turkey on circulars, the department store Kohl’s Inc. this spring plans to scale back. Kohl’s is hoping to save money by using shopper ZIP Code data to better target its circulars.
First, Kohl’s will use purchasing history to divide its shoppers into four groups: loyalist, underengaged, infrequent and new. Then they will be cross-referenced by their ZIP Codes. Only areas with the highest concentration of loyal shoppers will get circulars.
The plan aims to cut by half the number of circulars the company mails to residents in the test markets. If the approach is rolled out nationally, the retailer could cut its budget for producing and distributing circulars by 40%, estimates William Setliff, Kohl’s executive vice president of marketing. He then wants to use the savings to better reach the other three types of shoppers through channels that might be more relevant to them such as radio, broadcast, social media and digital advertising.
That is if all goes well. History shows it won’t be easy.
“Retailers are constantly testing alternatives to circulars,” said Gerry Storch, the chief executive of the Hudson’s Bay Co. and former CEO of Toys “R” Us Inc. “The difficulty is finding something as effective.”
Despite the withering of the newspaper business, the inserts still land in about 50 million households a year, according to Borrell Associates, a market-research firm.
Publishers have a lot on the line in keeping it that way. Circulars account for about a fifth of newspaper advertising revenue, Borrell Associates says, though the amount varies widely by paper. At the E.W. Scripps Co., which owns newspapers in 13 U.S. markets including Memphis and Knoxville, circulars accounted for about a quarter of advertising revenues in 2013. (Scripps is in the process of merging with Journal Communications and spinning off the combined newspaper business.)
At New York Times Co., circulars made up less than 12% of ad revenue that year, according to the companies.
News Corp, publisher of The Wall Street Journal, owns News America Marketing, a leading provider of free-standing inserts. The company doesn’t break out revenue for circulars.
In 2014, circulars generated an estimated $5.84 billion in revenue for newspapers, down 6.9% from $6.27 billion the prior year, according to Borrell.
Borrell doesn’t expect circular revenue to ever get back to its prerecession peak of $8.22 billion, hit in 2006.
Retailers from Wal-Mart to Walgreens have found that making changes to circulars don’t always deliver the desired results. The problem is digital alternatives have failed to lure as many customers into stores as the weekly deluge of paper coupons.
Banner ads are seen as ineffective. Search ads work only if people know what they are looking for. Emailed coupons often are diverted to junk folders. Fewer than 1% of people who read newspapers online end up clicking through to digital circulars embedded in the website, according to Wanderful Media, which operates digital circulars for 400 newspapers and runs a mobile app called Find&Save. By contrast, around 80% of people who read a print newspaper look at the circulars inside, according to Wanderful.
That hasn’t stopped digital media companies from trying to make online circulars work. Google Inc., for instance, offers a type of display advertisement in which retailers can embed an assortment of content, including their circulars. A company called Retale allows shoppers to browse the weekly circulars from dozens of retailers on their computers or mobile phones and find the nearest store.
Ben Smith, chief executive of Wanderful, which is partly owned by a group of newspapers, said retailers will ask whether digital advertising will make up for what they lose from print when a local newspaper shuts down. The answer is often no because there isn’t enough digital advertising to buy to get the equivalent impact, Mr. Smith said.
In 2011 and 2012 Wal-Mart Stores Inc. took the marketing dollars it spent on circulars and used those funds on digital advertising in a handful of markets like Fargo, N.D., Madison, Wis., and Tucson, Ariz. The result: Traffic fell off in its stores in the regions and the circulars were restored, according to a person familiar with the pilot.
“Print is still an important advertising medium,” said Danit Marquardt, a Wal-Mart spokeswoman, who said the test was small and the number of circulars the company distributes has remained constant over the past two years.
The tenacity of circulars is at odds with broader trends in retail marketing. Chains have shifted marketing dollars from print to digital advertising in an effort to connect with younger shoppers. Macy’s Inc., for instance, has tripled its spending on digital advertising over the past three years, while scaling back print advertising by 25%. Other retailers including, Target Corp. and Home Depot Inc., have increased their digital advertising as a percentage of their total ad budget, according to Kantar Media.
Yet Macy’s has simultaneously increased the number of circulars it distributes, according to Martine Reardon, chief marketing officer.
“Circulars are like crack,” said Corey Elliot, the director of research for Borrell Associates. “It’s hard for retailers to walk away from them, because they are ingrained in how people shop.”