Sales Reps: Beyond Display and Classifieds
As the revenue ratio changes, so is the mission for sales reps.
From 2005 to 2007, advertising expenses were the second largest cost (after editorial) for the average b-to-b publication, averaging about $4.1 million per magazine, according to American Business Mediaâs recently released Financial Trend Report.
But while the report says publishers were able to reduce advertising expenses primarily by dropping their reliance on outside reps (by almost 25 percent), the use of reps seems to be exploding among other publishers, particularly associations, many of whom say they can leverage an entire rep firm for the cost of one in-house sales person.
ABA Journal tapped rep firm James G. Elliott, which specializes in taking over a publisherâs sales function completely. âOur expenses are significantly lower than when we had ad sales and marketing staffs,â ABA Journal editor and publisher Edward Adams told FOLIO: recently.
Meanwhile, American School Board Journal has tapped rep firm Fox Associates. âWeâre estimating that outsourcing this function will give us a full, nationwide sales force at about the same cost as salary, overhead and expenses for one high-level, full time staff salesperson,â says associate executive director and publisher Marilee C. Rist.
New Realities for Revenue Streams
The mission for sales reps is changing. Many rep firms are now moving beyond display and classifieds to sell digital media and event sponsorships. Some, like The McNeill Group, are even moving into custom publishing and magazine production. Â
âThe pressure filters downâwhen theyâre not doing well, youâre not doing well,â says president Ed McNeill. âWeâve been at this for 20 years and today youâre working twice as hard to make less. For firms like ours, weâre really moving toward niche markets where we can offer custom publishing and fee-based business without relying on advertising commission. Twenty years ago, if you sold $2 million in advertising, you might have made $200,000 from it. Today you might be making $75,000 from the same sale. Whereas with custom publishing, on a million dollar account, you might be making $250,000. Like any business, you have to adjust.â
For 20 years, the American Bus Association published Destinations internally. Within the last four years, the magazine has farmed out not just sales but also editorialâincluding its magazine and directoryâto The McNeill Group. âThe sales commissions for an in-house staff versus outside sales reps were about the same,â saysÂ ABA president and chief executive officer Peter Pantuso. âThe major difference was all the restâby outsourcing it was so much more efficient. In the years we had it, it was a financial loser. In the last two years, weâve seen a swing of about $300,000.â
When the American Translators Association found it couldnât grow its magazine on its own, they outsourced toÂ The McNeill Group. âThey do all of our sales, both classified and display for the magazine, and also sponsorship sales for our conferences,â says executive director Walter Bacak. âWith sales, the commission is so important and we didnât have ability to do that in-house. If we did, we would have been concerned about morale with compensation for the other employees.â
McNeill handles much of the advertising invoicing for the American Translators Association, including collection of conference sponsorships before the event takes place.Â âOn exhibit sales, they need to sell up front but we have the reps have to ask our approval for that,â says Bacak. Â
The 360-Degree Sale
Rep firm R.W. Walker originally focused on selling for b-to-b and association publishers but in recent years has taken on consumer publications such as in-flight magazines and wedding titles (the firm also works with mass titles such as Success and Fortune). âThe qualifier for anyone who works here is to understand each of those product linesâprint, online or eventsâand how they fit with the market they represent,â says president Michael Walker. âIf you canât speak to all those items, if an advertiser has to speak to someone else about online, you lose the connection.â
While Walker is prepared to sell online and events, he says the majority of revenue remains print-driven. âA lot of publishers are demanding online but advertisers are not really stepping up to plate,â he adds. âOn any given day, if I pull a sales report, more than 90 percent of the revenue is coming from print.â
Still, Walker says he expects a nice uptick in Webinar revenue in 2009. âFor publishers that can provide Webinars properly, there is a lot of potential,â he says. âAdvertisers are basing results on cost-per-lead generation. Once you have a rolling idea of what your attendee levels will be, you can promise what youâll deliver. We havenât met an advertiser yet whoâs been disappointed with results of a Webinar.â
Credit Union Times has used R.W. Walker for 15 years (and also uses other rep firms today). âWhat I need is a company that can sell everything for us,â says publisher Tom Greve. âDonât break it into different sales channels.â
Credit Union Times expects to generate just over $6 million in revenue in 2009. âWeâre conservative on projections for print but weâre a little fortunate because vendors who have been focused on banking are now looking at us because weâre in better financial position that many of the banks,â says Greve. âWe have given our reps a much higher bogey on digital than print. If I would had thrown them a 10 percent or 20 percent increase on print, they would have looked at me like I was a nut.â
The Armed Forces Communications and Electronics Association, which publishes Signal, has used outside reps, including R.W. Walker, since 1987. In the U.S., the association works with three different rep companies. âThey handle our print, our Web site and our e-newsletter,â says director of advertising Marsha Carpenter.
Reps also handle collections. âWith collections, we only ask them to make an attempt for late payment at 90 days,â says Carpenter. âAfter that, the magazine takes over that responsibility.â
Managing Rep Contracts
According to the National Association of Publishers Representatives, total compensation for an advertising sales team usually amounts to about 25 percent of advertising sales revenues, including their base salaries and expenses. Commissions vary depending on the base salary. Some plans pay a big base while the commission is in the 3 percent to 6 percent range. The alternative is a smaller base and commissions of 10 percent or more. Outside sales rep firms generally charge 20 percent commissions plus expenses.
The time a sales rep devotes to the publishing client can be a major bone of contention. Signal is looking to grow internationally (currently about 6 percent of its total revenue comes from international advertisers) and also uses some foreign rep firms, with mixed results. âWith some of our foreign reps, weâve now gone to a zero-day cancellation policyâI can fire them that day, no questions asked,â says Carpenter. âWe went to that because having a sales rep whoâs not fully representing you is worse than no sales rep at all.â
Still, McNeill advises publishers to have realistic expectations, particularly when it comes to balancing the selling and administrative parts of the job. âA lot of times publishers are not used to working with an outside agency,â he says. âAnd sometimes that means the reporting is over the top. To produce those sales reports means less selling time. Youâve taken that sales person and made them an administrative junkie. Itâs a control thing. You want to use an outside rep but you still want the benefits of inside control.â
Prospecting new territories may be another sore spot. âWe have a lot of publishers who come to us and say, âWe have all these other markets we want to develop, would you like to come in and develop on a commission basis?ââ says McNeill. âThe answer is no because there was no revenue to begin with and nothing to sustain it. Weâre only getting paid on business you wouldnât have had.â