Building a Custom Business From Your Ad Base
Penton Media turns to custom and marketing services as core drivers.
Last month, Penton Media emerged from Chapter 11 after 23 days, shedding $270 million in long-term debt as part of its restructuring (Pentonâs private equity owners also agreed to inject between $38.9 million and $51.2 million into the company). Moving forward, Penton says it will rely more on custom and marketing services for growth. âOur clients are increasingly looking for a more targeted, return-based approach,â says CEO Sharon Rowlands. âWe all need to become more relevant in our market and that relevance has to be manifest in content strategy and driving new product development, which has a big impact on the sales organization and their ability to sell in a more consultative manner.â
While Penton has offered custom services for years, in February 2009 it relaunched that unit as the Penton Custom Solutions Group, led by vice president of custom solutions Scott Bieda. âIâve been a publisher for 17 years, and Penton wanted someone from a publishing background,â he says. âThe custom team had core offerings when I got there including special supplements, print and e-mail newsletters, Webinars and some virtual tradeshows. However, in the last year, things have exploded. The entire portfolio has tripled.â
That includes a new emphasis on market research. âWe realized research was being underutilized in the organization,â says Bieda. âResearch will be a big focus.â
That includes a Critical Trends Report in which Penton applies 10 different areas of evaluation criteriaâsuch as quarterly sales; profitability; back-log of work; raw material costs; labor costs; and other costs that may be extraordinaryâto a select marketplace. âThis provides readers and manufacturers with a forward-looking document,â says Bieda. âThatâs something you can plug into just about any market.â
Moving Into Marketing Services
As are many publishers, Penton is developing marketing services capabilities that go well beyond the traditional custom solution. âPeople talk about marketing servicesâbut what are they?â says Bieda. âOur clients are asking us for certain things. We have a whole new division that will start providing those turnkey services over the next month or so. Weâre not targeting the Krafts or Procter & Gambles of the world, they have those capabilities. But once you get past that level, then we start to get questions like, âCan you handle this for me?ââ
Bieda says marketing services require a dedicated staff. âYou can try to use existing staff but you end up serving two masters,â he adds. âEverybody is doing two jobs anyway, they donât need a third. If youâre getting into this business, you have to have a list of deliverables and be on the timeline of the client. To compete with integrated agencies, you have to be staffed up to do it. You can hire one point person and outsource all the deliverables but you make the least amount of money when you do that, plus you cede some of the control. You can buy yourself an agencyâMeredith has done that. The fourth way is to hire four to five people with the knowledge base that ranges from how to do a 2-D bar code program to knowing search engine optimization. We can pull SEO people within the company but they have to be fully committed to the marketing services group.â
A $10 Million Business That Grows Faster But Has Lower Margins Than Print?
Initial revenue will probably be less than $1 million but should ramp up quickly from there, according to Bieda. âIf we were to start this year, I will be happy with half a million dollars in business,â he adds. âAs we put more muscle behind these offerings, it could be $2 million next year and $5 million the year after. Eventually, this could be a $10 million business.â
However, Bieda warns other publishers that while marketing services can offer strong growth, these new revenue streams donât offer margins quite as profitable as what publishers may be used to.
Â âBefore the recession, the margins in the traditional magazine publishing business were pretty good and theyâre still not bad,â says Bieda. âThe margins with marketing services are slightly lower than traditional publishing. But, itâs always going to be an up and down businessâsomething like SEO services will be extremely profitable because itâs billing people for time and putting them on a monthly retainer. Some of the other servicesâlike videoâmay not be as profitable but are still good businesses. Theyâre still healthy but at a slightly lower margin than traditional publishing because the costs are much higher. But slightly lower than traditional media is still a great margin.â
Buffalo Spree Publishing: âWhere the Agency lets Off, We Begin.â
Custom and marketing services arenât just the domain of larger publishers. Buffalo Spree Publishing, a publisher of city and regional titles for Western New York, began its custom division eight years ago.
While the publisher does produce annual magazines for select clients, its custom work has historically included theaters, concert venues and spas. âWe publish 17 of the playbills for area theaters, concert halls, and other performing arts venues,â says vice president of sales Barbara Macks. âWe also do everything from identity packages to magazine inserts, direct mail, brochures, posters and postcards for three spas and salons in the area.â
Over the past few years, Buffalo Spree brought 50 to 60 new clients on board, despite not having anyone dedicated to selling its custom offerings. âThe jobs that we get come through our sales staff. When our sales reps are in the field, they pitch brochures to our existing magazine customers,â says Macks.
In 2009, Buffalo Spree brought in a new salesperson to head up a dedicated sales, marketing and promotion group. âWeâve taken our custom publishing to the next level,â says Macks. âHeâs also focused on promotional goods and direct mail campaigns, he buys radio and TV for clients and he will service billboards if he needs to. Where the agency lets off, we begin.â
Price-wise, the custom collateral ranges from business cards at âa few hundred dollarsâ to theater programs, which can cost âhundreds of thousands of dollars,â according to Macks. One spa client spent $40,000-$60,000 over the course of a year on direct mail and brochures, she says.
While there are no salespeople dedicated exclusively to custom publishing, each salesperson has part of their commission as well as annual budget based on custom sales.Â
Custom still remains âat the bottom of our repertoire,â Macks says, accounting for more than 15 percent of the publisherâs total revenue, up from 10 percent five years ago.
Ultimately, the goal is to increase custom to 25 percent of total revenue, according to Macks. n
Nine Opportunities for Marketing Services
Penton Media is developing a new marketing services group that will be a key asset of its custom business. Here, vice president of custom solutions Scott Bieda identifies nine areas the publisher is counting on for growth.
1. Online. âWeb site building, Web site design and SEOâthatâs going to be huge. I see that as one of the biggest untapped areas to provide a very profitable and very needed service to readers or advertisers.â
2. Market and Trend Research.
3. Mobile Marketing. âWeâre getting a lot of calls about doing this.â
4. E-mail Marketing. âEverybody does it but there is a strategic or systemic approach that should be applied.â
5. Content Marketing.
6. Metrics and Analytics. âPeople use them but there is a huge gap in understanding the metrics of their Web site and how they can use that data.â
7. Social Media Marketing. âEverybody thinks thatâs free. Itâs free except somebody has to do it.â
8. Video and Online TV. âThatâs a huge initiative. At AmericanPrinter.com, we have a bi-weekly TV news show that looks like an Entertainment Tonight-type report. Thatâs the only newscast that we know of for that marketplace. We want to roll that approach out to other markets. Thatâs a sponsorship modelâwe can produce video for clients or they can give us video thatâs already done.â
9. 2-D Bar codes. âWeâve done that with a few of our magazines and we will be coaching people on how to take advantage of that. Iâm hoping that brings some print back to life.â
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