More pain for newspapers as Progressive cuts print spend to 'close to nothing'

  • July 14, 2015
  • Damien Venuto
More pain for newspapers as Progressive cuts print spend to 'close to nothing'

In what looks set to be another big blow for local news publishers, StopPress understands that Progressive Enterprises will be shifting a significant chunk of its ad spend from press advertising to other channels and is also thought to be trialling a reduction of unaddressed mailers in some areas as part of its media strategy for FY16, which commenced on 30 June. And Foodstuffs is paying close attention to the moves. 

A source close to the business told StopPress that Countdown's spend on press advertising this financial year will be "close to nothing" when compared to previous years—a move which is being made in response to audiences shifting their media consumption to other channels. It's thought the budget is moving primarily to TV, which is still relatively cheap compared to other developed markets, and digital. 

In 2008, newspapers held biggest share of ad spend, contributing $760 million to the overall figure, according to AIS, which is based on ratecard figures. In last year's result, this figure had diminished markedly to $484 million dollars, leaving the newspaper channel in third position overall behind television and interactive. 

 According to Nielsen data, Countdown spent $78,860,000 on advertising for the financial year running from 1 April 2014 to 31 March 2015. Last year, it was the biggest spending advertiser in the country. Nielsen was unable to provide data on how much it spent on newspaper advertising, however. 

StopPress approached Countdown for comment on speculation that it was pulling out of print advertising completely, and the retailer's general manager of marketing Bridget Lamont confirmed that the company had over the last few years been shifting its ad spend from the newspaper channel.    

"For many years more and more New Zealanders have been turning online for news and entertainment," says Lamont. "Over the last three years, at Countdown we have been increasing our spending on digital advertising, and spending less on newspaper advertising. It's important for return on marketing investment to be where our customers eyeballs are."

Countdown's national communications and public affairs manager James Walker told StopPress that newspaper advertising would continue to be part of Countdown's advertising mix in FY16, but would not provide any additional information on how much the retailer would be spending on the channel.

Walker did however point out that Countdown would not be pulling out of paper-based advertising entirely, pointing to statements made by Lamont on the continued importance of mailers and catalogues.

"Print-based advertising, in the form of the mailer/catalogue, remains a vital part of what we do," Lamont said. "Every week we print and distribute 1.4 million catalogues/mailers. We are encouraging our customers to read the mailer online too. Currently, 340,000 Countdown customers receive the mailer in digital form."

The major newspaper publishers (NZME and Fairfax) today have sophisticated digital properties with large audiences so some of Progressive's ad spend moved from press advertising may find its way back into their revenue streams. But, as many publishers have discovered, the loss of print revenue is unlikely to be made up for by digital revenue. 

Countdown's decision to cut back on newspaper advertising is also interesting from a competitive perspective. And the ongoing reduction of retail ad spend in the newspaper channel has led some to question which of the major brands would blink first and pull out of print altogether.

Foodstuffs Group general manager of marketing Steve Bayliss was asked whether he would consider following suit. 

"At this time Foodstuffs has no plans to reduce paper-based advertising in the form of circulars and regional press," Bayliss says. "As a New Zealand-owned group these connections into local communities remain an important part of our communications mix. They also allow individual store owners to tailor messaging, product selection, and pricing to their communities. This very locally based approach remains a key source of competitive advantage for our cooperative structure and retail brands."

Bayliss did however point out that the cost involved in the production of mailers is an ongoing debate.

"As with any media channel we are constantly seeking to improve productivity by reducing paper weight, rates and other costs, while also ensuring our creative impact is maximised. At this time, we are concerned that print cost per thousand rates continue to be high and haven’t adjusted to the degree we believe they should have to remain competitive with other channels. This will be an ongoing focus in media evaluations and discussions."

Interestingly, Bayliss has previously in his career pulled print advertising from his media strategy, albeit for a limited time.        

"During my time at Air New Zealand we ran an Auckland-wide print starvation trial for three months. In parallel with this we boosted our digital assets. As a result of the trial, which certainly amplified which parts of the print messaging mix were working best, we did change our strategy. Print was reintroduced, but in a more targeted manner, and to be fair at a slightly lower cost."

This experience could no doubt encourage Bayliss to employ a similar approach at Pak 'n Save and New World, but he points out that print advertising can still drive results if used effectively. Whether the (often young) media buyers who might not read newspapers understand the effectiveness of print is another matter. 

"There are some great case studies on the performance of press. One of my favourites of all time was the fake OX Beer launch in Singapore. As much as anything it argued for the power of getting the mix right between media and brilliant creative messaging. One without the other, regardless of channel, delivering soggy results."

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