Advertisers are faced with a number of options and pricing structures when purchasing newspaper space. The cost of advertising space depends not only on the newspaper's circulation but also on factors such as premium charges for color or special sections as well as discounts available. The purchase process and the rates paid for newspaper space differ for general and local advertisers.
General versus Local Rates Newspapers have different rate structures for general or national advertisers and local or retail advertisers. General advertising rates apply to display advertisers outside the newspaper's designated market area (DMA) and to any classification deemed by the publisher to be "general" in nature. This includes ads run by national advertisers such as automotive, tobacco, packaged-goods, and pharmaceutical companies. Retail or local advertising rates apply to advertisers that conduct business or sell goods or services within the DMA. The rates paid by general advertisers are, on average, 75 percent higher than those paid by local advertisers. Newspaper publishers claim the rate differential is justified for several reasons. First, they argue it costs more to handle general advertising since ad agencies get a 15 percent commission and commissions must also be paid to the independent sales reps who solicit nonlocal advertising. Second, they note that general advertising is less dependable than local advertising; general advertisers usually don't use newspapers on a continual basis like local advertisers do. Finally, newspaper publishers contend that demand for general advertising is inelastic—it will not increase if rates are lowered or decrease if rates are raised. This means there is no incentive to lower the national advertisers' rates.
National advertisers do not view these arguments as valid justification for the rate differential. They argue that the costs are not greater for handling national advertising than for local business and that many national advertisers use newspapers on a regular basis. Since they use an agency to prepare their ads, national advertisers are less
Exhibit 12-24 The
Newspaper National Network encourages national advertisers to run their ads in newspapers
Newspaper National Network encourages national advertisers to run their ads in newspapers likely to request special services. The large and costly staff maintained by many newspapers to assist in the design and preparation of advertising is used mostly by local advertisers.
The differential rate structure for national versus local advertising has been the source of considerable controversy. Some newspapers are making efforts to narrow the rate differential, as is the Newspaper Association of America (NAA). In 1993, the NAA created the Newspaper National Network (NNN) to target national advertisers in six low-use categories: automotive, cosmetics and toiletries, food, household products, liquor and beverages, and drugs and remedies.31 The network's goal is to attract more advertising dollars from national advertisers in these categories by promoting the strategic use of newspapers and facilitating the purchase of newspaper space with their one order/one bill model. Exhibit 12-24 shows an ad encouraging national advertisers to place their ads in newspapers through the NNN.
Many marketers sidestep the national advertiser label and the higher rates by channeling their newspaper ads through special category plans, cooperative advertising deals with retailers, and local dealers and distributors that pay local rates. However, the rate differential does keep many national advertisers from making newspapers a larger part of their media mix.
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