As South Africa’s printing titans square off to fight the insert war, Peter Langschmidt – who has undertaken research for the one side – gives his perspective, in a story first published in The Media magazine.
Newspaper circulations and ad revenues are declining worldwide as consumers move to broadcast, Internet and mobile media for news. They are simply better and more immediate in terms of delivering news. After all, who followed the Chilean miner rescue, or the Japanese tsunami in their newspapers?
Each year, far more households in South Africa get TV sets for the first time than the circulation of the Sunday Times or any other paid newspaper total circulation. Today, more than twice as many people worldwide (1.1 billion) receive newsfeeds to their mobile phones rather than read newspapers (470 million).
There is, however, one area of print that has been steadily growing – but it is largely under the radar, since it is not measured by Nielsen Ad Dynamics as most of the cost is in printing, not media. This area is that of the ubiquitous retail inserts.
Retailers are a tough bunch and, unlike brand or image-building advertising, they are able to measure precise return on investment (ROI) on every leaflet they distribute. And inserts obviously work for them – as can be seen in the graph below, they have steadily moved from run-of-paper (ROP) adverts to inserts over the past few years. The reason is obvious: for a similar cost, they can fit about twice as many products onto a double-sided leaflet as an ROP advertisement.
The background to the war
When it comes to printing inserts, there are two major players: Paarl Media, owned by Naspers, and CTP Caxton. These are the two printing behemoths of South Africa, and together account for over R10 billion worth of print annually, of which retail inserts account for about R2 billion.
In terms of market share, Paarl Media has edged CTP out in most sectors, with one notable exception – retail inserts. This is how the ‘great insert war of 2010/11’ came about. CTP Caxton has dominated retail inserts because it leverages its community newspapers – some 58 in Gauteng alone. Advertisers who print with CTP get reduced rates on inserting in Caxton’s local freesheets. As Paarl could not compete for the printing, it had to introduce a competitive way of distributing advertiser leaflets… and this is called Shopper’s Friend.
It would be suicide to take Caxton’s 30-year-old established local newspapers head-on, especially in view of the fact that newspapers are getting a smack from digital media. So Paarl chose a distribution vehicle that is an entire new category, called ‘adpapers’. Papers without the news, just the retail ads. Not everyone likes news, but everyone shops. This distribution method is used very successfully in parts of the USA and Europe – a carrier that is a holder for retail inserts. With no editorial costs and huge economies of scale (Shopper’s Friend has an ABC circulation of over two million copies), Paarl is now able to undercut CTP-Caxton prices.
History repeats itself, things turn ugly
As Paarl has attempted to move advertisers that have been with CTP-Caxton for over 30 years, things got ugly. In the 1970s, when entrepreneurs Noel Coburn and Terry Moolman launched their local free newspapers, the ‘establishment’ – Argus, SAAN, Perskor and Naspers, as they were called in those days – slated them, saying freesheets had no value to readers and that they would never work.
Now, 35 years later, in a bizarre repeat of history, NAB Caxton’s newspaper sales arm – now ‘the establishment’ – is doing exactly the same to its new competitor! Actually, unlike the old-school-tie, gentlemanly press of the 1970s, Caxton is fighting hard, and concentrating in the courts, not the marketplace. To add fuel to the fire, Paarl recently bought and merged with Primedia@home, so it now has many new advertisers that will be shifted from knock ‘n drop into Shoppers Friend, giving it much-needed bulk.
Paarl approached me in June 2010 to do some research on the acceptance and performance of Shopper’s Friend vs ‘the establishment’. I can tell you that after 35 years in research I have learnt one thing: we are emotional beings, and cannot truly articulate our feelings towards products and brands, especially using a verbal questionnaire being conducted by an unknown interviewer. There is no ‘halo effect’ – the entire process is contrived and unreal, and this is compounded when we look at readership research.
So we decided to conduct a ‘readership and response audit’ rather than classic research – something that would provide irrefutable proof of readers having seen an ad and responded to it.
We placed an identical 13×4 FC Samsung competition advert in four Caxton papers, The Star and Shopper’s Friend. Each publication had a unique keyword, so we could monitor the response by each title.
We then measured the audited SMSes from each network and compared this to their circulation and rates to get a cost per response. The rate, of course, takes into account that the ads appeared on different pages, since front pages have a loading versus inside pages, so it’s all totally fair, based solely on money and response.
As can be seen, the cost per SMS response of Shopper’s Friend, at 9c each, was almost four times less than the newspapers, at 33c. So, from this audit, it shows that Shopper’s Friend is being read, and is delivering value to advertisers. But will this apply to the inserts, and will this continue? Only time will tell.
Who will win the war?
The beauty about new products is that consumers and the advertisers who follow their eyes decide whether they will be a success, not our audits – and most certainly not competitors’ opinions, lawyers or anyone else. In the 1970s, readers proved the establishment wrong. They embraced their local newspapers, which became a roaring success – so much so that, in 1998, Caxton swallowed up Perskor and is today a media giant with a turnover of R4.1 billion.
So will Shopper’s Friend succeed? Readers are the only people who will decide that. Early indications are that it will, and many large advertisers like Shoprite/Checkers, Spar and Cashbuild have begun to support the new publication. Paarl is owned by Naspers, South Africa’s largest media owner who, with a turnover of R28 billion, is almost seven times bigger than Caxton – so it has deep pockets for this battle. Paarl is rumoured to be investing over R100 million to gain a foothold in this R2 billion retail insert market.
So if you live in Gauteng and are LSM 4–10, go to your postbox next Tuesday to Thursday. Read your local paper and Shopper’s Friend. Look at the inserts and decide whether the other eight million residents are reading both, or only one or the other.