Sunday, August 2, 2009

Declining Ad Revenues at Regional Recreation Magazine

Exploratory research
Our company in this case study is a regional print magazine that has suffered steadily declining revenues. McDaniel and Gates (2008, p 41) recommend that research analysts perform situation analysis and exploratory research to correctly define the problem. Such preliminary work yields the essential context to better understand the problem, including industry and market trends, economic influences, and competitors.

In my exploratory research, I found a sound model for declining magazine revenues provided by Evans and Wurster (2000, p 42). The Internet has “disintermediated” print newspapers and magazines. Online media are imposing a new, more severe revenue structure on the venerable world of print journalism. In the past, magazines acted as intermediaries between journalists and readers because of the economics of the printing press. That has changed with the electronic media on the Internet.

Advertisers have taken note, and increasingly their business is allocated to online media. The situation is so dire that Ives (2008, p 1) asks whether print magazines will survive another five years. Maddox (2008, p 1) reports that magazine ad revenue across the board declined 2% in 2007.

Duncan gives us some insight on the advantages enjoyed by Internet (2005, p. 443) and they include better target selectivity compared with local print magazines, better geographic reach and shorter lead-time. Fine (2008, p. 1) reports on the declining prospects of mid-sized magazines for several reasons including online competition, but also a defection of advertisers who question the mid-term viability of print media because of the shift online.

Implications of Exploratory Research
Based on this exploratory research, declining ad revenues seems to be a symptom of an even worse problem. McDaniel and Gates (p. 45) inform us that a symptom is a result that is caused by something else and they recommend to continue asking, “what caused this” until you can’t go any further. This also helps to narrow the focus from the broader management problem to a more specific marketing research problem (p. 46).

Wyner (2001, p 1) says that the extent of our marketing research, as well as the tradeoffs we make in that research, depend on the risk to the business. Our exploratory research revealed a paradigm shift happening in print media. The situation for our regional recreation magazine is potentially dire.

This is a risk that management cannot ignore. From the exploratory research, we have information that our symptom of declining ad revenue might be caused by online ad competition, and concerns over our mid-term viability. Our audience is advertising spenders. We need to research the implications that our print magazine is undermined by online competition.

Problem Statement
Our magazine is encountering competition from online alternatives so that our advertising revenues are declining. To handle this problem, we need to understand the share of ad spending our clients plan to allocate to online and to print over the next five years. Additionally, what ad pricing is available to our clients from online competition? And finally will an online version of our magazine cause our clients to think us more viable?

Objectives for Primary Research

  • Forecast the transfer of our current print revenue to online competition based on client spending plans
  • Understand the new revenue structure of an online magazine in our product mix based on online ad rates
  • Discover our readership attitude to an online version of our magazine
  • Know our advertiser attitudes and beliefs about us if we stay strictly in print versus introducing an online product.

Recommended research design
Descriptive design is appropriate because we understand the underlying relationship between declining revenue at print magazines and online advertising. As McDaniel and Gates note (p. 49) "implicit in descriptive research is the fact that management already knows or understands the underlying relationship among variables in the problem." From our exploratory research we do have that understanding. We do not seek to understand what causes a shift in advertising revenue from us to our online competition since our exploratory research provides strong argument for that. We want to estimate the magnitude based on our client advertising plans.

On the other hand, we will be testing a new service with respect to reader and advertiser attitudes and beliefs. This is a causal study: what effect will a Web version have on readership and advertiser attitudes. Deploying a Web version is our independent variable while the attitudes and beliefs are dependent variables.

Incorporating both descriptive study and causal study will result in a more expensive design but as noted above this particular management problem could be calamitous. It will impact the ongoing concern assumption of our firm so we need the answers from marketing research in crosscutting areas. This may then result in more than one research method as well – is this reasonable? Wyner (2001, p 2) assures us it is: “Increasingly, however, marketing applications have combined elements of all three methods to get the benefits of each.”

Recommended methods
We recommend a causal design for finding the impact of a Web version of the magazine on reader and advertiser attitudes and beliefs. The method for causal can be survey or experiment (see McDaniel and Gates, 2008, p. 50). Wyner (2001, p 1) observes that experiment enables us to test a service that does not currently exist while at the same time controlling “nuance variables to show the true effect of the product [for us, service] itself.” While we could survey for a causal relationship, according to McDaniel and Gates, experiment is the better choice in our case.

Descriptive study would be appropriate for client spending plans and online ad rates. A survey for client spending plans is an orderly and structured approach to discover facts and opinions such as those underlying spending budgets (see McDaniel and Gates, 2008, p 50). An observational field study does not seem necessary for discovery of online ad rates. Instead, a phone survey seems a sufficient method.

This regional print magazine faces a risk with catastrophic consequences. Following the research design and using the research methods in this report will provide the marketing research data to more completely understand the nature of the problem. It will also provide insight into client spending plans, and client and reader attitudes towards a brand extension, adding an online version of the magazine.

Duncan, Tom (2005). Principles of Advertising and IMC. New York: McGraw-Hill Irwin.

Evans, Phillip and Thomas Wurster (2000). Blown to Bits. The Boston Consulting Group. Harvard Business School Press.

Fine, Jon (2/18/2008). Sweating Bullets in Magazineland. BusinessWeek. Retrieved on May 31, 2009 from EBSCOHOST.

Ives, Nat (11/3/2008). Will print survive the next five years? (cover story)
Advertising Age. Retrieved on May 31, 2009 from EBSCOHOST.

Maddox, Kate (May 5, 2008). Q1 ad sales reflect the slow economy. BtoB Magazine. Retrieved on May 31, 2009 from

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Wyner, Gordon (2001). Representation, Randomization, and Realism. Marketing Research. Retrieved on May 31, 2009 from

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