Invited Guest

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On the Delta Queen's Americana tour, passengers take a leisurely steamboat trip up the Big Muddy, chatting with a Mark Twain stand-in about the sites along the river's banks. Most are over 60, have household incomes of at least $30,000, are retired, and have no kids at home. Until recently, as much as half of the Delta Queen's $10 million marketing budget was spent on direct mail, in an effort to target people matching that profile. But one aspect of the profile is tempting the company to turn to a relatively new player in targeted advertising.

"We know that newspaper usage is incredibly high with our population," says Steve Mason, Delta Queen Steamboat Co.'s vice president of marketing. "That's why we're very interested in trying newspapers out."

This year, the company will begin testing the use of inserts in a number of major market dailies, including papers in Texas, California, and Pennsylvania, and will shift some of its marketing dollars away from direct mail if the results are good.

Targeted inserts can include any promotional pieces an advertiser has produced independently and inserted into a newspaper. The papers are then delivered to an area that includes subscribers matching a certain demographic profile. While inserts currently comprise only a small percentage of newspapers' total advertising revenues, they are one of the fastest growing categories in the newspaper business. Tom Ratkovich, president of ASTech, a database marketing consultancy, believes that within the next ten years, any newspaper with a circulation over 100,000 will have to embrace database marketing or be "eaten alive" by direct marketing companies. At The Washington Post, delivery of free samples has been increasing by 20 percent to 30 percent a year since it was begun in 1995. The Miami Herald saw its targeted-inserts category grow by 17 percent last year, and expects it to grow 25 percent this year.

Targeting is tied to newspapers' efforts to boost their advertising inserts category, which in 1997 overtook standard ad spending for the first time, comprising 51 percent to standard's 49 percent, according to the Newspaper Association of America. At the same time, the strength of direct marketing companies has dramatically increased. In 1981, newspapers took in 27 percent of all U.S. advertising expenditures, and direct marketing companies took in 15 percent, according to the Direct Marketing Association. By 1996 the ratio had changed considerably, with newspapers taking only 20 percent of the pie and direct marketing companies increasing their share to 22 percent.

Within this competitive climate, newspapers have aggressively gone after the business they are losing to direct marketing. Not only can they offer advertisers the tools of database and targeted marketing, but they are also stressing the traditional connection that newspapers have with their communities. "In our market, we are in almost half of all households, touching them very frequently," says Dwight Brown, vice president of advertising at The Houston Chronicle.

Along with that connection is a perceived higher level of consumer confidence in ads contained in a newspaper. "The newspaper is invited into your home, so that's what's valuable," says Wendy Martin, media director at Home Depot, which is looking into using newspapers to distribute some of the 60 million catalogs that the giant retailer mails out monthly.

Newspapers are entering the targeted advertising business by going to direct marketing ad brokers, and by buying data from governmental and private sources that they supplement with information from their own customer databases. Ratkovich estimates that about 100 newspapers across the country are now collecting detailed demographic data on their subscribers through collating circulation lists, classified ads, and surveys. The Houston Chronicle, for example, runs surveys to find out who's in the market for a new car and who's getting married. "Weddings are a billion-dollar business in Houston," says Gary Garvey, the Chronicle's database marketing manager. He uses this information to lure tuxedo, Cajun food, floral, photography, deejay, and limousine businesses to advertise. The Arizona Republic also uses surveys, says Jim Hart, the paper's database marketing manager. He is contemplating starting a kids' club to gather birthday dates, which, he says are "the second-biggest merchandising opportunity in households."

Besides price, newspapers can offer advertisers an exact delivery date, which the vagaries of the postal service make impossible for direct marketers to do. For example, the day before Super Bowl Sunday in 1997, Valassis Communications Inc., a targeted advertising broker for newspapers, coordinated the delivery of about 30 million packages of Pepcid AC, to ease the indigestion that millions of Americans would probably be suffering the next day.

Some papers are also employing their databases to tailor sections of the paper to certain groups of readers. Using its list to locate 18-to-34-year-old readers, The Houston Chronicle surveyed them and found that they'd rather be getting their entertainment listings in a tabloid-sized section, instead of in the paper's traditional broadsheet format. The Chronicle launched the new section last year.

The next step is delivering inserts to specific addresses. Bill Wilson at the Miami Herald is skeptical about the economic feasibility of such an endeavor. "The post office can deliver for as little as 11 cents. We can't do that yet." Those at the Houston Chronicle are more optimistic, however: they hope to be able to deliver by the end of the year.

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