The third anniversary of The Times’ price cut in August 1993 coincides with a number of fresh signs that the strategy has been a success.
Last week it became clear that the price strategy is by no means over. In addition to being 10p cheaper than The Daily Telegraph and The Independent five days a week, The Times has been on sale for just 10p on Mondays for its “Summer of Sport” promotion, which launched in May. Now it is understood the 10p price will move to Thursdays to target The Telegraph’s appointments day (MW August 23).
The impact of the Times’ strategy on its circulation is well known; the title has increased its circulation from 359,822 in July 1993, the month before the price cut started, to 753,784 in July 1996.
Translating that circulation rise into increased advertising revenue has not been so straightforward. Agency buyers use readership figures when they negotiate, although they will use circulation figures if they happen to be falling.
When a newspaper’s circulation increases because of a lower cover price readership lags behind. This is because those who read someone else’s copy start buying their own and the readership stays static while circulation goes up.
Once The Times’ readership did start to climb agencies then started to claim that the newspaper was not attracting the right kind of readers. They said that being cheaper made it inevitable that the newspaper blurred the distinction between the broadsheet market and the middle market by dragging in more C1 and C2 readers their clients did not want to reach.
These were largely negotiating techniques. C1 and C2 readers now account for just 35 per cent of The Times’ readership, up from 34 per cent before the price was cut.
The Times’ efforts to increase its volume of advertising also suffered from a lack of knowledge among advertisers. Even now, when The Times’ success is three years old, many schedule recommendations leave the newspaper out in preference to The Telegraph – buyers claim their clients just have a gut feeling that The Telegraph is where they want to be, a hangover from when it was a comfortable half million or more above the competition.
Slow-moving readership figures, agency negotiating tactics and client ignorance have meant The Times’ rates and ad volume lagged well behind its sales for perhaps the first two years of the low-price strategy. But there is evidence that this is changing. The Times’ deputy general manager Camilla Rhodes announced a 15 per cent ratecard increase two weeks ago. Rates were last increased by the same amount in 1994.
These ratecard increases can be meaningless. Most large advertisers’ business is handled on rates agreed by year-long contracts. A ratecard increase is largely the first indication of a new negotiating position.
However, agency buyers are reporting significant hardening of rates at the newspaper. In 1993 it was possible to get a rate of about 18-20 per single column centimetre (scc), similar to the rate for The Guardian. Before the recent increase that average scc rate had moved to about 30. The Times’ ad revenue has increased by 40 per cent since before the price cut and ad volumes have increased by 20 per cent. News International sources claim that in the financial year 1995-96 the paper’s advertising market share grew by ten per cent.
But the gap between perception and reality has managed to keep the price differential between The Times and The Daily Telegraph wider than many buyers believe it should be.
The Daily Telegraph’s average issue readership across the first half of this year is 2,494,000 compared with The Times’ total of 1,792,000. The difference between the two readerships is 28 per cent.
According to buyers a full-colour page in The Times will cost roughly 17,000-18,000 while in The Telegraph it will cost 33,000-35,000: the difference between the two prices is about 48 per cent.
Clearly each newspaper can and will produce reams of statistics showing that their newspaper is better value than the other.
What’s more, because demand, combined with sales strategy, decides the page rates, it is possible to argue that the price differential is fair because that is what the market has arrived at.
Yet common sense indicates that either The Times is still too cheap or The Daily Telegraph is too expensive.