71. Newspapers and Channel Reps: Are They Still Vital?

On July 10, 2017, the News Media Alliance, a trade lobby group representing 2,000 news organizations, called on congress to pass an antitrust exemption.  Essentially, this exemption would to try to fix prices with Facebook and Google for online advertising dollars and for access fees to the digital content of newspapers.

The political reason presented is that good journalism is vital to a healthy democracy. The economic reasons stem from the fact that newspapers continue to downsize from their previous monopoly status. In the past, distribution of physical newspapers along with classified ads, consumer goods advertising, and employment ads was geographically confined. One newspaper could dominate with careful management of readers, printing, delivery, and advertising reach.

However, now digital solutions have decimated advertising income streams and subscriptions are falling because younger adults don’t subscribe to environmentally-unfriendly print publications. If a newspaper doesn’t let Google and Facebook access their digital content (currently for free), too few readers come to the paper’s own website. Essentially, the news has become a commodity, and outdated overhead costs can’t be cut fast enough.

Are They Vital?

The question seems to be: should the papers be able to bribe lawmakers about what is in our vital interest or should the public get to decide? Are there other options? For instance, Jeff Bezos reinvented the Washington Post by turning it into a profitable technology company, something all businesses need to consider to stay alive. (For more information, Google NPR + all things considered + Washington Post.)

When it comes to distribution and channel reps, it’s worth considering whether digital information tools and B2B sellers have similarly undermined channel reps’ vital cost/benefit role.

Channel Reps’ Eroding Cost/Benefit to End Customers 

Channel rep compensation plans typically settle out at a cost of about 5%–6% of sales. To find out if the role of your reps has diminished, you first need to know if the customer benefit values exceed this percentage.

Start by listing the reps’ activities and then correlate them to both time allocation and type of product-solution category. For example, assume that 80% of a distributor’s sales are out of the warehouse and that 80% of those sales are rebuys for commodity products. Will the customer want to pay the rep 5% on 60% of their spend when Amazon Business prices are 5%–10% less?

This one category of sales alone will cause the ancient rep model to unravel. Expand this analysis for three other product-solution categories using a tool like Forrester’s B2B buyer/seller archetypes.

So, what do you do? Use customer profitability analytics with a cost to serve model at the line item level. Armed with this data, you can redeploy your best reps to your best accounts, selling supply-chain-savings solutions. For a how-to demo contact me:  bruce@merrifield.com.