Case Study: SourceMedia Uses Second Street to Tap Deals Market
How does an established media company break into the daily deals market? At SourceMedia Group in eastern Iowa, vice president of sales Chris Edwards turned to Second Street for a private-label deal platform that was high on flexibility and low on administrative costs. By integrating his company’s deal program with SourceMedia’s existing media properties — and providing incentives for sales reps to sell deals, in addition to their legacy products — Edwards has been able to differentiate Here’s the Deal from competitors in the marketplace.
Tell me a little about SourceMedia Group.
We’re a 130-year-old newspaper company located in eastern Iowa. We started with The Gazette, [which has] an average daily circulation of about 60,000. In the ’50s we started a TV station called KCRG, and we are the ABC affiliate for the eastern third of Iowa. We’re a little unique in that regard, because we’re one of the few newspaper companies that has a daily [newspaper] and broadcast TV in the same market. Those are our two dominant brands, but we [also] have a host of different niche properties. We’ve got a preps website, a jobs site, and niche publications. We’ve also got our sub-channels on broadcast, and our press facility.
When [SourceMedia] brought me in three years ago we had separate sales forces for all these entities. As we continued to transform our organization to be more digital-centric and find inefficiencies in the group, they said, “It’s dumb to have the Hatfields and the McCoys beating each other up in the market all the time. Let’s get it under one roof.” That was my charter when I came into the organization. Every rep we have now, no matter what their primary and core focus is, has the ability to sell deals. Everybody does. We also have a small group of what we call “new business and development executives” who do nothing other than call on non-advertisers to get them started with our products, and those guys have been really successful with deals.
Why was it important for you to get into the daily deal game?
We were aware of Groupon right as it was emerging, and we try to stay on top of those sorts of things. We said, “that’s probably something we ought to do,” just because of the sheer amount of revenue that was going into it, plus we were starting to get asked about it in the market. We had a version of a deals program we had done about three years prior to launching [our current program, Here’s the Deal] called Buy-It-for-Half that was exclusive to our TV site. Mostly it would wind up being a barter for airtime — you give me $5,000 worth of half-price merchandise to sell on our website, we keep the revenue, and you get that $5,000 in trade to use as promotion [on our broadcast]. We had been reasonably successful with that, but it was just an afterthought at most. It wasn’t a humongous moneymaker.
When we decided to get serious about deals, we knew we needed a more robust platform and we needed some management help. We didn’t want to develop it in-house because we didn’t know what the total revenue outlook was or the longevity of the program, so we had to find a vendor that could accommodate those needs. Second Street was a good pick.
Why did you decide to work with Second Street’s private-label deals platform in particular?
We wound up looking at three or four [options], including doing it ourselves in-house, but we pretty quickly dismissed that because of the development time. We wanted to be quick to market. We first looked at Second Street because of their contesting. We had actually signed up with them as a contest client before we did deals, but when we decided we were going whole hog into deals we opened it back up. It wasn’t a foregone conclusion that we were going to use Second Street, but we were surprised to find out that their deals platform was even more compelling than their contesting platform, which was already pretty good.
How does your deal program integrate with your existing media properties?
To set the stage a little bit, if you stretch out the footprint out the counties we serve, you’re talking about half a million people. So it’s a nice, smallish market. But [in this market], we’ve got seven different active and aggressive daily deals programs. You’ve got Groupon and LivingSocial, a new one called SweetJack, which is a broadcast property, and you’ve got two homegrown ones here in town that are pretty aggressive. It just boggles the mind that there are that many.
“Merchants are going to do deals. If they’re not doing them with you, then they’re doing them with somebody else. So you ought to have [deals] as an offering, even if you’re not going to aggressively pursue it.”
We’ve done two things to differentiate ourselves, and it’s proving effective. Of the two things we’ve focused on, one is sales. We’re positioning our deals program so it is not designed to be a big moneymaker for [merchants]. This is advertising, and [merchants] need to approach it that way. That keeps us out of the whole percentages game, because Groupon and LivingSocial are almost giving it away now. We’re saying the exposure you’re going to get from this whole thing — and the help we’re giving you in managing not just this specific program but everything else you’re doing — is a marketing expense. Once you get [merchants] thinking that way, everything else just flows.
When somebody signs on with us, the first thing we do is promote them. They get a lower strip ad on the front page of the paper announcing that day’s deal and prompting people to go to the website and get signed up for the email or buy the deal. We also run several 10-second promos in our morning news that begins at 4:30 a.m. and runs until 7, so they get two or three promos per half hour. Then, we send out almost 30,000 emails a day to people who have signed up. You’re reaching a pretty good population right there, and then we also make sure we hit our Facebook pages two times each, reminding people about the deal. The advertiser that’s coming on with us is getting a lot of exposure, and we are more forthright in putting the advertiser’s name out there than LivingSocial or Groupon. We’re really front and center with who we’re promoting because that’s part of our hook.
Did you have any challenges in setting your deal program up?
The biggest challenge has been that we quota our [sales] reps based on their legacy products, which they are primarily charged to sell, as well as what we call our gross products, which are primarily digital. We’re really trying to force people to understand that the future of the media business is going to include heavy doses of digital advertising, and you’d better start learning how to have those conversations [with advertisers] sooner or later.
If you pop a really good deal, for some of our reps that can take care of their month’s quota, so I figured this was a no-brainer. We’ve got great clients and great relationships, but when we rolled [the deals] out it was like pulling teeth. In a moment of brilliance or frustration, I just said, “There’s no such thing as a territory when it comes to deals. Anybody can sell any deal to anyone, no matter if it’s your client or somebody else’s.” And guess what? Deals started going crazy after that because the folks that knew how to convey that message now had a whole world to go after. When they started doing that, the reps that either weren’t talking about [deals] or weren’t talking about them well enough to get people [onboard] started to partner with the reps that could do it. A lot of team selling started. That drove not only the quality of the deals, but the sheer quantity.
Why do you think it’s smart for media companies to get into daily deals?
For three reasons. The first is that merchants are going to do deals. If they’re not doing them with you, then they’re doing them with somebody else. So you ought to have [deals] as an offering, even if you’re not going to aggressively pursue it, so that if a merchant would bring it up you can say, “Yeah, we have a deals program, and here it is.” If everybody else is doing it, you’d better have something yourself.
The second thing we’re finding is that this has become a good springboard into whatever the next thing becomes. For instance, if the whole concept of mobile shopping or GPS-related offers, or even text offers, becomes the next thing of the day, this becomes a very natural progression into that. I think that Second Street is working pretty hard on what their mobile offering is going to be next. We’ve been very vocal about wanting that, and I think that deals provide a good transition. Getting into whatever that mobile, on-demand shopping experience might be is going to be harder if you’re not doing a deals program right now.
The third one becomes that you’ve just got to continue to give as many digital offerings to your sales team as you can. If I was a rep at a place where people were beating on me to sell digital advertising and I didn’t have a deal offering as part of that, frankly I would feel like my management was letting me down by not giving me one more weapon out there to drive some revenue.
Stephanie Miles is an associate editor at Street Fight. This interview has been edited for length and clarity.
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