Executive Memo: Trome - News for the Base of the Pyramid
Business and Management
Submitted By adits88
GOAL: Empresa Editora El Comercio (EEEC) wants Trome to be an entertaining, popular newspaper that keeps the population informed. The readership/sales for Trome needs to be increased significantly. EEEC’s ultimate goal is for Trome to be a market leader in the C, D & E SES, specifically mid to low income families.
ANALYSIS: Around 1997, the economic crisis drastically reduced the population’s purchasing power and tremendously reduced the overall sales of EEEC’s major newspaper El Commercio, which lead to a 6% drop in market share. While El Commercio was still a market leader in the A&B SES bringing in 61.7% of advertising investment. However, to recover from the crisis and gain more coverage, EEEC decided to target the lower SES segments with a newspaper that would fulfill all the needs that other newspapers did not. However, the success of Trome posed significant challenges because there were already 4-5 major competitors for the same C, D & E SES with significant market penetration and the leadership of EEEC had differing views on how to launch the newspaper
Trome’s content style catered to mid to low income families thus there was no focus on sex or violence stories, typical to low income newspapers. Some of Trome’s innovating features were that the front page always featured a promotion – involving a cutlery set-in addition to headlines on sports, police, politics and entertainment news. The newspaper was unbiased and reported the news truthfully, avoiding lurid or ghoulish elaborations. Since Trome wanted to target families, there was an attempt to keep the language clean yet simple with a touch of local slang (necessary to appeal to the mass low income segment). The last few pages “focused on show business news, cooking tips and recipes, health-related articles, entertainment, and useful information for homemakers in general”. Trome’s back page included a section called las malcriadas with non-pornographic pictures of women taken from magazines published by other companies. To serve this new audience the company built an exclusive new editorial infrastructure with its own writing team. Additionally, due to a pricing dispute, EEEC did not use the local Newspaper Salesman Federation for Trome’s distribution but used regular and free lance salesmen instead
The following could be potential reasons for Trome not doing as well as EEEC hoped for: In terms of distribution, not using the local Newspaper Salesman Federation has greatly hampered the sales of Trome. Potential readers could not find the new newspaper at points of sale. This is very problematic especially since the research study conducted by Apoyo Opinion y Mercado which clearly states that a large share of low income segments decided what news paper to buy at the point of sale. In terms of layout, looking at Exhibit 9, firstly, the front page content of the Trome is more formal, objective style. There are no images from the show business, sports or police sections to make the paper more visually appealing. Secondly, the second page that includes editorials and useful information and the following sections that include political and police news are in not in color and are not contrasting. This could have potentially dissuaded low income readers from purchasing Trome especially when Aja provides more visual, colorful and interesting content for the same price. Additionally, Trome is very cluttered with information when compared to Aja (10 vs 4 articles per page). Furthermore, pushing political and police news which is perceived to be more interesting (stories that sell) news in the middle of the newspaper may not be the best idea. In terms of content/language, while “Hernandez matched the readership profile associated with Ojo, a
newspaper widely patronized by middle and low-income segments that struck a balance between serious
journalism and popular appeal, he often used an old-fashioned jargon typical of Lima's middle-class neighborhoods in the past that did not match Trome’s intended readership”. Furthermore, the content was not tailor made to target the mid-low income families. These reasons could have further reduced interest.
RECOMMENDATION: EEEC should not shelve Trome but should re-launch it with the following changes: * Distribution should be done using the federation so that Trome is constantly available at points of sale * Promotions should change everyday with a target to satisfy seasonal needs. Ex: Summer clothing, Back to School * Content/Layout: Continue avoiding sex and violence news but drastically increase entertainment and sports news (movie reviews, articles on actors, sportspeople etc.). Front Page needs to be more visual! Increase content on amenities that kids/teenagers can access as well. Use more current local language, avoid old fashioned jargon. Make the middle section less cluttered and have more color and contrast. Include a small section with jobs that need people on an immediate day to day basis/contractual. * Invest more in Trome promotions via ads in segment TV channels and promotions in popular TV series/personalities
Competition & Target Segment: Aja, El Popular, El Chino, El Tio, Extra, El Men. Being one of the first movers in the C, D & E segment, Aja has already captured its market. Target readers of El Popular, El Chino, El Tio and Extra. Basically, capture the “indifferent” and “entertained” market segment by incorporating the above recommendations.
Trome Income Statement | | | | | | | Current | Potential | Sales | 5634000 | 9390000 | Advertisements | 916000 | 1500000 | Total Revenue | 6550000 | 10890000 | | | | Editorial Overhead | 1130000 | 1130000 | Marketing | 565000 | 565000 | Administrative | 678000 | 678000 | Distribution | 169020 | 281700 | Var. Manufacturing | 3079920 | 3079920 | Promotion | 904000 | 904000 | Total Cost | 6525940 | 6638620 | | | | Earnings before Taxes | 24060 | 4251380 | Sales Tax to be paid | 1070460 | 1784100 | Net Income | -1046400 | 2467280 |
Assumptions: * All values in Peruvian Nuevo Sol * Number of days of production of 60,000 newspapers per day = 313 days/year (Mon-Sat) * Current Sales were 36,000*.05. In order to be in profits, Trome needs to completely sell its current production of 60,000 newspapers (almost double of current sales) and attain their expected advertising revenue of 1.5M * Advertising revenues for Trome is 1.7% as per Exhibit 3 * Distribution is 3% of sales * Variable Manufacturing is 0.164 per copy * Sales tax is 19% of retail price (sales revenue). Once Trome penetrates the market, pass on the sales tax to buyers.