Classified Intelligence Reviews AD2AD

After reviewing 10 different classifieds management systems, Classified Intelligence, "the global leader in classified advertising knowledge" calls AD2AD "a well-featured classified system that does more than services costing hundreds of dollars a month. The best part? AD2AD is practically free."
Click here to see CI's review (free, requires registration).

Best Practices: Pricing

The ideas below represent AD2AD's assessment of what works best for small newspapers and other community publications who want to maximize the effectiveness of their classified ads

Price your ads strategically
Decide on a pricing strategy that makes sense for your paper.
There are 2 drivers for classified ads

• Increase readership
• Make money

These drivers are not necessarily compatible, but they can be balanced.
Here are the extremes:

• Free classifieds -- classified ads become content. You provide the space, readers supply the content that drives community readership and participation
• Expensive classifieds -- classified ads are miniature display ads. You use sales techniques, including one-on-one sales, creative content (specialized layout, etc), special discounts, etc., to squeeze every last dollar from your advertiser.

In AD2AD's experience, greatest profitability lies between these extremes. We recommend:

• As a rule, charge for classifieds.
• Offer free or low-cost ads in certain classifications. Use these special classifications to create more readership and "create a marketplace".
• Charge less than large competitors. In other words, don't try to match the high price of large daily newspapers.

Establishing a base price
The base price for your ads should reflect your market strategy. AD2AD recommends that you create a base price for typical ad this way:

• Assume that a 'standard' classified is a column inch. In most font sizes, that will be about 15-25 words (3-5 lines -- but we'll discuss later why it's better to price by the word).
• Figure the number of column inches on your classifieds page.
  
• Your 'standard' classified ad should be priced based on a one-time full-page display ad buy.

For example: You classifieds page has 100 column inches. Your offer a list price of $750 for a single full page display ad.
AD2AD says that your basis price should be around $7.50 for 20 words.
It's reasonable to charge a premium for classifieds however: even double the average basis, or more. So a price between $7.50 - $15.00 for a 'standard ad' would be reasonable.

Price by the word, not by the line
Particularly when you offer self-service ad entry, you'll get more money by charging by the word, not the line.

Let's say you charge $20 for a four-line ad, then $4 for each additional line. A new line can get created by adding capital letters, punctuation, or additional content -- even a single extra letter. That can mean 1 more character = $4 extra dollars. That's a big penalty -- a big jump in price for very little extra value.

Consider instead a similar price: $20 for 20 words, then addtional words at $0.80/word. Now there is very little penalty for addtional content..just a simple incremental addition as new content is added.

AD2AD has found that in its system, users rewrite ads LONGER when charged by the word, but rewrite SHORTER when charging by the line.

Also words are easier to count and estimate than lines. Unless your system provides for perfect WYSIWYG ad entry -- including hyphenation, justification, kerning and letterspacing rules -- there is very likely to be a discrepancy between the lines as price-estimated, and as they show up in the paper. You KNOW that some customers will call and complain if the printed version -- after kerning, h&j, etc -- is a line shorter than what they paid for. When they call and complain, you will have a multi-minute argument, credits to offer, etc. In all likelihood, you will end up losing some large portion of the profit for that ad.


Don't offer frequency discounts
For most newspapers, no one can remember who created the rates. Like Topsy, They just growed. Typically, they'll have a lot of frequency discounts built in -- pricing like the display ad rate card in miniature.

AD2AD has found that for the most parts, frequency discounts are a mistake. Classified ads are a good example of a commodity with inelastic pricing: that is, within limits, customers will buy the commodity regardless of the price.

Consider the two 'typical' buyers of classifieds.

1. Short term advertisers. Car for sale, house for rent, yard sale on Saturday. Does it make sense to DISCOUNT for these advertisers? They will advertise as long as they car is unsold, or the house unrented, regardless of a discount.
2. Long term advertisers. Typically small-businesses, typically services. Seamstress, tutor, bookkeeper--you get the idea. They want a market presence, but can't (or won't) afford a display ad. Does it make sense to DISCOUNT for these advertisers? They will advertise as long as their ad brings business, regardless of a discount.

When does it make sense to use frequency discounts? In AD2AD's view -- never.

Offer free classifications
Don't offer free ads across the board -- but it can make sense strategically to offer free classifications. For example: Consider the Coast News of Encinitas, California. They offer free ads for cars under $5000. The classification is very busy.

• The Coast News is now the unofficial 'marketplace of record' for used cars. It's the first place locals look when they want to buy, and the first place they advertise
• The Coast News uses this popularity to sell Display Advertising to the many 'iron lots' in the area. They offer premium display ads on the used car classifieds. Why -- they have established that those pages are The Place to Look for used cars.
  

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