Yellow Pages Advertising for the small business: The decreasing value of Yellow Pages Advertising.

My credentials in Yellow Pages advertising are both extensive and long. Beginning in 1997, I began work at the largest Yellow Pages agencies as an Assistant Account Executive placing and managing an in-column “HS’ program for a major computer manufacture. The total account billing as over $125,000. During the next four years at the same agency I worked on 14 accounts placing in-column, display and specialty products. The account billing that usually was associated with my desk was about $1.2 million. After working with both online and print, I moved on to the client side, in 2001.

I was hired to revive a marketing program that had consistently gotten more expensive and generated less business. The company generated 70% of its new client business from the Yellow Pages. The annual Yellow Pages spend was over $1.6 million. The marketing cost per customer and cost per call had been steadily increasing for the past 6 years. It has reached a point where the business could not afford to market for new business any longer. The principles at the firm felt it was primarily a staffing issue. However, the real problem was the media mix and the Yellow Pages investment.  We will come back to this problem, because I believe this problem is similar to almost every business that relies on the Yellow Pages.

Here are some facts about Yellow Pages that the Yellow Pages publishers and agencies will tell you:

• Yellow Pages is one of the purest direct marketing media options. There is a statistic that 87% of the people go to the Yellow Pages make a purchase. This is very easy to believe. The Yellow Pages is a great tool for finding the contact information (name, phone, address) of a business when you are ready to purchase. No one peruses the Yellow Pages Restaurant heading to decide what they want, they go to the heading after they have decided on type of food or a specific restaurant.
• The Yellow Pages is a very effective “helper media.” TV and Radio can introduce you to a new product or service or start the process of switching brands or suppliers, but the memory rate for the contact information is very low. In other words a Creative Media commercial can convince you to try a different reseller, but when it comes time for contact, many people go to the Yellow Pages to reference the contact information. So if you run TV ads and you also have a Yellow Pages presence a synergy will take place that expends the performance of both ads.
• In 1999 almost every household had one or more directories in the home. The most likely directory was the telephone provider branded directory (Bell South, AT&T, Quest, etc.). The second most likely directory was a neighborhood directory that focused on a smaller geographic area. You may also find it valuable that homeowners are more likely to have multiple books than apartment renters.

Here are some facts about the Yellow Pages that Yellow Page publishers and agencies would rather not tell you:

• Every year the “rate card” price goes up between 3% - 7%. This is called a “rate-up.” If you assume that the entire book “renews” the revenue from that directory will grow year over year.
• Every year less and less people use the Yellow Pages. During a negotiation with SBC (now AT&T) a Senior Vice President told my agency reprehensive and myself that the use in the Yellow Pages declined in exact correlation with the adoption on High Speed Internet Service.
• The Yellow Pages has increased the number and type of ads in the book. All ads are ranked 1st by the size of the ad, then by the date it was purchased. If you were the second person to purchase the “largest” ad size you would be guaranteed the second position. Depending the category customers will look through an average of 3-7 ads before they make a decision. In the late 90’s Yellow Pages publishers began to offer Double Trucks, which are two full pages next to each other. If you wanted to keep a top position you had to purchase two full pages. The number of visitors to a section did not increase, but the cost to be a top position almost doubled. Other products like color, tip-on’s and tabs were added that gave advertisers better creative options, but increase the cost to be competitive.   
• Yellow Pages publishers discount. Some of the discounts I have personally negotiated are: AT&T 70% of display, Valley Yellow Pages 30% off all placements, United Publishing 75% off all placements, Verizon 50% off all renewals and new ads, Yellow Book 50% off every book purchased after my 1st purchase at full price.

Follow the logic – every year less people use the Yellow Pages and the Yellow Pages continue to get more expensive. Advertisers pay more and get less.

The reduction in the usage of Yellow Pages has many causes. The Internet has taken the largest amount of market share, but other medias have been eroding the product before the Internet. The resurgence of the Catalog business hurt retail headings in the Yellow Pages. Data mining practices related to direct mail hurt professional services categories of the Yellow Pages. Local cables stations provided a vehicle for large business with local markets to utilize the creative media of TV, this hurt the Automotive and Hospital categories of the Yellow Pages.

In concert with less people using the Yellow Pages the price has been increasing. Even if you assume that the Yellow Pages was an under priced media before this trend began, after 16 years of less use and higher prices the value proposition has gone upside-down.  

The discounts are both proof of the failed value proposition and an indicator of a major issue with the product. When you see discounts like this it usually indicates the product or service is performing poorly or is about to cycle out. 75% off at the Gap means that it was a style that was uniformly rejected by the customers or the Gap is aggressively trying to create shelf space for new products. TV offers discounts at this level, but usually only days before the ad space will air. In other words they would prefer to sell it as almost nothing that give it back to the station for filler self promotion content. The Yellow Page on the other hand has been increasing its rate card for years, while it slashes it price for any sophisticated client who have the guts to demand it.   

There needs to be a warning issued to small, medium and any business that does not track it marketing results. If you are paying rate card for your Yellow Pages, assume that you are paying much less than larger advertiser who are using agencies or competitors who are good negotiators.

The Yellow Page Publishers sell full price ads to three types of customers. The first are customers who are reaping an advertising value from the product. There are still categories that do very well. For example there are two population groups that are not adopting high-speed Internet access. The first is the lower social-economic segment of society and the over 50 years of age market. If ether of these two groups is your primary demo/psycho-graphic then the Yellow Pages is probably a valuable place to advertise.  

The other two groups cause me concern. The first is small businesses. The local Yellow Pages sales representative presents the Yellow Pages are a “lifeline” to customers. 15 or 20 years ago this was true. If you were not in the Yellow Pages you were effectively invisible to most of your potential customers. That sales pitch is just not true anymore. Now that “lifeline” will probably be an anchor that holds back or sinks a small business. Preying on non-marketing savvy small business is something I have a problem with.

The Yellow Pages also prey on businesses that do not track their marketing results. This was the situation that I came into after leaving the agency. A new referral network had been added and was delivering a large amount of very cost effective customers and an Internet program that I had helped start was delivering very cost effected new customers. These two new sources of leads disguised decreasing performance of the Yellow Pages. Once a better ad tracking system was put into place, it became clear that the Yellow Pages were too expensive to maintain.

What does the future hold? In my option both trends of reduced usage and increasing costs will occur until even the headings that represent business serving the two Yellow Pages using groups will become too expensive. In other words the Yellow Pages publishers will try and squeeze as much money out of the product as possible.

Both Yahoo and Google have made very public initiatives into “Local Search.” Both Search Engines have the estimate annual $4+ Billion Yellow Pages marketing in their cross hairs. Other Local Search solutions are surfacing. Sites like Insiderpages offer a keyword search function with local listings that include customer reviews. The Internet will continue to take market share from the Yellow Pages. Potentially the Internet could find a way to take at least half of the current Yellow Pages advertising market.