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Phone Directories: Let the Power of Competing Yellow Pages Work for You By Anne Hedin Buy from our competitor. That’s what Phone Directories Company (PDC), an independent directory publisher, welcomes you to do. While that might sound like strange request, it makes a great deal of sense in the world of yellow pages. John Woodall, CEO of the Orem, Utah-based, PDC, tells customers to maximize benefits from the ad medium, they should advertise both in their independent books and the directories of the so-called incumbents. (The incumbents are the historic local phone service provider in a market, often a former Bell company.) “It costs more to advertise in two directories than in one, but those who do, get a bigger percentage of the pie,” Woodall said. “So the cost of the second ad is not really an expense, it is an investment. It more than pays for itself in increased business and it reduces the blended cost per call.” A typical business receives $14 in sales revenue and $4 of profit on average for every dollar spent on yellow pages advertising, claims the Yellow Pages Integrated Media Association, an industry group. “That kind of ROI is like putting an ATM on your desk,” Woodall says. “If you put in $1 and it spits back $14, how many times a day do you want to do it?“ The thinking from the independent publishers goes along these lines: When the customer benefits, so do the independents. In 1984, independent phone directories accounted for only $200 million out of the total $2 billion spent on yellow pages advertising, according to industry estimates cited by Woodall. Now, he said, the estimates indicate that independents generate $3 billion out of the total $15 billion annual expenditure. The coexist-to-compete mentality reflects the nature of competition in the telecommunications industry. In 1984, the Supreme Court ruled that AT&T was a monopoly and broke up the company to increase competition in the public interest. The same ruling provided independent publishers with access to listing information; later the Telecom Act of 1996 eliminated restrictive pricing for listings. The independents began introducing the features we now expect in phone books – maps, community sections, coupons, and so on – to compete against the incumbents for consumer “eyeballs” and advertising dollars. Competitive Advantages Many small businesses turned to independent directory publishers just to improve the position their ad held in their category. Incumbents usually place ads in a category by size (biggest first) and by seniority (first sold, first placed). Advertisers generally keep their original position unless their company goes out of business. So if a new lawyer comes to town and is the fiftieth law firm to advertise, his ad will probably stay in fiftieth position throughout most of his career unless his competitors die off. There are financial incentives to buy into the independent books as well. “In general, independents charge half of what the incumbents do for the same size ad. So, if an advertiser pays $20,000 for a full page ad in an incumbent directory, he can usually get the same ad for $10,000 in an independent directory,” Woodall says. If that sounds like he’s advising you just to buy the cheaper ad, hold the phone. It’s not just about the dollar; it’s about your cost per call and your share of market when you advertise in multiple phone books. Put an ATM Machine on Your Desk To see how this works, let’s say there are 10 pizza parlors in a market that’s only served by an incumbent directory, and all of them advertise. Let’s say 1,000 consumers a day order pizza from that phone book. If their calls were equally distributed, each pizza parlor would receive 100 calls. Now bring in a second, independent directory. Four out of 10 pizza parlors buy ads with the independent because of the strictly local distribution. Also, Woodall estimates that a minimum of 25 percent of the consumers prefer the independent directory because of its added features and stop using the incumbent’s book. There are still only 1,000 calls a day for pizza, but now the distribution has changed. Now 750 consumers call from the incumbent directory, so the 10 advertisers there would each get 75 calls. Additionally, the four pizza parlors that advertise with the independent split 250 calls. They average 60 calls from the independent directory plus 75 from the other, for a total of 135 calls a day. For 50 percent of the cost, Woodall says, the ad in the independent book generates 80 percent as many more calls as the incumbent ad alone. As a result, your cost per call drops because you advertise in two directories. That’s how competition benefits the advertiser.” About the Author Anne Hedin is a Chicago-based freelance writer. She can be reached via email at journalists@betuitive.com.
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