Content-Type: text/html RATE-SETTING PROCEDURES FOR PREPRINT ADVERTISING AT NONDAILY NEWSPAPERS A Manuscript Submitted to the Media Management & Economics Division For Presentatiion at the AEJMC Annual Convention Washington, D.C. August 2001 Ken Smith Associate Professor University of Wyoming Communication & Mass Media University of Wyoming P.O. Box 3904 Laramie, WY 82935 (307) 766-5437 [log in to unmask] RATE-SETTING PROCEDURES FOR PREPRINT ADVERTISING AT NONDAILY NEWSPAPERS ABSTRACT This study examines the procedures used by nondaily publishers in setting their preprint rates and compares them to ROP rate-setting procedures. The findings indicate that target-profit pricing is the main procedure used for setting both preprint and ROP rates but with one important difference. Preprint target pricing includes the cost of distributing the preprints only. ROP target pricing considers all costs in running a newspaper, including the cost of producing news. Basic economic theory posits that market structure can affect prices. In the newspaper industry, this means that the nature of the market should affect advertising rates--that, for example, newspapers in more competitive situations would exhibit lower rates. Among nondaily newspapers, competitive pressures do not appear to have a great affect on ad rates. To some degree, Blankenburg (1980) explained this lack of responsiveness by noting that most nondailies operate in monopoly markets, however small these markets may be. Thus, competitive pressures should not be expected to influence their rates. Studies of ad pricing among nondailies have focused primarily on ROP advertising (also called display advertising--the type printed right on the newspaper page alongside the news). Yet, during the end of the 1900s, a new type of advertising came to play a major role in newspaper operations. Known as preprints (also called inserts, or circulars), this new type of advertising was printed elsewhere and merely distributed with the newspaper. Since preprints were not bound to a newspaper, as was ROP advertising, they opened the door to new competitors that could serve as substitute distribution vehicles. Yet, since preprints were used by newspapers' largest advertisers, including grocery stores and retailers such as K mart, new competitors for this different type of advertising had the potential to create a large impact on newspaper revenues. This study will examine the setting of preprint rates at nondaily newspapers. More specifically, it will examine the procedures used by nondaily publishers in setting their preprint rates, it will compare rate-setting procedures for preprint and ROP advertising, and it will seek to determine if circulation, ownership type, or competition affect preprint rates. Background If the structure of a market helps to determine price strategies, then nondailies should exhibit pricing behaviors typical of the oligopoly and monopoly markets that they most frequently inhabit (Picard, 1989). Nondailies in monopoly situations should be expected to exhibit independent pricing strategies, while those in oligopoly markets should be expected to exhibit a recognized interdependence in their pricing behavior (Greer, 1984). In these latter situations, oligopolists tend to set prices with an eye to what their competitors charge. Studies of advertising rates in the newspaper industry have focused on ROP rates, and while these rate-setting procedures do deviate somewhat from the behavior predicted by economic theory, in large part this behavior does conform to what one would expect from firms in highly concentrated markets. Overall studies indicated that competitive situations did not tend to lower ad prices (Ferguson, 1983; Picard, 1988). Picard (1988) attributes this to the low number of competitive newspaper situations in existence. Newspapers in monopoly situations did tend to exhibit higher rates as expected (Picard, 1988). Studies specific to nondaily newspapers show that competition has, at best, a weak effect on ROP rates. Blankenburg (1980) found that if anything, competition is related to moderately higher rates. A follow-up study by Lacy and Dravis (1991) arrived at the same result, but also found that competition from other weeklies resulted in lower cost-per-thousand (CPM ) rates. Competition from radio stations resulted in higher CPM rates. To some degree, the inconsistency in ROP rates exhibited by newspapers may be explained by their rate-setting behavior, which Picard noted is based more on hunches than marketing knowledge or economic theory, and relies on, "intuition, adapting pricing strategies used by other industries, or blindly stumbling along with a let's-try-it-and-see strategy" (1982, p. 7). Apparently, the most commonly used strategies in setting ad rates are target return pricing (a rate that will yield a certain rate of return based on costs) and competition-oriented pricing rather than a more desirable demand-oriented pricing (Picard, 1988). This lack of sophistication in setting ad rates may be even more evident among nondailies that have fewer resources available to compile the data necessary for setting sophisticated rates. In one small sample of weeklies, Blankenburg (1980) found that 76% based their rates on cost. He concluded that weekly publishers, "decide rates largely according to habit, their perceptions of cost and from a sense of what other publishers (not necessarily nearby) are doing" (p. 666). If research has shown a lack of sophistication in setting ROP rates, preprint rates have not been the subject of any studies. Yet preprints have become especially important to the newspaper industry in recent years. Even though preprints first began to appear in newspapers only as recently as the late 1960s, by 1995, they surpassed ROP as the major source of retail advertising revenues (Davis, 1996; Lallande, 1996). Yet, while many advertisers used preprints to replace what had formerly been ROP programs, some evidence suggests the two types of advertising may have different demand curves. Lacy and Simon (1993) noted that newspapers do not face the same set of demand curves for all advertising, and that curves for various types of advertising will vary in their price elasticity. For example, while the demand curve for ROP ads is fairly inelastic (Picard, 1988), the curve for preprint rates appears to be more elastic (Smith, 1995). Two reasons may account for this greater elasticity. One is that preprint advertisers tend to be more sophisticated than ROP advertisers (Smith, 1995). Due to economies of scale, only larger advertisers tend to use preprint programs. Often, the people who decide with whom to distribute these preprints are experts whose only job involves advertising. This stands in contrast to many ROP accounts where advertising is only one of many tasks handled by the person placin g the ads. Economic theory suggests that sophisticated advertisers will be more aware of market conditions and, as a result, will have more elastic demand curves (Greer 1984). The larger advertisers who use preprints tend to be more familiar with the price they should pay for advertising, they know what other advertising alternatives are available to them, and as a result, they are more prone to move their advertising to a competitor if newspaper rates climb too high. A second reason demand curves for preprints may be more elastic is that they are affected more by the availability of other delivery vehicles (Picard & Brody, 1997). Smith (1998) found that nondaily newspapers in competition with one type of alternative delivery vehicle, shared mail, did exhibit lower preprint rates. Those nondailies with shared mail competition were also more likely to have lowered their preprint rates in response to the competitor. Due to a greater number of competitors for preprints than for ROP advertising, the market structure for preprints may take on more of an oligopolistic appearance than the market structure for ROP advertising. If this is the case, than the rate-setting procedures for preprints could differ from that of ROP, even within the same newspaper. This study examines the rate-setting procedures for preprints at nondaily newspapers and compares them to the procedures used to set ROP rates. The research questions that will be examined are: RQ1: What considerations do nondaily newspaper publishers use in setting preprint ad rates? RQ2: Are the same considerations used in setting preprint rates as in setting ROP ad rates at nondailies? RQ3: Do any of the following factors appear related to the size of preprint rates or the methods used to set them: circulation, type of ownership, intensity of competition, type of competition? In addition to competition, ownership type and circulation may also affect rates and rate setting. A number of studies have shown that group ownership of newspapers is one factor that results in higher ROP rates (Lacy & Simon, 1993; Picard & Brody, 1997). One reason for this rate differential is that groups have better access to data and can make better estimates of the prices they should charge (Lacy & Simon 1993)--in other words, they may use more sophisticated methods of setting rates. In addition, groups emphasize financial performance more than independent papers (Picard & Brody, 1997). The price charged for ROP advertising can also be influenced by circulation (Lacy & Simon, 1993; Picard & Brody, 1997). Due to their potential influence on ROP rates, variables that relate to competition, circulation and ownership type were examined to determine if they have an influence on preprint rates or rate setting. Method Personal interviews were conducted with the publishers of 117 nondailies from the Midwest and West. The interviews were conducted between January and April 1999 at the press association conventions of five states. Respondents were selected based on their attendance at the press conventions and their willingness to participate in the interviews. However, no potential respondent declined to participate. This method resulted in a sample of nondailies that are more traditional in their format-the type that typically belong to press associations as opposed to free nondailies or those publishing a specific type of content such as entertainment. However, the sample did display similar characteristics to that of a random national sample of the entire weekly industry (Coulson et al., 2000). Both samples showed close similarities in average total circulation (5,410 for this study, 5,311 for the national sample), and ownership (46.2 percent group, 53.8 percent independent for this study; 49.7 percent group, 50.3 percent independent for the national sample). Respondents were asked to provide a detailed explanation of the method used in setting their preprint rates. They were also asked to describe the method used in setting their ROP rates, and if this differed from preprints. In addition, respondents were asked their preprint rates, circulations, ownership type, primary competitors, and the number of preprints in their markets distributed by other media. For purposes of analysis, circulation was operationalized as the total circulation (paid plus free), and ownership type was operationalized as independent, in-state group, and out-of-state group. Competition was examined from two perspectives, one numerically based and one perceived. The numerically-based measure was intensity of competition, and it was operationalized as the number of preprints distributed by other media in the market-- little competition was 0 preprints, moderate competition was 0.1-1.9 preprints, and strongest competition was 2 or more preprints. The measure base d on perception was the type of competition, and it was operationalized as the competing media for preprints identified by respondents. Results The results of this study indicated that what had already been written about the pricing of ROP advertising by newspapers in general also held true for preprint pricing at nondailies. Picard (1988) wrote that the most common pricing strategies were target return pricing and competition-oriented pricing, with demand-oriented pricing used less occasionally. The results of this study indicated these are the most common methods of preprint pricing at nondailies. This study found nine methods of setting preprint rates (Table 1). The three most common included cost-based (a form of target-return pricing), competition-oriented pricing, and demand-oriented pricing (what the market will bear). These three pricing strategies were all more sophisticated than more intuitive forms of pricing because they relied on a knowledge of market data and internal goals, and they involved an analysis of actual revenues and expenditures. Many of the other methods used to set both preprint and ROP rates appeared to rely more on "let's-try-it-and-see" strategies that typically did not utilize relevant data. The methods used to set preprint and ROP rates at nondailies were significantly different. The three most common methods used to price ROP advertising at nondailies were target return pricing, what similarly-sized nondailies charge, and historical rates. Thus, the methods used to set ROP prices appeared to rely less on local market data and more on intuition. The two dominant forms of preprint and ROP rate-setting were similar, although they contained one important difference. The cost-based pricing used in setting preprint rates was a form of the target return pricing used in ROP. The difference was that cost-based pricing took into account only the costs involved in distributing preprints. The target-return pricing used for ROP took into account all costs at the newspaper, including the cost of producing the news. Thus, the revenues generated by preprints often did not contribute to news production, since the rates were set based on a return that would result from the costs of distributing the preprints only. Nondailies were divided into three categories based on their circulations. Preprint rates decreased as circulation increased (Table 2), and the methods used to set rates differed significantly by circulation. Despite this significance, the only trend that appeared evident was that as nondailies grew in size, they relied more heavily on market- and data-based methods of rate setting (Costs, What Competitors Charge, and What the Market Will Bear) and less on the intuitive rate-setting methods than did smaller newspapers. The lower preprint rates may be an indication that since larger newspapers resided in larger and more competitive markets, the methods of setting rates at larger nondailies were more competition based. However, the differences may also be due to economies of scale in which larger newspapers had more resources with which to hire financial planners who could analyze market data. Without these resources, smaller nondailies may have had to rely on more intuitive method s of setting rates. Respondents fell into three ownership categories, Independent, In-State Group (all newspapers are located in the same state), and Out-of-State Group (newspapers are located in multiple states). Ownership type also resulted in significant differences in the methods used to set preprint rates (Table 3). Group owners used fewer intuitive methods of setting rates and more that relied on actual data, while independent owners used more intuitive methods than other types of owners. Out-of-state groups did use the historical method of setting rates more than other types of owners probably because they were also more active in acquiring newspapers and assumed existing rates. Group ownership did not result in higher preprint rates. The highest rates were evident under local ownership. If group ownership resulted in higher ROP rates, it did not have the same effect on preprint rates. The intensity of competition significantly affected the method used to set preprint rates (Table 4). However, no real trend was evident in that in many ways nondailies with the most competition were more similar in their rate setting to those with little or no competition than they were to those with moderate competition. As expected, mean preprint rates declined as the level of competition increased. However, the methods of setting rates expected in more competitive markets (what competitors charge and what the market will bear) did not follow predictions. Nondailies with no competiton and those with the most competition used these methods almost equally, while nondailies with moderate competition used them much less frequently. Unlike the mean rates, which followed expectations, the method used in setting rates did not appear to be a good indicator of the levels of competition. Five primary competitors for preprints were identified by respondents, while 15 respondents said they faced no preprint competition. It should be emphasized that this variable represents perceived competitors, since 38 respondents identified a primary competitor for preprints even though no preprints were distributed by other media in their markets. The method of setting preprint rates differed significantly based on the perceived primary competitor for preprints (Table 5). Two interdependent methods of setting rates would be expected of newspapers in oligopoly markets--what competitors charge and what the market will bear--since these two measures determine rates with an eye to what competitors charge. When the numbers in Table 5 representing these two methods were added, the sum indicated nondailies perceived other weeklies as the strongest competitors with shared mail second and direct mail weakest. Yet, nondailies in competition with other weeklies did not exhibit the lowest mean rates, which would be expected in the most competitive situations. These higher-than-expected rates might indicate that when two weeklies shared a market, they kept an eye on each other's rates, but both set them high-an interdependence in pricing that can occur in highly concentrated oligopoly markets. Ironically, more nondailies with no percei ved competition based their rates on what competitors charged than those with any other type of competition. Respondents in this category said that they set their rates based on what potential competitors might charge to keep them out of the market. Nondailies with no competition also exhibited lower preprints rates than those found in more competitive situations unlike the previous "Intensity of Competition" variable in which nondailies with no competition exhibited the highest rates. The lowest mean rates were found at those nondailies that competed with shared mail, while the highest rates were found at those that competed with direct mail. With shared mail, a number of preprints were mailed in the same package, so advertisers shared the mailing costs. With direct mail, a preprint was mailed by itself, so this advertiser paid all costs. When direct mail was the primary competitor, the higher costs involved allowed nondailies in these markets to charge higher rates. Discussion The most common method of setting preprint rates used by nondaily newspapers is "cost-based," a form of target-return pricing. Using this method, a newspaper determines the cost to insert and distribute a preprint, adds a desired percentage of profit, and then sets its preprint rates based on this total. Perhaps the most important implication of this cost-based method is that nondailies add up only the costs directly involved in distributing the preprint. The results also indicate that nondailies use different methods to set their preprint and ROP rates. The most noticeable difference occurs between the dominant target-pricing method used for ROP and the cost-based method used for preprints. With target-pricing, the costs used to arrive at a target profit include all costs that the newspaper incurs. With cost-based, the costs include only those costs directly associated with the preprint advertising. In setting preprint prices, nondailies do not use any other costs in the equation, such as the cost of producing news. For society, this means that a move by large advertising accounts from ROP to preprint programs could have an impact on the news that is available. If fewer revenues are allocated to news production, either the amount or the quality of the news could suffer. Smith (1999) found that preprint advertising is less profitable to nondailies than ROP advertising. The prevalent use of this cost-based method of setting rates may indicate that one way nondailies compensate for this difference in profitability is by reducing the costs associated with preprints, and by not using preprint revenues to help fund news production. The simple fact that differences exist in the methods used to price preprints as opposed to ROP suggest that different demand curves do exist for the two types of advertising. This lends credence to Lacy and Simon's (1993) assertion that different types of advertising in the same newspaper do exhibit different demand curves and that they can vary in their price elasticity. The methods used to set preprint rates indicate that the demand curves are more elastic than those for ROP because the methods used for preprints exhibit more of the recognized interdependence that is typical of oligopoly markets. The two methods most closely associated with this interdependence--what competitors charge and what the market will bear--are used by 36% of the newspapers in setting preprint rates, but by only 13% of the newspapers in setting ROP rates. That the preprint market is more competitive would make sense. ROP requires a publication--normally a newspaper or shopper--on whose pages the ad can be printed. All that is needed for preprints is a delivery vehicle, so the barriers to potential entrants are much smaller, and the number of sellers in the preprint market is probably larger as a result. However, the number of sellers, by itself, may not account for methods of setting rates that result in more elastic demand curves because other competitive measures in this study indicate that the method of setting rates is not a good measure of the intensity of competition. Other elements of market structure may be more responsible for the greater interdependence in rate setting shown in the preprint market. One of these elements of market structure may be the sophistication of preprint buyers. Preprint advertisers tend to be more sophisticated, and economic theory suggests the demand curves for sophisticated buyers will be more elastic. Thus, the greater degree of recognized interdependence used by nondailies in setting preprint rates may indicate a response to more sophisticated buyers--buyers who are more aware of alternative delivery vehicles and more likely to place their advertising elsewhere if rates get out of line. The methods used to set preprint rates also appear more sophisticated than the methods used to set ROP rates in that they tend to rely more on hard data and less on intuition. If past studies have shown that the methods of setting ROP rates are not very sophisticated, this study offers no evidence to contradict them. Circulation does appear to have a predictable effect on both the size and setting of preprint rates. Preprint rates are lower at larger papers, which is logical since they tend to inhabit larger markets where either more competition exists, or where a greater number of preprints could attract potential competitors. Larger nondailies also use the more sophisticated and less intuitive methods of setting rates that would be expected of newspapers whose greater resources allow for a more thorough analysis of market data. Ownership type did not conform to expectations in that if other studies found group ownership increases ROP rates, preprint rates were lower under group ownership and highest under independent ownership. These rates may be a reflection of circulation since groups tended to own larger papers. If a trend was evident in the methods of setting rates, it was that group owners used more sophisticated and fewer intuitive methods. This finding is logical given the greater resources and stronger profit motive typical of group ownership. Earlier studies show that competition has, at best, a weak effect on ROP rates. The results of this study show the effect on preprint rates is also mixed. Nondailies in the most intensely competitive situations do exhibit the lowest rates, as expected. However, the methods that they use in setting rates do not exhibit the recognized interdependence in pricing expected of more competitive oligolopy markets. The two methods of setting rates that show the greatest interdependence (what competitors charge and what the market will bear) are least common at nondailies with moderate competition and much more common at nondailies with either no competion or the most intense competition. If, as many respondents at nondailies with no preprint competition indicated, they set their rates at a level that keeps other competitors out of the market, this would indicate they are trying to use lower preprint rates as a barrier to entry. Still, the rates are highest at these newspapers with no actual competition despite this intent to discourage competitors through lower rates. Apparently , other elements of market structure also enter into the rate-setting process so that the method of setting preprint rates by itself is not a good indicator of the level of competition. An analysis of the perceived primary competitors also produces mixed results. Newspaper competing against shared mail display the lowest preprint rates, so these could be considered the most competitive situations. Yet, the methods of setting rates that indicate the greatest interdependence are exhibited by those nondailies in competition with other nondailies, where the mean preprint rates are among the highest. Thus, they may use this recognized interdependence to keep rates high. Ironically, respondents from nondailies who perceive that they have no preprint competition exhibit lower mean rates and more recognized interdependence than most of those with other types of competition. This could indicate nondailies with no perceived competition keep their rates lower to keep other competition from entering the market. In other words, they show an interdependence in that they recognize the rate that is necessary to keep competitors from entering the market, and they charge this rat e. Thus, the low rates may be the reason that they have no competition. In summary, the most common method used to set preprint rates is one based on the costs directly involved in distributing the preprint. This method differs from the most common method used to set ROP rates in that ROP rates are set to achieve a target return based on all costs, including the cost of producing news. The method of setting rates does appear to be related to a nondaily's circulation, but not to its ownership type or to competitive variables. The actual size of the rates is related to competition, ownership type, and competition. The results of this study are applicable to one segment of the nondaily industry only--to traditional nondailies that serve the general population of a geographic area. Respondents were all drawn from among those who attend state press association conventions, and they tend to represent more traditional community newspapers. No special-interest nondailies were included in the sample, either those that serve a specific type of reader, or those that focus on a specific type of content. Examining their preprint rates and rate-setting tactics would be one area of further study. The results of this study are probably not applicable to daily newspapers as well. Just as the considerations used in setting ROP rates appear to differ at dailies and nondailies, those used for preprint rates probably differ as well. Preprint rates and rate setting at dailies make another valuable area of study. While the methods of setting preprint rates suggest that preprints are not used to fund the cost of producing news and that the news hole suffers when advertisers use preprints rather than ROP, this study did not specifically examine this issue. It would make another valuable area of study. References Blankenburg, W. (1980). Determinants of pricing of advertising in weeklies. Journalism Quarterly, 57 (4), 663-666. Coulson, D. Lacy, S. & Wilson, J. (2000, August) Weekly Newspaper Industry: A Baseline Study. Paper presented at the convention of the Association for Education in Journalism and Mass Communication, Phoenix. Davis, N. (1996, April). News holes, inch by inch. Presstime, 18 (4), 26-29. Ferguson, J. (1983). Daily newspaper advertising rates, local media cross-ownership, newspaper chains, and media competition. Journal of Law & Economics, 26, 635-54. Greer, D. (1984). Industrial organization and public policy. New York: Macmillan Publishing Company. Lacy, S. & Dravis, S. (1991). Pricing of advertising in weeklies: A replication. Journalism Quarterly, 68 (3), 338-344. Lacy, S. & Simon, T. (1993). The economics and regulation of United States newspapers. Norwood, NJ: Ablex Publishing Corporation. Lallande, A. (1996, January). Navigating the microzone maze. Presstime, 18 (1), 29-33. Picard, R. (1982). Rate setting and competition in newspaper advertising. Newspaper Research Journal, 3 (3), 3-13. Picard, R. (1988). Pricing behavior of newspapers. In R. Picard, J. Winter, M. McCombs, & S. Lacy (Eds.), Press concentration and monopoly: New perspectives on newspaper ownership and operation (pp. 55-69). Norwood, NJ: Ablex. Picard, R. (1989). Media economics: Concepts and issues. Newbury Park, CA: Sage. Picard, R. & Brody, J. (1997). The newspaper publishing industry. Boston: Allyn and Bacon. Smith, K. (1995). Intermedia competition for advertising in small daily markets. The Journal of Media Economics, 8 (4), 29-45. Smith, K. (1998). The responses of community newspapers to new competition for advertising created by changes in postal policy. Marriner S. Eccles Biennial Policy Yearbook, 1, 37-66. Smith, K. (1999). Preprints versus display advertising: Which is more profitable for nondaily newspapers? The Journal of Media Economics, 12 (4), 233-245. TABLE 1 Methods of Setting Advertising Rates at Nondaily Newspapers Preprints ROP Method of Setting Rates # % # % Cost-based 1 44 37.6 0 0.0 Based on What Competitors Charge 28 23.9 8 6.8 What Market Will Bear 2 14 12.0 7 6.0 What Similarly-sized Nondailies Charge 13 11.1 21 18.0 Historical 3 8 6.8 21 18.0 Based on ROP Rates 4 4 3.4 -- -- Target Return Pricing 5 2 1.7 40 34.2 Set at a Level to Discourage Preprints 2 1.7 1 0.9 Set at a Level to Encourage Volume 2 1.7 0 0.0 Regular Increases Tied to Inflation 0 0.0 9 7.7 Annual Increase--Raised a Regular % Yearly 0 0.0 8 6.8 Guesswork or Impulse 0 0.0 2 1.7 TOTAL 117 100.0 117 100.0 X2=124.87, df=11, p<.001 1Cost-based = A rate that results in a certain return based on the cost of the advertising only. 2What Market Will Bear = A rate based on what the publisher perceives that advertisers will tolerate. 3Historical = A rate based on what previous owners or managers charged. 4Based on ROP Rates = A rate that results in the same income as an equivalent amount of ROP. 5Target Return Pricing = A rate that results in a certain return based on all newspaper costs. TABLE 2 Preprint Advertising: Methods Used to Set Rates, Range, and Mean of Rates by Circulation Circulation ________________________________ 650- 2,501- 6,001- Method of Setting Rates 2,500 6,000 21,000 Cost-based 35.9% 28.2% 48.7% What Competitors Charge 15.4% 30.8% 25.6% What Market Will Bear 7.7% 12.8% 15.4% Based on Other Nondailies 18.0% 12.8% 2.6% Historical 10.3% 2.6% 7.7% Based on ROP Rates 7.7% 2.6% 0.0 Target Return Pricing 0.0 5.1% 0.0 Set to Discourage Preprints 2.6% 2.6% 0.0 Set to Encourage Volume 2.6% 2.6% 0.0 TOTAL 100.0% 100.0% 100.0% X2=53.47, df=16, p<.001 Number of Nondailies 39 39 39 Mean Preprint Rates (cents)* 7.36 6.15 5.89 Range of Rates (cents)* 4.6-12.0 2.4-11 2.4-11 *The preprint rates listed are per-piece rates meaning the rate is the cost charged to deliver a single preprint. This makes them similar to cost-per-thousand rates in ROP advertising since they reflect the cost of reaching a unit of the audience. TABLE 3 Preprint Advertising: Methods Used to Set Rates, Range, and Mean of Rates by Ownership Type Type of Ownership ________________________________ Group Group Method of Setting Rates Independent In-state Out-of-state Cost-based 39.7% 37.8% 29.4% What Competitors Charge 12.7% 40.5% 29.4% What Market Will Bear 12.7% 2.7% 29.4% Based on Other Nondailies 19.1% 2.7% 0.0 Historical 6.4% 5.4% 11.8% Based on ROP Rates 1.6% 8.1% 0.0 Target Return Pricing 1.6% 2.7% 0.0 Set to Discourage Preprints 3.2% 0.0 0.0 Set to Encourage Volume 3.2% 0.0 0.0 TOTAL 100.0% 100.0% 100.0% X2=103.02, df=16, p<.001 Number of Nondailies 63 37 17 Mean Preprint Rates (cents) 6.70 6.14 6.33 Range of Rates (cents) 3.7-12.0 2.4-11 4.0-11 TABLE 4 Preprint Advertising: Methods Used to Set Rates, Range, and Mean of Rates by Intensity of Competition Intensity of Competition ________________________________ Little Method of Setting Rates or None Moderate Strongest Cost-based 35.9% 37.5% 40.6% What Competitors Charge 20.8% 15.6% 37.5% What Market Will Bear 18.9% 6.3% 6.3% Based on Other Nondailies 9.4% 21.9% 3.1% Historical 3.8% 18.8% 0.0 Based on ROP Rates 7.6% 0.0 0.0 Target Return Pricing 1.9% 0.0 3.1% Set to Discourage Preprints 1.9% 0.0 3.1% Set to Encourage Volume 0.0 0.0 6.3% TOTAL 100.0% 100.0% 100.0% X2=95.43, df=16, p<.001 Number of Nondailies 53 32 32 Mean Preprint Rates (cents) 6.94 6.30 5.86 Range of Rates (cents) 4.6-12.0 3.75-11.0 2.4-11.0 TABLE 5 Preprint Advertising: Methods Used to Set Rates, Range, and Mean of Rates by Primary Competitor ________________________________________________________________________________________________ Primary Competitor __________________________________________________________________ Direct Weekly Daily Shared No Method of Setting Rates Mail Newspaper Shopper Newspaper Mail Competition ________________________________________________________________________________________________ Cost-based 25.8% 22.2% 44.8% 36.0% 60.0% 26.7% What Competitors Charge 12.9% 44.4% 24.1% 28.0% 33.3% 46.7 What Market Will Bear 22.6% 11.1% 6.9% 8.0% 6.7% 6.7% Based on Other Nondailies 6.5% 11.1% 20.7% 12.0% 0.0 6.7% Historical 25.8% 0.0 0.0 0.0 0.0 0.0 Based on ROP Rates 0.0 0.0 0.0 12.0% 0.0 6.7% Target Return Pricing 0.0 11.1% 3.4% 0.0 0.0 0.0 Set to Discourage Preprints 3.2 0.0 0.0 0.0 0.0 6.7% Set to Encourage Volume 3.2 0.0 0.0 4.0% 0.0 0.0 TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% X2=347.02, df=40, p<.001 Number of Nondailies 31 9 29 25 15 15 Mean Preprint Rates (cents) 7.25 6.44 6.26 6.21 4.90 6.23 Range of Rates (cents) 5.0-12.0 3.7-8.0 3.75-10.0 2.4-11.0 2.4-7.0 5.0-10.0 ________________________________________________________________________________________________