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A Free Advertiser Magazine – Quick Guide and Case Study By Earnsmart Business Kenya

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A free Advertiser Magazine, as referred here, is a publication that is circulated freely and contains advertisements from local businesses. The publication can contain light news and various kinds of tips but the main focus is the advertisements. The business model for this kind of magazine is that the revenue from advertising will cover the cost of printing, circulation, design, rent, labor and all the business costs and still give the publisher profits.

Go Places, which started in 1993, was perhaps the first advertiser magazine in Kenya publ. It was published by Leisure and Travel Guides EA, and focused on the tour and travel niche. Thus most of the advertisements and content had to do with the travel industry. The pioneer of the current advertising magazines aimed at the mass market was one titled The Advertiser, started in 2005. It was independently published and circulated in Nairobi. After a few issues it was purchased by the Nation Media group who killed it after a few issues. www.Earnsmart.com Don’t invest blindly Page 2

Nakumatt Supermarkets also had a free magazine called Smart Life. It was distributed to its loyalty cad customers free of charge. Their strategy was to attract premium advertisement, however after a few issues it became unsustainable and they started selling it Since 2011, and with the birth of the county governments there has been an explosion of advertiser magazines largely targeted at the counties or limited area within the county. The turnover of the county based advertiser magazines opening and closing has been high. In Kiambu town for instance there have been 4 advertiser magazines which operated within the last 3 years. Only two remain. In Machakos, two have started and closed, in Embu too. Nairobi 11 has started and 4 have closed within the last 1 year. The reasons for the volatility of the sub sector will become clear below.

(We are going to note the experience of an entrepreneur who ran one such magazine) Starting Procedure:

Register business

Acquire licenses

Get premises

Identify printer

Approach business for advertisements

Sign up advertisers

Take to printer

Circulate

Things To Think About

Location

Size of Town

You need a location with a big number of businesses that have the potential for advertising. Very small businesses are more reluctant to spend on advertising. A location with colleges, hotels, supermarkets, Saccos, motorcycle dealers and other highly competitive businesses are preferred. Duopolistic or oligopolistic competition works best. This is where there are two or just a few number of a particular business, say three major colleges. This means the businesses are under pressure to stand out and survive thus are more likely to advertise. www.Earnsmart.com Don’t invest blindly Page 3

In Nairobi there is a big enough number of all types of businesses. Independent business people outside Nairobi business people are more conservative and take time before buying into an advertiser magazine idea.

Types of businesses

In your location you should have a mix of both big and small businesses. The big businesses are more bureaucratic when it comes to making decisions or process payments. And although small business are less likely to advertise than mid sized and big businesses their decision making process is easier.

Still it’s a game of numbers, and the region you are focusing on should have enough businesses to sustain your magazine. Out of 10 businesses that you approach only one may actually buy space.

Level of competition

Look at the level of competition. Is there another advertiser? Look in relation to the size of the town. Whereas Nairobi is big enough to sustain up to 20 advertisers, outside Nairobi most towns can’t sustain more than two advertisers. Some towns even two is on the higher side. Nakuru, Mombasa, Kisumu can sustain 2 to 3 magazines. A town like Kiambu, Muranga, Eldoret, and Kisii can sustain at most two. Muranga, Embu can work with one. Remember you will be going after the same clients. And with the limited budgets of small and mid sized businesses they are unlikely to book space in two magazines circulating within the same location and likely to be read by the same people around the same time. That does not mean you should not get into a market with an existing advertiser. You can do it but with a very clear plan of how you are going to beat the competition; aggressive sales, promise of more impact, better rates or anything that will make you stand out or weaken the competition.

If you are operating in a town with an existing advertiser magazine it will be easier to introduce the idea than if you are starting from scratch. However in relatively small towns relationships between people are deeper. The existing advertiser could have very good personal and business relationships with existing businesses. Thus they will be reluctant to ditch his magazine for yours, meaning you will need to do more to win over customers. Licenses & Registration.

You need to register a business and have a bank account with the business name. This is because the bigger of the businesses will most likely pay you using cheques. You can register a sole proprietorship, partnership or limited company as suits you. When registering its preferable to say you are engaging in advertising, sales promotions or related rather than say publishing. For publishing you will need to meet some extra conditions including bonds which can be as high as Kshs.1, 000,000. www.Earnsmart.com Don’t invest blindly Page 4

A basic advertiser magazine can operate with a county license only. The price will range between Kshs.10, 000 and Kshs.15, 000 depending on the county and location within the county.

Graphic Designer

You need a designer to design advertisements and layout your magazine. The layout should be able to maximize space and make all the ads visible. This is by using all necessary elements: colors, fonts, lines and everything else. A good designer should be able to make the magazine easy to read and attractive to the eyes.

Some entrepreneurs with only basic design services opt to do the design themselves. Though they get the work done it’s at the expense of aesthetics and readability of the advertisements. Though the effects of poor design may not become immediately felt by such an entrepreneur, badly designed ads result in low conversion rates. And if advertisers don’t see the results of advertising in a magazine they stop purchasing space. So it’s important to invest in a good graphic designer. A keen designer who understands the purpose of the magazine is to convert customers. You should ask for samples of his or her work before engaging them.

If you are the graphic designer make sure you have required skills, and continue improving on them. Take a number of magazines and compare designs. The internet is also full of sample advertiser magazines.

Printer

After you have collected advertisements and laid out the magazine then you need a printer to print the magazine on paper. When looking for a printer considers price and reliability. There are big differences between various printers so walk around looking for a printer who offers the best price at the best quality.

Price is based on quality of paper, number of copies, color, number of pages, and the whims of the printer. The more the copies the less the cost of per unit. Also look for a printer who delivers on time. There are many printers who have a reputation of not delivering on time. If you are within a reasonable distance of Nairobi compare the prices of printers in Nairobi and those in your location.

Due to the intense competition in the city the prices are relatively lower and there is more room for negotiations. On the other hand Nairobi printers are relatively busy, and thus are more likely to do deliver late.

Premises / Reference Point

You need a reference point of sorts. This validates you, and makes some doubtful businesses take you more seriously. There are several advertiser magazines which don’t have a permanent www.Earnsmart.com Don’t invest blindly Page 5

office, rather they operate from cyber cafes, bureaus or give friend’s offices as the reference point.

Have a physical address that you can say is your office. If you rent an office then you will also need some furniture and signage. Computer

If you have an office, you are doing your own design work then you will need a standard computer. Even if you are not doing the design work then a computer and possibly an internet connection will be of help in searching for ideas and helping you identify businesses to approach. You might also need to fine tune designs, or write copy, invoices and do any other documentation.

There are advertiser magazines which operate without a computer. It’s actually possible to do so by outsourcing all your documentation. However the more you grow, the more you need to work on copy and designs, and customers start visiting your office then you will need a computer.

CAPITAL

Kindly refer to the sample data from an advertiser magazine where we breakdown capital. Operations

The key operations when running an advertisement magazine are: a) Finding Advertisers and Selling Space

b) Designing of advertisements and layout of the magazine. c) Printing

d) Circulation

Finding Advertisers and Selling Space

Some magazines use a clear strategy to get advertisers while others do it haphazardly. The ones that use a strategy map a town or region. Then they pin point the businesses that are most likely to advertise, and concentrate on those first. To determine which businesses are most likely to advertise they look at size, previous advertising history, competition in the business and personal networks.

It’s presumed that a bigger business will have more money at its disposal that it can invest in advertising. Also bigger businesses are presumed to have an element of professionalism and thus appreciate advertising more.

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This is not always the case, however a business like a local Sacco, local supermarket, college, large hotel are likely to have budgets for marketing unlike smaller businesses which don’t set aside definite amounts for purposes for promotion. On the flip side the bureaucracy in decision making and payment is more in bigger entities.

A business with a history of advertising means that it understands the power of marketing. If you illustrate the value that you will bring in then they are most likely to advertise. On the other hand business with experience in advertising will most likely be keen on possible impact of any ad they purchase and will be reluctant to opt in without a good sales pitch. Relatively large businesses enjoying a duopoly or oligopoly are more likely to advertise. This is when compared to small businesses with cut throat completion (think Mpesa) that may not see value in extra advertising since there is little differentiation in their business, and consumers’ purchase decisions are based on convenience.

Mapping helps organize better and makes sure you don’t miss out on any business. In addition if you are using salespeople it’s good to allocate them regions to avoid overlapping, where two or three different salespersons but all from your magazine visit the same business. This gives the impression of unprofessionalism which could turn off some potential business owners. You can personally sell space or hire salespeople. Remember you have only about 20 or so days in a month to collect advertisements and the rest you use to follow up on payments, do the layout, chase printers, get the copies and start circulating. So if you are doing all that alone ask yourself if you will have time to cover every bit of it effectively. The advantage of personally doing the sale is that you save on commissions, and are able to use your networks. However it can be straining.

The advantage of hiring salespeople is that they are able to use their own networks, since they are paid on commission (and possibly a small retainer) they are more aggressive and persistent. The disadvantage is the extra cost in terms of commissions. Also if any sales they make are based on personal relationships then if they quit working for you or shift to a rival you could lose some clients.

Salespeople also help you reach a wider area. Even relatively smaller towns like Machakos are difficult to handle as a single person. Nairobi would require several salespeople. Sales are about numbers and strategy, so the more businesses you are able to reach and pitch to the higher the chances of striking sale .Some salespeople have very particular knowledge and understanding of certain areas that helps clinch sales. For instance they are aware of intense rivalry between two businesses, which then presents a chance for advertisements. You may not have this kind of location based knowledge thus limiting sales you make personally. Haphazard sourcing of advertisements could work but it could lead to inefficiencies in the use of time and how well you cover your area. Inadvertly you could omit some areas and possible business.

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A typical sales pitch for an advertising magazine could take several days. First you approach the business and introduce your product. You may or may not find a decision maker. If you don’t find a decision maker a likely answer will be “Why not come when the boss is there”. If you find a decision maker then she might say “Let me think about it”. This means you will have to visit the business several times.

Some businesses will be clear and say no, we are not interested, we don’t have a budget and so forth, whereas for others it could take a few visits before you know that they are not interested. The gist of it is that it’s unlikely to sign up a business within the first day, and you will need to persist and be prepared for several visits. If the business owner /manager say yes then you will have to make follow up visits to take photos if need be, get more information, brainstorm copy of the ad, confirm copy is good and get down payment. Depending on the businesses you could need to sign order forms, create invoices, and chase payment and so forth. It’s all a process and sometimes hectic. You need to use your time very well otherwise the month ends without doing much. Also be psychologically prepared. It’s common to see investors in the ad magazine business getting very frustrated because the process is not moving as smooth as they expected. You visit ten businesses in a day and non commits to buying even the least of space. You get one which buys space but it gets problematic to have them pay. Have a thick skin and as you will see below enough capital. When seeking advertisement be flexible enough so that you are able to work with a business’ budget. Thus if someone says they have Kshs.1500, don’t turn them down because you have not designated space for that amount, work out and equivalent space and sell to them. Discount coupons offered to consumers also work well.

b) Designing the magazine

Once you have the ads you need to design the layout of the magazine page by page. Make sure every ad is where it’s supposed to be. If someone paid for the front page then make sure the ad is on the frontage. Disappoint a first time customer and they will be reluctant to purchase space again.

To make the magazine more ‘edible’ it’s good to have some news content. The best are light hearted news of say 500 words about something non political happening within the location. It could also be some tips on business, health, agriculture or any topic of general interest within the location. How to articles will attract attention. The purpose of the content is to fill any free space that is not occupied by advertisements and also make the magazine interesting so that consumers can pick it. The fact that it’s distributed free of charge does not mean that consumers will necessarily pick it. Have some headline content and a few light hearted articles within the magazine. www.Earnsmart.com Don’t invest blindly Page 8

As mentioned make the design appealing to the eye. Let it be easy to read, to tell one ad from the other and have a clear call to action.

Lay particular emphasis on the front page. Come up with a quirky name which resonates with the local people and business. And have your contacts well displayed and clear in case someone reads and would love to advertise.

c) Printing

Once you have the layout and artwork ready then its time for the magazine to be printed. Have clear agreements with the printer about every important printing aspect from paper to be used, what to do in case of damages, timelines, packaging and so forth. This will give you ground to make definite follow ups, plan and end up with a magazine of the standard you wished. Many advertisers do their printing in downtown printing presses which although they deliver are famous for inefficiencies. You need to be firm with them otherwise they may not prioritize your work or do it shoddily. Don’t pay the full amount upfront rather in two or so installments: when making your order and after the magazines have been published. d) Circulation

The advertiser magazine is of no use if not widely circulated. As many consumers as possible need to read it so that the chances of conversion to actual sales can increase. If the ads in your magazine do not lead to actual conversions then some business will be hesitant to advertise in the next issue.

Free does not mean that everyone will be willing to pick it. Also it does not mean that businesses and institutions will be willing to have the magazines in their premises so that customers can pick it.

Have a clear distribution strategy. Depending on your target market make sure the magazine reaches the right consumer. If it’s biased towards finance advertisement, or college or just general then let it reach the customers likely to make purchases. Newspaper vendors are very key in the distribution of magazines; however without a motivation of sorts they are reluctant to distribute the advertisers. They can give all manner of reasons but the bottom line is that they want to get paid for their time space and

‘goodwill’. If reasonable then it’s worth it. A partnership with a newspaper vendor could see him giving everyone who purchases a newspaper a copy of your magazine. A person who purchases and reads a newspaper is likely to take time to read the advertiser. Make sure all those who have advertised have a copy, and where possible distribute some copies within institutions. Depending on the county and the fees that could be involved you could have people stand on the street and distribute the magazine. www.Earnsmart.com Don’t invest blindly Page 9

You could also look at where there are large gatherings like churches, and distribute it. You need to be aggressive in distribution. The more the magazine is visible the more you will attract more advertisers and the more the present advertisers will find value. On the face it could look like it’s easy to distribute even 500 copies but the reality is that you need to push them. You want the maximum effect within the month, so you just don’t want the copies to move too slowly. It’s common to have advertisers who holding hundreds of copies which they could not distribute. Try reach as much as many people as possible. Case Study Magazine Started July/August 2013

Location – Eastern Province

Note about owner –

- Retrenched from formal employment

- Had been living in Nairobi and moved to the rural area to start the business

- Have family of 4 school going children ; primary and high school

- No prior experience in running business

A note about location

- County headquarters

- Former provincial headquarters

- Growing town – two 3 star hotels, a couple of large bars and hotels, no major colleges until 2012, three campuses of major universities,

- Three major supermarkets – Naivas, Maguna Andu and Uchumi. The former dominate. Also four mini supermarkets

- Two three star hotels, several decent but unrated hotels

- Several Nissan Matatu companies plying the Nairobi route

- Over 15 private primary schools

- Two market days

- Peri urban area with a large rural population

- Growing population

- Increased development especially in hotel and accommodation, colleges and residential house

- Town supports parts of neighboring in terms of facilities Competition

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- No other advertising magazine

- No other exceptional local advertising channel

- Billboards, sign boards, occasional leaflets are the major source of advertising

- Major hotels have an internet presence through own websites and listings in directories and travel and tour websites

- No dominant product activation activities

Capital

When thinking of capital don’t just look at the physical items like computers and the office. A very big aspect of capital in an advertisement magazine is the ability to run at least 3 issues with your own money. It could take up to 6 months for you to break even. Again businesses usually pay for advertisement in two or three installments: some amount before publication, and the balance after. Not all businesses will pay on time, while others will insist on seeing results first before paying. This means you need to have enough money to continue publishing.

How much will you charge for space?

This will depend on the competition that is if there is another advertiser within the same locality. Also the size of the town and businesses within. The smaller the town the less you can charge. Consider your costs, and especially printing costs, commissions, rent, transport and any other. Present advertisement fees in the market range from as low as Kshs.7000 for a full A4 page to as high as Kshs.25, 000. When setting the price give yourself room to go down incase competition becomes very stiff, and absorb any increased costs within the first 6 months. From experience it will impact negatively on the business if you increase your prices within 6 months.

Actual Start Up Figures

Business registration (sole proprietorship) – Kshs. 5000 Licenses – Kshs. 12,000

Office (Shared) – Kshs. 4000

Computer – Kshs. 21,000

Digital Camera – Kshs. 8,000

Business cards – Kshs. 1000

Order Book – Kshs. 2000

Airtime – Kshs. 3000

Office / sales assistant – Spouse who was expected to share in profits. Transport – Kshs. 9000

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Other Figures

Cost of printing – Kshs. 30 per copy colored. Printed in Nairobi No of pages - 16 A4 pages

No of copies - 1500 copies per issue.

Cost of Adverts

Full page Front page Kshs.10, 000.

Other pages – Kshs.8, 000.

Other sizes divided accordingly – Half Kshs. 4000, Quarter – Kshs. 2000, eighth – Kshs.1000. Smallest size was to be worth Kshs.500.

Designer – Kshs. 500 per page

Expected Revenues

Total Revenue if all 16 pages fully booked - Kshs.128, 000 Expenses (Expected)

Printing – Kshs. 45,000

Transport – Kshs.9000 (Within county and Nairobi to deliver artwork and pick magazine with own transport, cost of circulation)

Airtime – Kshs. 3000

Office – Kshs.4000

Miscellaneous – Kshs.5000

Graphic Designer – Kshs.8000

No commissions since was doing sales together with wife. Total – Kshs. 74,000

Expected profit – Kshs. 54,000 What

actually happened?

Set up operations in August

- Started by getting phone contacts from directory and internet and making calls. Response from telephone cold calls was poor. A lot of time needed to explain the concept

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- Some businesses didn’t get concept of freely distributed advertising magazine - Stopped making calls and went out in the field to pitch and sell

- Bureaucracy even in one man shows - “ I will have the person in charge of marketing call you back”

- Face to face didn’t work the magic expected. Quite a number of business thought I was selling concept with no actual results.

- To entice some businesses I told them they could pay when the first issue was out but got responses such as “ I will think about it” or “ let us talk when the first issues is out “

- Managed to make some few sales but the progress was too slow

- By end of August I had no enough ads to fill even half the pages. Soon advertisers would start calling to ask if the magazine was out

- I changed tact, I was going to bankroll the first issue from my own pocket and savings and not rely on advertisers.

- Decided to offer free advertisement so that I could have a tangible product with which to entice businesses the next month. Had thought proprietors would break their feet trying to get the free space in my magazine, but that was not the case. They seemed suspicious of something, the deal was too good.

- In the end I focused on some core and big businesses, the ones if they had ads in the magazine would mean a vote of confidence in the magazine, and thus make the smaller businesses advertise.

- Released the first issue early October with adverts of about 20 big businesses. I had only been paid Kshs. 23,000 for the first issue. The rest was free, and then the agreement was that the advertisers would pay half when booking the ad, and the rest after publication. . Thus I printed the first issue almost 100% with my money.

- Distribution was not smooth. Businesses like cyber cafe complained that the magazine

‘would eat up space’. Eventually I distributed about 500 of the 1100 copies I had printed.

- Even with a ready product advertisers were still reluctant to buy space. Same excuses as before. My savings were on the low and I had to make the next issue succeed or else I would close shop and be totally without of income.

- Even business who had paid for space before were now reluctant saying they had not seen any results. Only two paid for advertisement ø By mid November I had only enough paid ads to fill half the magazine. To cover the other part I offered the businesses double space for what they had paid for.

So if someone had paid for a quarter pages, I generously gave them half a page. I released the issue the first week of December r and counted another big loss. Distribution was problematic as before.

There were no enough people willing to advertise in December, my little savings were gone. Having missed on the big Christmas shopping I had no hope for any sales in January. I wrapped up the business

Looking back I realized the many mistakes I had made: www.Earnsmart.com Don’t invest blindly Page 13

- I was blinded by my immediate financial pressures and the prospects of money that I didn’t take time to do some research that would have seen cut my printing costs by more than a half. Also I’d have known the thinking of businesses in the area, and made my product more friendly

- I so much believed in a first month success to an extent I didn’t plan for an eventuality that I might not have broken even in a few months. So I didn’t have enough capital, neither did I seek more. I believe with a little patience, better strategy and more capital I would have broken even in 6 months.

- I should have employed salespeople on commission. Though I believed I was good in sales there was no way I could reach the whole region. Salespeople use their contacts and skills to make sales. I was overwhelmed.

- I should have planned about distribution. In my head free would have done wonders, but that was far from the truth.

- I should have hired a professional to do graphics. I got a cheap not very skilled assistant and now when I look at the magazine it was shoddily done, not appealing to the eyes...

- Generally I should have planned better.

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