Growtion Case Study: REA Group/ Propertyfinder.com
In 2006, REA Group - the "Rightmove of Australia" - acquired Propertyfinder.com, the original UK property portal. It had been overtaken by Rightmove's cash and Primelocation's strategy in the early 2000's and was ripe for a new owner to bring fresh impetus.
I was headhunted from Primelocation to head up a new business that was created when Propertyfinder took over a luxury magazine business called London Property News. The Concept was to use the 5-title magazine’s 350,000 free distribution to high-end properties in London and Surrey to advertise Propertyfinder’s brand, getting property-interested consumers to use Propertyfinder as their preferred search portal for their next property move.
The business itself was losing £650k per year when we took it on. My background in online portal growth didn’t instinctively lend itself to running an offline print business but Disciplines and Elements that stood me in good stead in the digital world mapped directly across into analogue.
We completely re-Designed the Product to better appeal to both readers (who would get the magazines free posted through their doors) and advertisers. The latter would cover the costs of the magazines’ printing and distribution. With the Propertyfinder logo featured on the bottom of every single page and uncharged full-page ads in each magazine, the Concept remained at the forefront of the Product.
However there remained a problem – and it was not insignificant. That £650k loss needed to be turned around into break-even at the very least, profit if possible. Losing £55k a month was, clearly, not sustainable. We needed to quickly cut costs and increase revenues.
The Sales Process undertaken to achieve higher revenues won’t detain us here – we’ll revisit that in Element 13: Sales: Goals.
Instead, looking at the Service that was being provided and comparing that with the Service that we wanted to provide enabled us to find the savings and, ultimately, turn that £55k per month loss into a profit within 10 months.
The Service as it stood was predicated on a high-quality Product being provided to high-quality agents. This was incredibly expensive to administer. Add to the mix a highly competitive market where there were three or four other similar magazines catering to the same high-quality estate agent market with similar distribution across the same households. The agents therefore had the power to choose which ones they would do business with and achieved prices per advertised page was low.
The solution was to get the cost of production down. That would enable us to lower our cost-per-page, attracting more agents in the mid- to upper-segment of the market to the Product and selling more pages at a margin that would cover the huge fixed costs of printing and distribution.
For each advertised page, a relatively complex process was involved of page “laying-out”; most agents would still have a selection of properties that they would want to feature, as part of their own pitch for business was that the seller’s property would appear in this high-end magazine.
(The world looks very different ten years on, to be sure …)
We had an online, “DIY” solution where the agent could lay the pages out themselves. We made this a much more tempting proposition by discounting these pages, saving us the cost of doing it ourselves. However, we still needed a solution for the (majority) that did not want to do this and wanted us to. It was the offshoring of this function to India – and the planned Service impact of doing so – that changed the game for us and ensured that we succeeded. But it was not without controversy, internally and externally.
No one else Serviced their customers from India. These were – in general – estate agents that were used to being treated with a fair amount of deference by their suppliers and would gravitate to the magazine that continued this. There was a significant risk in alienating historic clients and reinforcing their choices to use competitors.
It was a risk we felt worth taking. We considered that the increase of custom in the mid-market – due to our ability to provide pages at prices lower than any of our competitors – would more than offset the loss of customers at the top-end, particularly as we were not capturing enough of that market anyway.
It worked. The Service that we provided was less than our competitors were doing but deliberately so. We brought more agents into the market and gained new customers. Our costs weren’t solely cut by offshoring – we cut distribution and a couple of titles that were never going to work. Where there was the market, however, our magazines were thicker than they used to be, more widely read and our advertisers were happier.
One final point – you’ll recall that I declared that competing solely on Price was not a sensible strategy. Here, surely, is an example of that working? There is a crucial difference – we changed the Service to accommodate the Price rather than just slashing it and hoping for the best. Price can be a differentiator but never on its own.