'Understand the changing consumer behaviour' Angela Sargunan The advertising industry has been urged to go back to basics, in reaching out to consumers today. "Go back to principles of consumer marketing and understand the consumer,"said Celcom chief executive officer Datuk Shazali Ramly (pix) in his presentation at the Malaysian Media Congress (MMC) on Tuesday. He said with the ever-growing web world and digital convergence, consumer behaviour has changed drastically.

"Understanding the consumers' behaviour is the key to reach out to them, because there is no use creating and satisfying a 'need' when there is none."

Among the other key speakers at the conference, which gathers experts and key decision-makers in the fields of media, marketing, branding and advertising, were Yahoo! Southeast Asia's director of sales and operations, Tom Snipple, Pinstorm founder Mahesh Murthy, MindShare Singapore's CEO Jeffrey Seah, OMD MalaysiaÊmanaging director Andreas Vogiatzakis, and Universal McCann CEO Gaurav Bhasin.

"With changing consumer patterns, a free daily makes a lot of sense. There has been a change in lifestyle. We don't have time to go through over 200 pages worth of news everyday. What we want is a quick read, a summary of the morning's news," Ho said.

He said that before theSun became a free paper, it made RM25 million in losses a year. It has since cut its losses down to RM5 million as of 2006.

"Yes, we're still losing money," he admitted, "but turning free rescued theSun from going under."

"When theSun was a paid paper, it was printing, on average, about 120 pages a day. Why? Because you are asking someone to pay a ringgit," he explained.

"But at 120 pages, we only had a small ad ratio - that's why our losses were so huge.

"So what we did was instead of printing 50,000 copies with 120 pages, we instead printed 40 pages and increased the circulation to 120,000 copies as a free paper.

"Because the paper relies solely on advertising, the number of pages would be determined by the ads - which is now about 55% advertising and 45% news.

"The moment the advertising goes beyond 55%, we will increase the pages. So you (advertisers and media players) will determine how many pages theSun has. That's the formula we have," he added, explaining the paper's business model.

Earlier, Ho recounted the history of theSun from 1993 when it was owned by Tan Sri Vincent Tan of the Berjaya Group, and how it was hit four years later by the Asian financial crisis, which saw its circulation dropping from 80,000 to 50,000 copies daily.

After an incident in January 2002, when editors and journalists were sacked over a highly- controversial story, Tan sought help from The Edge to see if anything could be done to help out the paper.

"It didn't take long for us (The Edge) to provide two options - the first was to shut down the paper. However, after investing close to RM200 million over eight years, Tan wasn't ready to take that step," Ho said.

"A second option was offered - turn theSun into a free paper. I don't know if the first or the second option shocked him more," said Ho with a laugh.

"But nevertheless, he was quite startled. Naturally, he was against the idea, (probably thinking) how could I give my product away for free?"

Ho said when Tan consulted media experts on the proposal, "they told him if he (Tan) decided to turn theSun into a free paper, it would close in six months".

"We, however, gave the free paper model a try - that was really the only way to go if he wanted to stay in business."

But why this particular model?

"Clearly, the market was saturated, with two well-established national dailies," said Ho.

"The cover price was clearly a barrier to entry, thereby creating low ad revenue as a result of low circulation.

"But as a free paper, you can print and distribute as many copies as you want, thereby establishing your reach.

"By going free, we created a totally new distribution network. The traditional business distribution network was hard to break as the vendors favoured more established titles.

"Back in those days, theSun was placed either below the table or at the back of the shop. When the vendors don't support you, you don't stand much of a chance.

"Today, many people ask me when I'm going to start charging (for the paper) - they find it hard to believe that this is the model forward. We simply can't reverse it.

"The reality between the paid model versus the free one is that you have to spend RM100 million before you start to see if it works. With the free model, you'll see the RM100 million upfront in the first few years by bumping up circulation.

"If you're a paid paper, you'll struggle and you'll take time to build your circulation to that level - it may even take 10 years.

"People talk a lot about the success of The Star - and it has truly done very well. But people forget about the struggle during the first 10 years of The Star. A lot of money was invested in there before it broke even."