FEATURE 

Cheat and prosper with cut-price marketing

Is securing sufficient marketing budget like getting blood from a stone? If it is, then don’t despair. Here Peter Hobday outlines some tried and tested techniques to help you achieve good revenue with even the most inadequate of budgets.

By Peter Hobday

The marketing director for one of the larger trade magazine publishers drew up a plan for re-launching an ailing weekly subscription-based financial newsletter. At the all-important presentation meeting he showed the plan to his managing director and the prospective publisher.

The managing director was dismissive. ‘I’ve never seen a budget like that,’ he said. ‘All that marketing expenditure – it’s far too high.’ Dismayed, the marketing director explained that, for a subscription title, money is only spent if enough revenue comes in. The expenditure is always matched by the income.

The market was fast growing and there was a potentially lucrative gap to be filled. But, unconvinced, the managing director turned the project down.

In the (true) story above, the prospective publisher, who had maintained a curious silence throughout the discussions, left the following month to start up the magazine with a major competitor. He phoned the marketing director from his new office to thank and congratulate him on coming up with a great concept. The title became the leading finance title in its market. It attracted a great deal of recruitment advertising and three rival publishing companies copied the idea. Was the marketing expenditure too high? No. Would the marketing director receive the same negative response from his managing director today? I’m afraid to say he probably would.

Subscriptions are the safest business model yet if you show a plan containing high subscriptions marketing expenditure to one of the main trade or consumer publishers, it will probably be turned down. But the fact is that a well-planned subscription title has a far safer business model than either a controlled circulation or a newstrade publication. In my last article I looked at B2B magazines. This time I’ll examine newstrade publishing.

The madness of newstrade publishing

Is madness too strong a word? Let’s examine the facts:

* The average number of titles handled by independent newsagents is less than 285. They don’t have room for more, so unless yours is a big budget launch prepare for some pretty anxious times.
* Wholesalers send newsagents hundreds of magazines without first getting their agreement. So many are just sent back.
* Up to 30% of your magazines will be returned without ever going on the shelf – and in some cases, many more. One publisher has complained that, in a recent promotion, Tesco sent back 25,000 copies without them ever going on display.

If you run a smaller consumer publishing house, prepare to be squeezed by the big boys very hard indeed. They get most space on the shelves. Very few specialist magazine publishers have the manpower to visit wholesalers regularly - but if they did they’d be horrified to find hundreds of packs of their magazines returned unopened, despite having paid for in-store promotions in supermarkets and newsagents.

An open mind

With an open mind, you have an open market. The relevance to this on saving money is: think laterally, and out of the wholesale box. Spend your budget where it’s accountable. With subscriptions, you only invest when you are certain the revenue will come in. No income? No expenditure.

And with subscriptions, unlike newsstand sales, a marketer can provide watertight evidence that a promotional program will work. He will run a test first. He can promise, up front, that marketing expenditure will only be used if ‘the fish are biting’; in other words, when a test shows the revenue from new subscribers meets set targets. By its character, however, this is not an easy kind of budget to formalise. It’s a moving and changing thing and it’s probably this that puts managing and financial directors off.

Looking at various magazines’ ABC figures, I’m always amazed at the number of bulk copies that are given away free of charge, rather than sold through subscription. Surely, any income is better than none? Think of the extra advertising that comes in through higher paid subscription sales. And when you realise that most publishers pay a ‘placement fee’ for each copy to be distributed in airports, hotels and trains etc, it makes financial sense to get what you can from a subscriber in the knowledge you can upgrade them once they are aboard (more about this later).

Free marketing

Almost free marketing will always be popular. In case our story up to now has depressed some readers, here are some marketing proposals I can guarantee will get passed, because they cost next to nothing. From experience I can say these will prove popular with senior managers.

Making money appear out of a highly restricted budget is not easy, but that’s what many marketers are expected to do. The best way to approach the task is to imagine you are going broke and your company is desperate for cash. (That’s what many an MD would have you believe anyway.) Here is what you do.

Loose inserts

Sadly, creating a loose insert represents the main marketing effort for many publishers. A loose insert, of course, isn’t marketing. For consumer publishers it’s simply changing the way you deliver your magazine to your reader. And for most controlled circulation publishers the revenue wouldn’t pay for an office party.

Most insert cards are copied from other magazines. That’s why they all look alike. We have reproduced a typical example here. (Be assured I could have chosen almost any insert card for this demonstration.)

It’s no help to be critical without being constructive. So with some creative thought we will turn things around. We will increase the revenue received from this insert without spending any more money. Here are five measures to take, with resulting benefits:

1. Cut colour. Benefit: costs reduced.
2. Add in three and two year payment options. Benefit: increase revenue by 10% to 15%.
3. ‘Bill me’ orders accepted only. Cut out other payment options. Benefit: orders increase by 50% to 100%. Mailing list built up.
4. Offer a more exciting incentive (extracted from a previous editorial feature?). Benefit: ‘red-hot’ report lifts response by 40%.
5. Include three inserts in your publication instead of one. Benefit: 40% uplift in revenue.
6. Write your copy so the insert sells when it’s placed in other titles. Benefit: lots more money for nothing.

Costs have increased by printing more inserts, the free report for subscribers and running a billing series. However, you have reduced costs by printing in only one colour. And with each invoice you send out to new subscribers, you can up sell and up-grade your subscribers by selling ancillary products. Your business will really start to rock and roll.

The subscription volume and revenue is multiplied many times. Because your mailing list is suddenly making great leaps in growth, you can sell other products and bring in new revenue through more frequent list rentals.

Most loose inserts are created and designed in house, and copied from others. But as a rule of thumb a specialist copywriter can usually increase response and revenue.

The incredible 3% outsert

If you bind or glue your insert to the base of the magazine front cover, you have created an outsert. An outsert is probably the most responsive in-magazine device there is.

For a newstrade publication there’s another benefit: because an outsert is so visible, it’s a highly efficient way to boost copy sales without having to distribute extra copies. It usually works better than an in-store promotion (and you don’t have to pay extra for it). This, it must be said, is partly because your promotion will appear without fail in every newsagent, while an official in-store promotion is more of a lottery (with you paying up to £20,000 for the ticket).

The first publication to carry an outsert in the UK was Running magazine in 1981. The response was an incredible 3%. In comparison, a good in-magazine insert will pull a 1% response and a professionally created advertisement 0.5% response. The cost of fixing an outsert to the cover can be more expensive than loose inserting, but the extra revenue covers this many times over.

One reason we don’t see more outserts in the UK is because editors don’t like part of their magazine’s front cover being obscured. However, they can usually be persuaded by the huge increase in circulation. And when I do see an outsert, often the design doesn’t fit the purpose, which doesn’t help.

Design

One of the cheapest ways to boost response is to make sure each visual element of your promotion supports the main selling message. Direct response design is a craft, not an art, so a magazine art department is probably the wrong place for it.

The design must contrast, not fit in with, the overall magazine design. It must catch the attention of the reader in the most intrusive way. The artwork may look rough and a bit of a shock, but that’s what works. Unfortunately, there are few designers who can create this kind of responsive look when left to their own devices.

Renewals, upgrades and extensions - in two steps

As every good marketer knows, renewals are where a publisher makes his money. Here, in two steps, is what happens when you install a reasonably good renewal programme. Let’s say you start with 10,000 subscribers paying £50 each. You then lift your subscriber renewal rate by 20% and sell some ancillary products – say £25 per head.

1. 10,000 subscribers paying £50 each at a 70% renewal rate: total income over five years is £1,386,550.
2. 10,000 subscribers paying £50 each at an 84% renewal rate: you will be bringing in £1,818,088 - £431,538 extra revenue.
3. 10,000 subscribers paying £75 each at an 84% renewal rate: in two steps, the total revenue has jumped to £2,726,132 - an extra £1,340,582 more than our starting figure.

For most businesses, it would probably be worth investing around 10% of your extra income on achieving this kind of increase, as it will continue for many years to come. But it just may be that you (or others) have decided, for reasons that are not immediately fathomable, not to allow that kind of budget against this kind of revenue. If so, here are some other cost-free ways to increase renewal revenue, with solutions to common problems:

A new renewal series

The best renewal series start when the subscriber first comes aboard. These early-bird efforts are designed to upgrade and extend the subscriber. Current upgrade techniques can lift average subscriber revenue by between 50 and 150 %. So that initial £50 revenue becomes £75 to £150 revenue, simply by creating a state-of-the-art renewal series. You can upgrade a subscriber by offering all kinds of ancillary products in the knowledge that the subscriber will probably welcome more of what he or she has already bought.

Include the editor

There are certain editorial subjects that lift copy sales. These often appear as special supplements. This kind of editorial, when emphasised in your mailings, will also improve response to new-business and renewal promotions. You can easily test various topics with low-cost promotions to your reader database. Once you have the evidence, invite your editorial department to marketing meetings. Make sure they see regular monthly renewal figures so they appreciate high or low renewal percentages. Low renewals could be because the editorial doesn’t meet expectations. Tell editors which editorial incentives are the most popular.

Free editorial

When a writer cannibalises or repeats a past feature with a few changes and updates, it’s lazy journalism. It happens all the time because it means the editor can hire almost any journalist to write it. That’s why most magazines gradually lose their readers. Creative journalism comes from talking to your readers, not other writers. So include a subscriber questionnaire on your website, loose insert, or the back of your label carrier when mailing your publication. Make the questions open-ended. Ask what’s on your reader’s mind, how he solves common problems, what he thinks about sex, his wife or his boss.

Publish the most interesting answers. Ask the most forthright responders to expand their replies. They will be so pleased to receive recognition they won’t ask for payment. By creating a regular dialogue with your readers you’ll stay current and achieve far more response to your promotions.

All for nothing!