What a few years, a few countries and a few disasters have taught me about selling subscriptions

My parents scrimped and saved to send me away to a good school. I’m not sure exactly how they scrimped and saved. Maybe they cut down on booze. My brother once calculated that my father, who ran a very successful pub, drank between twenty and thirty pints of Sir Fredrick Robinson’s excellent Best Mild every day.

They hoped posh schools would turn me into a gentleman – a bitterly thwarted ambition. I hated every minute I was at school - eleven horrible years from seven to eighteen. One of the things I hated first and hated most was my first maths teacher, an ogre and bully called Geoffrey Latrobe Foster. May he rot in hell.

He gave me a lasting dislike of mathematics, from which I only recovered when I went into business on my own nearly forty years ago. Then bruising experience taught me that vague, back of the envelope calculations are not enough to survive.

Dumb, dumber, dumbest

With great difficulty, my partner and I raised the money to buy a newsletter. With the confidence born of youth and complete ignorance we proceeded to make some fairly spectacular mistakes. We nearly went broke before we got started.

First, we decided to make the newsletter look like a magazine. Dumb. You can never charge as much for a magazine that anyone can buy as for a newsletter, which purports to be confidential. Second, we sent out our first subscription mailing in mid December. Nobody reads mailings then. Dumber. Third, and dumbest, we put our brilliant new work of genius in the mailing. It made it too expensive, and anyhow no publication can match the bullshit you can write about it.

Guess what? To this day few UK publishers understand many of the things I learned all those years ago. They are antediluvian. But it’s never too late.

A good example

One of my clients for some years was Ziff Davis, the publishers. When they entered the UK market a few years ago with their computer publications any objective observer would have said they faced an impossible task.

Publications like Computer Shopper, Personal Computer World, Personal Computer Magazine and PC Plus had circulations of between 70,000 and 120,000. But none had the foresight to build a strong subscriber base. This gave Ziff an opportunity they exploited with a vengeance. In just eight months they acquired 33,000 paid subscribers out of a total circulation of 90,000. And later they did even better.

One thing amusing about Ziff Davis’s success is that one of their competitors is VNU. Many years ago VNU hired me to sell one of their publications. I created an ad to test against theirs. It produced ten times as many sales. This is not a tribute to my matchless writing skills; rather to the dire quality of their ad.

Years later I met my old client. He had become publisher at Marketing magazine, for which I wrote a column for ten years. "Why didn’t you give me any more work?" I asked. He told me the results were so extraordinary they simply couldn’t believe them. I bet they never even counted them properly. Well, whatever they believed, they did not do the sensible thing - start investing in effective subscription generation - one reason why Ziff Davis were able to enter the market so successfully.

The most important calculation

So what did Ziff know that most publishers don’t? Quite a few things, but perhaps the chief one is that they understood the value of a customer. Why is that so critical?

Well, let me bore you with a few more figures. The first is how much Bill Jayme, a friend in America, used to charge to write one mailing pack before he retired nineteen years ago. He specialized in getting magazine subscriptions.

Freelance direct mail copywriters generally regard this as the greatest challenge. So not surprisingly charge most for it. Bill charged at least $20,000 for a mailing. That’s the creative work, not the artwork or anything like that.

If his mailing beat the pack it was tested against, the fee went up to $30,000. Of course, most UK publishers don ‘t even test properly, but that’s another matter. If it was a mailing pack for a new publication the fee was $40,000.

What will they pay?

About twelve years ago the publisher of The Spectator called me in. They had never made a profit in their entire 250-year history. My first advice was to put the price up. It has since more than doubled. Their circulation has steadily increased. And they have been profitable for a few years now. A magazine or newsletter subscription is worth whatever you can sell it for. Most publishers are just cheapskates. They have fixed ideas about price. And they are the wrong fixed ideas. Because they are cheap, they think their readers are. So they imagine they constantly compare prices. They don’t.

Peter Hobday, the infinitely wise publisher of Subscriptions Strategy, says, "In most price tests we found raising the price did not adversely affect response. In fact, it was sometimes clear that subscribers actually preferred to pay more. They felt better about the purchase."

Therefore it is well worth paying somebody like Bill Jayme $25,000 or $30,000 or even $40,000 for a successful mailing. I imagine bearing in mind inflation, he would probably be charging $50,000 or $60,000 today. Still cheap.

The market obviously thought his charges were reasonable, as he had a queue of clients about eighteen months long. He only did one job a month, so that was seventeen people waiting while he was working on one.

What should you pay?

There is another factor worth discussing. How much should you spend to bring in each subscriber? Here, the industry standard is a 100% return on your marketing investment (100% ROI).

Others - an increasing number - are bolder. Having calculated the total revenue their subscribers bring in over their "lifetime", they are prepared to spend three to five years’ income to bring each one in.

Once you have locked people into a relationship with you on a regular basis, they will, if you look after them, stay with you for quite a long time. People like Time-Life have been thinking this way for at least twenty years.

Fifty years ago today

I became a newspaper reader well over fifty years ago. I remember, quite vividly, following the battles of the Normandy campaign in the Daily Express. The name Von Rundstedt, who took over from Rommel, made a deep impression on me, for some reason.

When I was a little older, my imagination was aroused or inflamed by the serialised novels in the Sunday Express. Aroused by The Cruel Sea ... inflamed by Forever Amber - or was it the other way round?

For many years I visited the North to see my mother, who died two years ago. I generally read her papers – the Daily Express and Sunday Express. I think my mother and father took them almost from the day they married in 1934. So that's sixty seven years of sales.

If a mailing could get you customers who would stay customers for sixty seven years, $40,000 could be quite a good investment, even for something as cheap as a newspaper. (Most newspapers squander millions on slashing prices. Idiots.)

Of course the average subscriber does not stay with you for sixty years. Five, six or seven would be quite a reasonable length of time. And that applies not just to newspapers but to insurance policies, bank accounts, and club memberships – many things. And knowing this enables people to invest intelligently in successful sales letters and other direct messages.

Crazy accounting logic

Unfortunately many British publishers don’t grasp the truth. Their bean-counters class future subscriber revenue as ‘deferred income’. This, according to generally accepted accounting principles, is not a balance sheet asset. So although your subscribers constitute your ‘forward order book’ and deliver future profits, they are regarded as a liability, not an asset. The profit they will bring in is ignored. This seems crazy to me. What do you think?

Of course, in the US people are willing to pay far more for professional services than here - whether legal, medical, dental, financial - or even writing successful communications. No wonder they get better service. Better results, too. Last time I looked, subscriptions represented fewer than 10% of the total UK market; in the US, 81%.

Is this because the British are in some way different to the Americans ? I doubt it. We like the same films, the same jeans, the same junk food and, yes, the same magazines. Almost invariably what works in the US not only works here, but works better. I learned from having helped run an international direct marketing agency that customers around the world are much more similar than they may seem. As Confucius once put it "Men’s natures are alike; it is their habits that drive them far apart".

They have it right in the US

Publications like the Wall Street Journal, Cosmopolitan, Vogue and the Reader’s Digest succeed all over the world. In the United States they are doing the right thing by concentrating on subscriptions; and in the UK we would be well advised to follow suit. The Economist, a British publication, only started being truly successful when their New York publisher started copying US principles, which he then brought back here.

When you sell directly, thinking on the basis of lifetime customer value the mathematics of subscriptions marketing entirely change. Your gross margin is greater. So you can offer a better deal to people who commit to buy from you every week rather than just on some weeks.

Quite simply, you have more money for marketing. That means you can outspend your competitor. So those who fully grasp what we are discussing are far more likely to thrive than those who don’t.

As I mentioned earlier, a measure of the importance US publications place on acquiring and retaining subscribers is that so many of the best-paid, most successful freelance direct mail writers and art directors specialise in it. Despite what I have told you about the value of a customer and so forth you may still think they are overcharging. But this is just a matter of double standards. People think paying a million pounds or so for a TV commercial that may run a few months, is, if a little excessive, not completely unacceptable.

The world’s most successful advertisement

So how much money do you think you should pay for a mailing that might work for over thirty years? Because that is what one did for the Wall Street Journal. Just a simple two-page letter and a double-sided leaflet ... probably the most successful single advertisement ever. It has pulled at least one and a half billion dollars-worth of sales in the last thirty years.

Seven tips from me …

So apart from these musings, here are a few things I suggest you think about. Most are things I have suggested to various clients, especially the Spectator, the Daily Telegraph and Management Today. They have worked quite well when properly applied. The most important suggestion comes first.

1. Think, think, think about your database. You can sell a lot more to readers than paper; and you can reach them in ways other than through the publication.

2. Letters are more important than brochures; and the biggest fallacy is that they must be short. Long letters always outpull short ones making the same proposition. Usually by at least 50%.

3. Don’t let your production department manage subscription generation. They haven’t a clue.

4. Ask for subscriptions not once, not twice, but as many times as you can. Use little ads, bound-inserts, loose inserts – the lot.

5. Test incentives. They always produce more than they cost, unless they’re silly ideas. But you never know what will work best.

6. Put your incentives up front. Don’t bury them. They do not produce a lower class of reader as long as you have a reasonable trial period. Half-price subscriptions that run for at least eight months renew at exactly the same rate as full-price ones, according to US pundit Richard V. Benson.

7. Look intensively for likely lists – and adapt your copy to their nature. Smart targeting generally matters more than clever creative; and segmentation almost always pays.

… and three secrets from him

And finally, I asked Peter Hobday of Subscriptions Strategy to give me his three vital secrets.

1. Write benefit-led copy: most copy in subscriptions promotions does not give concrete examples of how the reader will benefit from the publication. Use a professional to create your copy. You have the best editors and the best advertisement managers. Why not have the best copywriters?

2. Create better offers: most subscription order forms look like a mortgage application. The longer the order form, the less the response. Be creative. Make it easy and exciting for the prospect to place an order and you'll see a leap in response.

3. Don't hold your marketing department back! Give your marketers freedom to invest more in subscriptions. You'll create a golden parachute to protect your publication from competition and recession.