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Follow the reader

One of the highlights of the 2005 PPA Subscriptions Conference was the keynote speech by Peter Phippen, in which he outlined how he saw the relationship between publisher and reader evolving in the years ahead, and the central role that subscription marketing and fulfilment will have in managing that relationship. Here is the text of Peter’s speech.

By Peter Phippen

Let me begin with a small confession. I’m not a direct marketing practitioner and claim no great expertise in the discipline being examined over the next few pages. There, I’ve said it and I feel much better.

Why read on? Well don’t flick the page just yet (particularly if you work in this field), because it is my belief that you, who work in the direct marketing of magazines, have the power to change the face of our industry over the next few years. I’d like to examine the role of subscription marketing and fulfilment within the publishing mix.

The UK newsstand

For as long as I can remember, there has been a rather arid debate raging about newsstand versus subs. The UK magazine market is unusual, from an international perspective, in having a better-developed newstrade market than subscription market. The fact that the UK market is so competitive at the newsstand has certainly helped to make it one of the most creative and dynamic in the world. The cost of entry is lower, leading to rapid innovation. If we’re honest, it has also led to a growing reliance on price promotion, an increase in pastiche publishing, short termism in marketing, the survival of those with the greatest distribution clout, and, quite often, an investment in trade marketing at the expense of brand building. And no one would deny that the retail landscape is changing rapidly, and the growing share of sale through grocery and grocery convenience, has impacted sales in both the high street and independents.

For publishers, this increasing dependency on grocery may well lead to increased costs - whether it’s the cost of securing space for a new launch on restricted ‘hard’ ranges, the cost of promotional space where demand outstrips supply, or where minimum rates on availability have the potential to push waste levels higher and higher. The picture is likely to be one of a rising cost of trading with retail and pressure on margins.

The case against subs

But those, who promote the virtues of newsstand competition, still have good reason to regard subscriptions as a decidedly unattractive channel to the UK market. They say that large discounts are at odds with strong brand values. High postage costs mean that subscriptions are expensive to fulfil. They say that subscribers are not considered, by advertisers, to be as active a purchaser as a retail buyer. Peeking at the US magazine market, where a reliance on heavy discounting has become a symptom of guaranteed rate base advertising sales, certainly can substantiate their arguments. Customers sometimes pay a mere fraction of the cover price, sometimes pay little heed at all to what they’re buying for that reason, and may not read thoroughly what they then receive. So, is a focus on subscriptions in the UK a sign of desperation rather than sound strategy on our part? I don’t think so.

Discounts. Yes, some subs are sold at a discount. Others are not. And, in any case, a subscription to a quality magazine can be a really big hit to anyone’s pocket. Radio Times is about £50 for a year, and the Economist about £75 for example. The revenue per copy sold is generally less than a copy sold at retail, but, at the right level, a discount is an exchange for the subscription contract rather than a reflection of the brand values. Many publishers launched their businesses from the positive cash flow that subscriptions deliver, cash that we obstinately refer to as liability.

Another arrow often aimed at subs, is the high costs of delivery and postage. Nobody would dispute the frustration at the lack of genuine competition in the British postal market. This is changing gradually. Since January of this year, the UK's mail market has been opened up for competition, and new operators licensed by Postcom. But, in any case, the cost obviously has to be measured against the true cost of newsstand distribution today, including the high levels of waste and the increasing pressures at retail.

Lastly is the usually self-serving accusation by some foolish publishers that the subscriber isn’t as ‘active’ a purchaser. I would, instead, contrast the level of commitment and conviction that a reader has with a publication that she reads for perhaps 25 minutes on the train and then throws away, with the relationship that he or she has with that eagerly awaited friend through the letter box, referred to again and again, written to, shared, treasured and stored. The subscriber relationship highlights one of the great strengths of magazines, and that some in our own industry belittle it is a crying shame.

So, does the message of this article boil down to ‘move marketing money from the newsstand to subs and then we can off-set the power of the grocers, stimulate growth within the industry, and enjoy publishing nirvana’?

No. This isn’t where the debate should be at all. Something more important is going on, which requires a response.

Changing consumption habits

The concept of publishers controlling the format and timing of content consumption will fast become alien to consumers. In general, we form our media consumption habits in our youth, and we largely stick with them through our adult lives. So, the habits of today’s youth market will become mainstream within 10 years.

They expect to control how they receive it, when they receive it and the pace at which it is consumed. They also want to form a two-way dialogue and form communities with like-minded people. The good news is that this can be an environment in which magazine publishers will excel – but only if we re-invent ourselves.

Publishers have largely got to grips with the fact that they have become distributors of content rather than of magazines, but, so far, this activity has been pretty clunky. In banking, for instance, adding ATMs, internet banking and large call centres were all designed to remove the need for expensive branches situated in prime retail sites. Customers quickly embraced the new channels, and responded to the convenience factor by using them more often. However, it was only when banks adopted classic database and retail techniques, together with appropriate staff policies, did they manage to deliver growth from their investments in new channels. Similarly, publishers have the opportunity to achieve growth from flexible content delivery married with customer insight – with the emphasis on developing distinctive capabilities.

How others do it

In my view, many magazine companies are still like babes in the wood – innocent when it comes to customer insight, in comparison with other industries. And, some in our industry don’t even recognise it. When I call Sky, they know who I am, what I receive immediately, and will make a change to my requirements instantaneously, re-coding the card in my Skybox. When I go on, they store a list of my regular purchases, so I don’t have to re-enter them, and if something I want is out of stock, they suggest an alternative likely to fit with the profile of my buying habits. When I call First Direct, at any time of night or day, they give me swift, excellent personal service. I can download music to my ipod in single track segments, and, again, I’m recommended new releases that I’m likely to enjoy. Very soon, within months, I will be downloading TV through intelligent search engines.

But, what happens when someone calls to subscribe to one of our magazines? We claim not to know them, and we take their details, even though they’re already subscribing to other magazines on our database, published by other companies. We say that they can receive the issue after next. It will arrive in 40 days’ time. And then they will receive it in monthly instalments thereafter, and they will receive the same product as everyone else. We ask them if there is anything else we can do to help them, instead of suggesting any ways in which we might. And we don’t follow up. Short, cheap, and dull.

Revolution required

We need nothing short of a revolution in our industry, if we are to be among the shapers of the future, and not the bystanders. This is a challenge that needs to be picked up by both publishers and their subscription fulfilment companies.

For a moment, we had a vital personal contact with an important person … someone wanting to be our customer. And, contrary to the misconceptions of some CEOs, this has the potential to be a high value contact. The value to advertisers of these customers raises the revenue calculation straight away. For BBC Worldwide, that person may well subscribe to others of our magazines. They buy our books, attend our exhibitions, and visit our websites. They may subscribe for a lifetime. And they are a license fee payer and expect certain values in their dealings with us.

That final corporate responsibility point is interesting … this may be particularly relevant to the BBC today, but could be equally relevant to Time Warner, or Emap or Hearst if those companies wished it to be.

One day, we will know who they are instantly. We will provide them with their desired magazine immediately. We will provide past content, if they wish, and we will provide them future content tailored to their needs, and in the format and at the frequency they want. We will invite them to provide us with insight and feedback. And we will invite them to join us at gatherings of like-minded people. We will invite them to share content.

Companies, across every sector, have spent millions trying to understand and influence customer behaviour, to hold on to them and to encourage them to spend more. When loyalty is so elusive and the customer relationship so complex, the traditional metrics of satisfaction and defection are not enough. I believe that, as an industry, our capabilities in the skills of direct selling are not yet distinctive enough to deliver growth.

You, who work in the industry, know this already. Pass it on.

What needs to be done

* Create a database that captures a single view of your customers.
* Take great care of, and invest in, any direct contact you have with your customers. (It’s part of the overall relationship you have with them and the value you provide.)
* Ensure knowledge of customer and prospect behaviour.
* Staff will need to be experts in business partnerships, learning to select and get the best from delivery, promotional and product partners, working with them to combine and develop joint capabilities.
* However, it’s not just about data, new delivery channels and partnering; it’s also about great ideas. Our customers don’t just want another standard early-bird discount, even if it is sent to their mobile phone. They want to be teased, surprised and delighted by how and why we ask them to spend their money and time with us.