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Is permission a circulation issue?

With the help of their own recent research, Opt-4’s Rosemary Smith explores the role of circulation professionals in obtaining and managing marketing permissions.

By Rosemary Smith

Most circulation professionals would agree that they need another set of corporate targets and auditable processes like a hole in the head. So, when the board of directors finally wakes up to the value of marketing permissions, will the buck stop in circulation or with someone else?

Very few directors, it seems, are alive to the fact that getting – and keeping – reader permissions, in a way that is compliant with data protection legislation, is actually going to affect profitability in the not too distant future.

And, hand on heart, how many publishers actively involved in collecting and using personal information, can say they are doing anything more than paying lip service to permission marketing?

Research shows opt-out rates are increasing

Opt-4’s research, Permission Marketing Tunnel Vision, recently revealed that, whilst opt-outs are believed to be growing, many companies are not even tracking this crucial evidence of brand disaffection.

In depth interviews with a cross section of major marketers – including top UK publishers - showed that where opt-out rates were measured, 30% to 50% refusal was not unusual. Opt-outs of third party messages – putting the readers’ details beyond the pale for lucrative list rental deals – were reportedly even higher.

One of the most extraordinary findings of the research was how few companies seemed to know how many customers and prospects were opting out of receiving their marketing communications. Most could provide an opinion on whether opt-out rates were changing, but few were able to provide precise information on how many people had asked not to be contacted, or, indeed, any estimate of the financial consequence of this.

Perhaps the reason why companies are not overly concerned at present may be because they are simply not aware of their opt-out rates.

Where rates were tracked, some respondents perceived opt-outs to be acceptably low, especially from communications to existing customers. One online catalogue company, typically emailing 20,000 registered customers at a time, reported only 50 unsubscribes per campaign. Another loyalty programme provider said they would usually get just ‘a few dozen’ from an email campaign to over 10,000 addresses. A company which handles third party email campaigns said they were pleased their typical opt-out rate was only 1% per campaign. Clearly, the cumulative attrition rate could quickly build up if emails are sent frequently.

By contrast, publishers seemed to be experiencing growing opt-outs. Partly, this seems to be due to the increasing use of e-commerce as a channel to promote subscriptions and controlled circulation registration. One publisher noted that permission rates had worsened since using email for acquisition, but the cost savings far outweighed any lost revenue.

A significant permission ‘pain point’ was the impact of the electronic communications regulations on the sale of third party email data. Many consumer publishers did not have the required opt-in permissions and attempts to entice opt-ins, including incentives, seem to have little impact. In one publisher’s case, it proved very difficult to persuade consumers about the benefits of giving their permissions, resulting in only 0.5% opt-in and £500,000 per year in lost list rental sales.

There was, however, a difference between consumer and business permission rates, partly because opt-out can still be used in the corporate arena, even for emails from third parties. Where publishers had decided to adopt positive consent, some reported a significant difference between opt-in for messages from the publisher itself and for those from third parties – broadly an 80/20 rule seems to apply, resulting in a much smaller universe for email list rental.

Testing permission gathering

Despite this decrease in permission, previous research of ours showed that publishers were not making the most of their opportunities to test different permission statements for opt-in efficacy. The Opt-out Fallout survey tested reactions to differently worded statements, and revealed that the way permissions are sought can have a huge impact.

Data protection statements are often an afterthought on circulation promotions, and heavy handed legalistic wordings are the least likely to gain consent. Few publishers use the tone of voice of the magazine in their statements, definitely a missed trick as the survey identified empathy with a brand as the single most important factor in gaining permission to market.

Inbound call centres can also be responsible for high opt-out rates if permission statements are not carefully scripted. It is very easy for a negative option to turn into an opt-in when offered in a live call. Mystery shopping sometimes reveals that operators are encouraging opt-out, and few publishers target their call centres and bureaux on achieving high permission levels.

Carrot or stick

One reason for compliance apathy may be the perception of weak enforcement from the Office of the Information Commissioner (ICO). Whilst the ICO has made it clear that more enforcement is on the cards, the powers available are cumbersome to say the least.

A respondent to the research commented that the Information Commissioner had "completely dropped off the radar." In line with the ICO’s policy of selective enforcement, many publishers felt it was unlikely that they would come under any scrutiny with ‘rogue operators’ being targeted first.

Whilst B2B legislation might be deemed less restrictive, data protection does apply to individual employee data. However, respondents in the B2B space tended to be more complacent than those marketing to consumers.

Impact on circulation growth

One inevitable side effect of increasing opt-out (especially of third party contact) is reducing list universes which can be used for circulation promotion.

An international publisher said that, as a result of falling third party list sizes, they were having to use more names from less responsive lists in order to maintain mailing volumes. The result, unsurprisingly, was less acquisition and reduced return on investment.

Data protection requirements have the capacity to be severely limiting to cross and up-sell opportunities. Publishers who do not get the necessary consents are unable to promote other titles, and have to source external names at a considerable cost.

There was little evidence that the increased cost this represents is being factored into customer value calculations for the long term. Publishers are already redeploying budgets as a result of opt-outs (or lack of opt-ins) but this is a largely reactive tactic.

Is the real threat reader disengagement?

Some publishers were already experiencing the impact of greater awareness amongst consumers of data protection rules, and an increase in 'where did you get my name?' enquiries. However, more serious complaints about data use were less common.

The massive sign up to the Telephone Preference Service is an indicator of negative feeling about direct marketing in general, but messages from known magazine brands can be surprisingly well received. One publisher found 34% of its customers were registered, but were receptive to telemarketing from the title, because they felt they had a relationship and had specifically given their permission.

The buck stops in circulation

So, will all of this come home to roost in the circulation department? Clearly, most circulation managers have the job of managing reader records. The additional requirements to manage evidence of permissions, possibly by title and by channel, will mean more complex database structures. Selections for cross selling campaigns will need to be made net of objectors, and every publisher now needs to maintain their own in-house suppression file.

Now might be the time to embark on an audit of the permissions which have been obtained, to identify any legacy data which needs to be re-contacted with appropriate requests for consent. Whilst there is no official requirement to retain physical proof of permissions, there is a need to be able to say how a reader’s details were collected and how permissions were sought.

Permission = Profit

The capitalisation of reader databases is now relatively common, but customer details without permission for future marketing have limited value. Even so, boardroom recognition of permission issues remains poor.

Very few researched companies seemed to have an accurate idea of how fast customer and prospect attitudes to marketing communications are changing and, most importantly, what the future financial ramifications of any change might be.

We are currently researching measurement of lifetime value by publishers, and the impact that permission has on that value. Early results suggest that readers recruited with permission can be worth nearly three times as much as those who do not give consent.

Circulation professionals, whether they like it or not, are going to be at the forefront when it comes to planning and executing an active (and profitable) permission strategy. Getting ahead of the game on this issue may be a real differentiator for publishers in the future.

Email David Milnes for a full copy of the research Permission Marketing Tunnel Vision.