For consumer magazine publishers, the skies are full of thunderclouds and visibility is closing in. The old advertising and circulation models are fast becoming obsolescent in the face of a digital revolution that is exacerbated by the deepest economic depression ever experienced. The irony is that demand for media entertainment is increasing. However, the only publishers who will survive this difficult environment will be those who have created new online advertising models that offer ad-rate integrity and revised circulation models that deliver premium audiences at much lower cost than at present. The development of the former and the one million dollar question of how publishers charge for online content and advertising is a generic concern, but it will not be solved without the precursor of a circulation model which optimises the content offer via the smartest routes to market. In other words, unless publishers have a cost-efficient multi-platform circulation strategy in place, they needn't bother about any new advertising models because the right delivery vehicle isn't available.
The trouble with newstrade
The newstrade model continues to frustrate publishers with its endemic features:
* Unsold levels continue to rise inexorably in the face of title over-population and over-worked allocation systems. It is a simple task for publishers to calculate their annual newstrade waste bill but always scary when the bottom line number emerges. Moreover, print and paper prices have been hammered down by publishers for years, but there can be no guarantees that this happy state (for publishers) will continue in future given increasingly stringent environmental regenerative demands.
* "Trade marketing" cost has been the one element in the newstrade model which every consumer publisher knows will rise every year. The only unknown is the annual percentage cost increase levied by the retail groups. The grocers now have a vice-like grip on large-circulation titles by virtue of sheer footfall volume and specialist magazine retailers control the future of smaller titles by virtue of their market share that often approaches 50% of their total.
* Retail range reviews have become a regular feature of the specialist publisher's environment, with the inevitable need to better last year's promotional spend in order to make the cut and stay on the shelves.
* In-store promotions as a genre have been plagued by the issue of non-compliance, to a level where their cost / benefit is compromised and publishers feel short-changed.
Taking control
Lurking behind this leakage of a large element of the investment cost along the chain, there is a far more fundamental issue at stake for all publishers of specialist consumer titles. It is quite simply one of control over one's destiny, or, given the foregoing, a lack of it. Lack of control over consistency of title exposure, lack of control over consistency of copies purchased and, most importantly, lack of control over any ability to talk directly with the title's readership and sell them additional goods and services. How then, to change matters and regain an element of control over the marketing chain which offers more financial security and an opportunity to know each reader personally?
The answer lies in a controlled shift from newstrade sale to online / subscriber marketing. The benefits conferred by online / subscription readers are well documented. Apart from the up-front cash-flow (increasingly important in these times), every copy allocated to this route to market is accounted for, there is a consistency of sale and you have a live customer whose lifetime value lies in your hands. The newsstand will always offer a launch environment, but that is increasingly the preserve of larger publishers with deeper pockets who can afford the launch marketing costs and the inevitable high initial copy wastage. The growth of online shopping during the past two years has been extraordinary and is the smart way to go.
Review process
Here are just a few pointers to consider when adjusting your circulation balance:
* Re-examine your current newsstand performance in detail. Look at overall sale efficiency and then drill down to examine regional / wholesale / retail group variation. If you were re-launching your magazine, what comparative titles would you use in the profile? It is probably the case that every sector has had more entrants since your original launch, so an overall review is overdue in any case.
* Decide what level of copy waste your newstrade publishing model can sustain and drive this figure with your distributor.
* Review the cost / benefit of your last year's retail marketing spend and the retention it generated.
* Your publication is the best weapon in your armoury. Always include an order form in each newsstand copy.
* Be creative in thinking of alternative premiums for your readership and test them. This isn't just about reduced pricing but a real opportunity to see what turns your readers on.
Over the past two years, we have been working closely with a number of our specialist consumer clients, helping them develop circulation marketing strategies that exploit fully the revenue generating potential that their customer base offers. What has become evident is that the publishers who succeed are those that are prepared to take a long hard look at their business models, in effect throwing away the old rule book and rebuilding from the bottom up.
Direct sales opportunity
Specialist publishers are for the most part in that wonderful position of having a genuinely loyal and committed customer base. Although newsstand sales volumes may be modest they are usually pretty steady, but they represent only the tip of the iceberg. The real opportunity comes when publishers are able to sell directly to all segments of their customer and prospect marketplace.
Significant and sustainable revenue gains are being made by those publishers that recognise and invest in developing a detailed and meaningful understanding, both of their current customers as well as their target prospects. The key that unlocks the potential is, not surprisingly, in the data. By bringing together all relevant customer and prospect data sources – this will include competition entrants, reader offer responders, enquirers, past purchasers, as well as affinity partner lists, exhibition attendees, online registrants, active and lapsed subscribers – into a single customer view database, publishers are for the first time being able to get a real insight into the structure, profitability and characteristics of their marketplace.
With the right tools, publishers are now analysing, segmenting and ranking their customers and prospects. For one of our specialist consumer clients, this has resulted in a twofold increase in response rates to new acquisition direct mail campaigns. Cost per acquisition has dropped by over thirty percent averaged across all channels. Also, by being able to refine offers to specific customer segments, renewal rates have increased by just under five per cent.
Another publisher who has a portfolio of hobbyist titles and events has taken the insights learnt from profiling his database to reconfigure the company’s product offering. Building on the strength of the print magazine brand and reputation, the company has accelerated its strategy of expanding its product and service portfolio, primarily through digital and online channels, but also launching some additional niche events and print newsletters. The intelligence it now has access to through the database has also enabled the company to move into generating income and profits, at very low risk, from brand extension activities. By carefully matching its customer profiles and propensity to purchase characteristics, the publisher has been able to identify and strike cooperative marketing alliances with direct merchant companies with similar profiles.
By white labelling goods and taking a margin on products sold, the publisher is maximising the value of his print brands and creating a multi-channel, multi-product business. With a broader base of paid-for products and services, whether subscription, pay per view or outright purchase, the publisher is increasing both the number of customers he is serving as well as the overall value per customer.
Getting started
Most importantly, getting the work done to enable publishers to re-engineer their circulation revenues can be achieved quickly and cost effectively. In less than three months publishers can be fully operational, going from initial database design and build through to rolling out direct marketing campaigns. Key factors to consider include:
* Bring together all appropriate customer and prospect data sources from across your business. Make sure that all the data is clean, accurate and usable (be mindful of data privacy issues).
* Build a single customer view database and then analyse it to death so that you fully understand the outputs – both the good news and the bad.
* Be prepared to invest in acquiring more data if gaps need filling.
* Develop a marketing communications strategy that addresses both product specific requirements, such as magazine subscription sales, as well as those of each channel, such as online.
* Remember to measure total customer lifetime value, across all products and services purchased, as well as single product based lifetime value calculations. Customer profiles for separate groups may well show telling differences.
* Carefully plan your spend on subscription marketing; getting the data sorted out first is the best way of ensuring that your money will get the best possible return.
With the relentless pressures and increased costs of selling through the newstrade unlikely to diminish, consumer specialist publishers should move quickly to invest more time and resources into exploiting the many opportunities direct selling offers them. All businesses are moving inexorably towards greater online sales, so publishers, if they act now, will go a long way to ensuring long term success and financial stability for their businesses.
