Managing your subscribers and direct sales customers

Subscriptions fulfilment is rarely considered to be a sexy subject. For marketers, it is often the restraining factor on their otherwise award-winning, innovative subs recruitment idea, and, for most other people within the organisation, it only appears on their radar when a subscriber manages to find their phone number or email address to register the fact that they have not received their latest copy.

Sadly, I have to confess that I do find the subject quite fascinating, not because I enjoy dealing with the general public or anything masochistic like that, but because I am intrigued by end to end sales process and the different perspectives that publishers have on their direct customers.

So, why do some publishers invest in setting up an in-house fulfilment operation and others outsource to a bureau?

Company culture

The culture of a business often decides the starting position; being in control of all aspects of the business vs keeping the operation as light of overhead as possible.

Managing the customer relationship, first hand, can often provide valuable feedback about what readers think of a publication, particularly with a start-up. However, this information is only valuable if it gets to the editor, and more often than not, fulfilment resides with the finance department, because the cash has to be processed. Subscribers can soon become an unwelcome interruption rather than an information source.

Cost control is an important issue for any business and, for an investment of a couple of thousand pounds it is now possible to buy a fully functional subscriptions fulfilment package that can handle all aspects of sales order processing and activity reporting. For example, Country Publications manages 45,000 customers in-house with the aid of R.E.D Computing software, three full time employees to process orders, and an army of temps to cover the Christmas period. Direct marketing manager Simon Howarth confirmed that ‘Country Publications has successfully managed its subscribers in-house for many years from an extremely low direct cost base, however I have invested a considerable amount of my time getting close to the data and we have to think hard about response handling when planning big acquisition promotions.’ What is difficult to evaluate, of course, is the opportunity cost of time detracted from marketing activity.

Specialist skills

For Origin Publishing, it was the acquisition of Focus magazine that led them to outsource their subscriptions fulfilment. Marketing manager Michaela Sillick confirmed that ‘Origin could manage up to about 30,000 subscribers successfully in-house, but beyond that, the business needed to make major investments in telephony and specialist personnel to streamline business processes.’

Origin publishes a range of hobbyist titles with an enthusiastic readership, who respond well to gifts and merchandise offers. These types of readers are notoriously demanding upon resource; they’ll phone if the issue is a day late, for help with a stitching pattern, or just for a chat! These phone calls, of course, come in waves rather than being helpfully spread through the month.

Catalyst for change

Neither in-house software nor bureau services are a spontaneous purchase. Few circulation managers wake up one morning and decide that they are in the mood to buy new software, outsource or swap bureaux!

Catalysts for change include: new banking procedures, complex trial offers that the current system can’t handle, jammed business phone lines, the resignation of the only person who knew how to work the system, or of the account manager with whom you have built a rapport.

Publishers rarely want to invest in subscriptions infrastructure when the alternative is to invest in a new or existing publication. The reward is less visible than a new product, or worse still, non-existent. Upgrades will be needed simply to fulfil the orders that current marketing activity has already generated, and no publisher enjoys spending money with nothing tangible to show for it.

My theory, so far, has therefore led me to believe that, if you have twenty thousand subscribers or less, you can run a cost-effective fulfilment operation in-house. If you only measure direct costs you will be quids in, but if you add general IT support, banking and overhead then the cost advantage may become more marginal.

Fast growth

My caveat to that is, if you want to grow your subs file quickly; because to achieve such growth you will need to achieve high responses from marketing activities and need to interrogate the data thoroughly. My experience of in-house operations is that they are always six months behind where you need to be; for example you can only justify that extra body once your lost call rate is too high, when you really needed the resource before you spent the cash generating the call that never got answered.

At a bureau, resource headaches belong to them, and, as long as you’ve told them what you’re up to, your marketing spend will not be wasted, and, as long as your bureau has customers who are at least as sophisticated, or ideally more so, than you, then they’ll be able to cope with most reporting requirements.

Strategic choice

So, what’s life like at the other end of the scale? Julian Thorne has recently moved from Dennis Publishing to Saga Publishing, where he is now responsible for a file of over 600,000 customers and the smooth running of the in-house fulfilment department. With a file that size, Saga has obviously been able to invest in the necessary infrastructure cost effectively. But is cost the main driver behind its in-house strategy? According to Julian, ‘the financial benefits of fulfilling customer transactions in-house are real, but so is the management time required to do it effectively. The strategic benefit for Saga is its ability to integrate customer data with other internal data sources and the exploitation of cross selling opportunities that emerge from such data access.’

Access to data

The issue of data accessibility is echoed in a recent article about using customer data to manage retention by Professor Merlin Stone. He said ‘visualisation translates insight into action.’ After surveying over 50 blue chip companies, he concluded that data visualisation is widely regarded as one of the critical steps to ensuring that customer data is used by line marketing managers who are not data experts.’

Data access is a recurring theme amongst subscriptions marketers. Ranjinder Lall, marketing director for Highbury House Communications, has recently outsourced her subscriptions activities and, in so doing, improved the quality of order processing and management reporting. Ranj stressed that ‘as well as looking for cost saving opportunities, my main objective is to get my data in one place and ensure that I have easy and low cost access to it.’

Managing your customer

In the world of retail and financial services, companies recognise the fact that consumers will use their range of distribution channels (retail, call centre, on-line) as and when appropriate to the customer’s current state and appropriateness of the transaction. Topshop customers may, for example, browse on-line, purchase at retail but register a complaint by phone. Whereas banking customers may get cash from an ATM, pay bills on-line, take a loan out by phone and use the branch to make a complaint or deal with a complex query. Managing the efficiency of each channel is an essential element of customer profitability.

Most bureaux can provide ready access to transactional data, so, as long as all sales are handled by your bureau, it is possible to establish the lifetime value of your direct sales customers and analyse them by recency, frequency and by channel. But, if you want to add softer metrics such as web site visitors or SMS responses, you will probably have to build your own integration solution from a range of data feeds.

Content providers

As magazine publishers become content providers rather than producers of a paper product, it is likely that you will need greater insight into customer activity, and if the traditional subscriptions bureau can work with publishers to offer a solution, their value as strategic partners will grow immensely.

In conclusion

I believe that, if you have up to around 20,000 direct customers and you are prepared to invest management time and effort in integrating the process into your business model rather than bolting it on the end, you can gain real insight into your customer base and do it cost effectively in-house. However, if you are not prepared to embrace direct sales into your business strategy, then let the bureaux take the strain.

Handling over 20,000 customers in-house and you really do need a robust infrastructure and experienced staff to deliver it or your marketing may become compromised. This size of business will be attractive to any subscriptions bureau so you should be able to negotiate a deal that makes financial sense.

If you have over 200,000 customers, you may well be able to deliver efficiency in-house from scale, however such a choice would have to be strategic rather than tactical and be worthy of constant IT investment; you never get to the end of the shopping list. You should also talk to the bureaux and find out what their development strategies are and establish what synergy they have with yours.

Strategic synergy

Whatever your choice, there is no doubt that selling content is far more complex than selling a subscription to a paper product, so both software vendors and subs bureaux will need to stay relevant to the challenges facing publishers for their own businesses to survive, so take the time to consult with your short-list of suppliers and ensure that their future plans match your business strategy.