US B-to-B’s: Shifting Strategies, Shifting Circulation Needs

While UK and US business-to-business publishers—these days, perhaps more accurately termed "B-to-B content providers"—certainly have some differences, many of their dynamics and challenges run parallel. At InCirculation’s request, here’s a summary of some key trends in the US B-to-B market as they pertain to shaping circulation management/audience development strategies and practices.

First, a look at macro trends underlying strategic shifts in circulation and all disciplines within the B-to-B equation:

Economics driving restructuring, new strategic emphases

After robust double-digit advertising revenue gains in the late 90’s, U.S. B-to-B’s, with their predominantly controlled-circulation business model, have been even more affected than consumer publishers by the shaky economy of recent years. (B-to-B’s posted ad revenue declines of approximately 18 percent and 13 percent in 2001 and 2002, respectively.)

In response, B-to-B’s have been aggressively overhauling their operations and improving cost efficiencies in all areas, including circulation. At the same time, they have been developing new business models based on being brand-oriented content providers. As a result, they are now positioned to concentrate on growth and capitalize on new opportunities arising from the reviving economy. (B-to-B ad spend grew by just 1 percent in 2003, but there are projections of modest growth of 2 to 4 percent for 2004--including an upswing in the critical tech sector, as well as continued growth in the healthcare, automotive and construction markets.)

Brand extension through database mining, CRM

The economic lessons of recent years have made B-to-B’s more determined than ever to broaden their revenue bases beyond display advertising and (where existent) paid subscriptions. To develop information offerings that are ever more tailored and specialized in both editorial and advertising content, B-to-B’s are focusing on developing more sophisticated audience profiles and customer relationship capabilities. Database mining will grow in importance as a means of determining which information is needed by specific B-to-B audience segments, and which media platforms and delivery frequencies are preferred by various segments.

Content and media integration

Such integration has become more critical than ever to successful development of new revenue streams. While progress has been made, B-to-B’s continue to grapple with how best to serve audience and advertiser needs across all media platforms (print, digital versions, Web sites, email newsletters, face-to-face events, etc.). Segmenting and tailoring content and platforms while maximizing revenue and minimizing cannibalization continues to be challenging, in part because advertisers and ad agencies are still sorting out models for buying integrated media. But it’s clear that advertisers will increasingly demand that B-to-B’s provide them with total solutions, as opposed to isolated ad-page buys, Web site buys, trade show buys, and so forth.

More stringent ROI measurement

Developing more sophisticated measures of return on investment for clients, as well as for their own operations, is a key challenge for B-to-B’s. There will be growing emphasis on effective use of research—and again, database mining—to document advertising/marketing ROI (more data on the relationship between the reader and content, as well as audience usage and absorption of advertising content). There will also be more partnering with clients in measuring advertising effectiveness. In line with content integration, this emphasis will span all ad-supported media, not just print.

Similarly, all indicators point to increasing demand for more detailed circulation reporting and auditing, reflecting more detailed demographics—as well as to greater demand for integrated, cross-media circulation statements and audits. (U.S. B-to-B’s are also becoming more responsive to growing exhibitor demands for independent audits of trade show attendance and attendee demographic profiles.)

From an internal perspective, B-to-B’s will need to continually evaluate the ROI of their own content-distribution models. Will the mix of advertising versus reader-generated revenues shift for certain forms of distribution? Predominantly controlled-circulation publishers will be looking to charge for information access in some platforms and niches, and paid-circulation publishers will seek to identify and deliver content that can command premium subscription or access prices. At the same time, B-to-B’s are now employing stringent metrics to evaluate the cost-effectiveness not just of overall circulation levels, but each source. For instance, at one major company, metrics include financial contribution per qualified subscriber, advertising page yield per qualified subscriber, promotion cost per qualified subscriber and promotion cost per one-year direct request.

The potential of digital distribution

In the past few years, evolving, more reader-friendly software and hardware and growing Internet use have made the creation and electronic distribution of digital versions (and/or independent digital products) a reality for a growing number of B-to-B publishers. And with Adobe and Microsoft now making major commitments to the technology, digital magazines will become increasingly pervasive.

Beyond significant distribution and circulation cost advantages, digital publications may potentially yield real benefits for advertisers and publishers alike. For instance, some believe that digital may help publishers and advertisers cost-effectively reach new segments of targeted audiences (such as international and/or tech-oriented younger professionals) and—perhaps—enhance involvement in both editorial and advertising content through capabilities such as ready access to archives, hyperlinks to advertiser sites and creative with audio-visual components.

Assessment of this new medium, including its potential strengths and weaknesses as an advertising vehicle, is in its infancy stage. Few publishers as yet have digital components exceeding 10 percent of their total qualified circulations, and digital versions are still barely on the radar screen as far as many advertisers and media buyers are concerned.

Publishers and their advertising partners will need to collaborate to provide an adequate environment for determining the true capabilities and value of digital. (For a start, advertising creative will need to be more dynamic.) Also, this technology allows for greater measurement, and is therefore "ROI-ready." Media buyers, publishers and suppliers on BPA International’s Digital Task Force ultimately agreed that, in addition to clear opt-in, verification of email delivery alerts--rather than actual downloads by subscribers--should be the auditing standard, at least for the present. This is intended to enable publishers to develop and experiment with this new medium. However, reporting and auditing standards will continue to be reevaluated as the medium evolves.

How should digital versions be integrated into publishers’ traditional business models? This of course depends in large part on how well digital ultimately serves audience and advertiser needs. Will the traditional cost-per-thousand based ad buy change? The dynamics will become clearer over the next few years.

What are the circulation implications of these larger trends? While circulators of course continue to test messages and positioning of various types of efforts within the acquisition and renewal cycles, and otherwise hone overall and by-source cost-efficiencies, new "breakthrough" tactics are few and far between. Instead, there is a greater focus on strategic synergies that can move the needle in significant ways. Let’s take a closer look:

Demand for more sophisticated circulation expertise

The need for collecting and managing data is a common element in most of the trends/initiatives highlighted above. Next to the quality and timeliness of information, knowledge of the customer is the most critical key to profitable growth for B-to-B’s. This, in turn, means that there will be greater demand than ever for sophisticated circulators (increasingly termed "audience developers" within B-to-B’s, to reflect audience integration across media). Chief circulators will not only need to understand the publishing model as a whole, but glean ever-deeper insights into customers and market segments and effectively convey these insights to management, ad sales and editorial. Circulators who can participate as equals in the strategic process, and collaborate closely with all departments, will not lack for career opportunities, even in a consolidated B-to-B environment.

On a tactical basis, honing audience profiles and delivering ever more targeted segments to advertisers within the context of constantly shifting market dynamics is driving continual reassessment of information-gathering vehicles, including the questions asked in controlled circulation qualification and requalification forms.

At the same time, as advertisers—particularly endemic advertisers—increasingly do their own media buying, circulators need to have the skills to help convey the value of publishers’ investments in quality circulation, market coverage and audience profiling. Those who can not only help ad sales understand and convey this value, but also go out with the team and help educate advertisers, will forward their careers.

Publishers’ need to learn how to manage circulation within a dual print/digital environment also creates new demands on circulation professionals. Circulators are working hand-in-glove with management to continually evaluate and manage desired levels of digital. Just as important, they are monitoring actual downloads by readers and experimenting with various techniques to increase downloads. They are testing various messages used in email delivery alerts, and in some cases probing subscribers as to why they have not downloaded recent issues—or even informing them that their digital version will have to be stopped if they do not begin downloading. However, renewal rates for digital seem to be quite good, and renewal by email clearly offers major cost advantages.

Source management and electronic circulation marketing

As the cost-efficiency of direct mail, in particular, has declined in recent years, and market universes have shrunk due to title and company foldings and reductions in work force, both paid and controlled business publications have been increasingly challenged by the rising costs of circulation acquisition and maintenance. Hence, the more stringent circulation assessment metrics mentioned earlier.

According to the American Business Media Circulation Committee’s latest analysis of source data reported on B-to-B circulation statements (Paragraph 3B), written sources’ contribution has declined to 29 percent, from 64 percent in 1995. (In addition, an unsettling increase in broadcast-fax related lawsuits against B-to-B’s lodged by attorneys looking to win judgments by capitalizing on U.S. regulations is a growing challenge for that portion of the written source.)

While in some respects posing competitive challenges for traditional B-to-B publishers, the Internet obviously also has provided significant opportunities for more cost-effective circulation acquisition and requalifications/renewals.

The Internet continues to gain as a circulation source. In fact, in 2003, subscriptions generated and/or requalifed through the Web (largely driven by email efforts with links to site subscription forms) accounted for fully 15.2 percent of all direct request circulation—up from 10.9 percent in 2002 and 1.3 percent in 1998, the ABM analysis shows.

Circulators have become adept at electronic cross-marketing to in-house databases (subscribers to sister titles and email newsletters, site registrants, trade show attendees, etc). They are also actively involved in efforts to partner with advertisers for email list access and site co-registration or linking opportunities.

Publishers will continue their efforts to increase the use of the Internet source as a cost controller and subscriber-friendly contact medium, with an eye to non-tech markets becoming more accessible through and receptive to email/Web efforts as time goes by. But they will also have to employ even more sophisticated programs and safeguards to ensure that their companies do not run afoul of the new U.S. federal anti-spam ("Can Spam") law. The ever more critical need for careful management of email opt-outs and distribution practices also has significant ramifications for the growing revenue stream of email list rentals, of course. These email considerations add up to more reasons for a greater demand for savvy circulation professionals.

Telemarketing has also flourished--accounting for 27.9 percent of direct request last year, compared to 8.2 percent in 1995--in part because of the declining efficiency of direct mail and other traditional sources, in part because of technology that has enabled telemarketers to control costs. Once too costly to be used except as a last-resort effort just prior to statement filing, telemarketing is now often used early in the requal series. Particularly when the subscription was acquired by phone, calling as a first effort may now be most cost-effective. (To improve costs even further, some U.S. B-to-B’s have taken to outsourcing telemarketing to countries with lower labor costs, such as India, although some circulators are concerned about the impact on circulation quality over time.)

In short, the challenges of responding to economic trends, new media, and changing reader and advertiser expectations have created a "whole new ballgame" for B-to-B’s and the professionals who manage their circulation.