What price loyalty? Building long-term profitable relationships

For any business built on a subscription or membership model, there are four distinct stages in the relationship:

Acquisition > Retention > Development > Win Back

Acquisition: Acquiring your subscriber through an ever more sophisticated and integrated series of multi-channel campaigns (for example: direct mail, telemarketing, online advertising, online search, email, off-the-page, inserts).
Retention: Ensuring successful renewal, again through utilising all the above marketing channels and through providing exemplary customer service. This clearly includes timely delivery, speedy resolution of any customer service issues and acknowledgement of the relationship.
Development: Getting more value out of the relationship – ie. deepening the relationship across different brands, using marketing efforts to convince your subscriber to be your advocate – for example, introducing a friend / family member or buying another subscription as a gift, attending a magazine show or signing up to an online newsletter.
Win Back: Encouraging lapsed customers to come back to you through a well-timed and targeted direct marketing communication.

Management data tells me a number of facts about cost per response, return on investment, analysis of the relevant performance of different marketing channels and the specifics of retention rates. Analysis of this data makes it clear that for publishers who either have, or aspire to, sizable subscription files, retaining customers is the key to profitable growth.

The gold standard of success is the length and depth of the relationship: successfully building, leveraging and cementing repeat interaction and transactions.

So what happens in practice?

For a business built around lifetime value modeling, it is surprising to note that the amount of time spent by many publishers on retention, development and win-back is secondary to time spent on acquisition.

Publishers often also face renewal challenges in relation to "introductory offers" which often give existing subscribers the impression that they get the worst deal.

This perception and its consequences were recently highlighted in an excellent Brandlab research piece written for the PPA, sponsored by Royal Mail.

According to the research, 41% of magazine buyers have simply never thought about subscribing to a magazine and so the role of the introductory offer has a very valid place to tempt people to experience the joys of subscribing. It does, however, present significant challenges.

The Brandlab research showed that, although more and more publishers are scaling up investment in growing subscriptions, the average length of a subscription is getting shorter.

There were also clear – and worrying - indications from the magazine buying public that subscribers do not feel special or agree that they are rewarded for their loyalty.

According to this report, "The overall impression is… that the whole subscription process is very cold and businesslike. It is a transaction rather than a relationship…"

Let’s take a look at why people subscribe:

1. Convenience. Time and time again we get feedback from subscribers about just how much they enjoy receiving their favourite magazine when it is delivered through the door each month or week. Letters to magazine teams often wax lyrical about how the subscriber and members of family, friends and neighbours come to enjoy and anticipate the regular arrival of their regular magazine treat. Many people go on to give a gift of the same magazine they enjoy or to subscribe to another magazine from the same stable.

2. Never missing an issue. For magazine devotees, this is a great USP and one that is particularly true of specialist magazines.

3. Incentive. Very often a gift incentive, or an attractive discount are the trigger point for subscribers taking up an offer. A pair of quality gardening pruners, a set of roasting tins, a cookbook from one of the celebrity chefs, all these are proven incentives that give people a reason to make the commitment to subscribe. Again, discounting will make a big difference in response where the audience is price sensitive. The downside of the incentive is that many people have learnt to expect a repeat incentive for their business at the end of the fixed subscription term.

An excellent example of a magazine that really lives the ideal, where the key USPs - convenience and never missing an issue - are integral to all marketing communications, is Radio Times.

Growth from 11,000 subscribers to 75,000 subscribers in less than three years, and the best renewal rates I have ever seen on any magazine, has been driven by upholding these principles to the core. On this magazine, existing customers do get the best deal and loyalty is rewarded.

Excessive discounting?

In other markets, with different products and circulation strategies, using rock bottom pricing to drive sampling makes sense, but using it to drive high volumes of sales on well-established products runs the risk of treading the rocky path of US subscriptions. Over the pond, there is very little in the way of profitable circulation and with an audience accustomed to low low prices, publishers face a big challenge should this balance need to be addressed in a soft advertising marketplace.

Trial offers do attract customers who know the system and are serial cancellers. I recently listened in to a call on one publisher’s title in which their customer wanted to know exactly when they could cancel the offer in order to get the six free issues (having done the same thing previously on this title!). We underestimate customer savvy and market knowledge at our peril.

In today’s online marketing world, where viral marketing can go crazy and whole communities have sprung up sharing canny consumer tips on where to get the best bargain, many consumers are playing the companies at their own games.

Take a look at www.freestuffjunction.co.uk as one such website that features a number of magazine offers.

What happens when you get it right?

Given that you have got it right in getting your subscribers to commit to a subscription in the first place, and given that your editorial product continues to offer the customer the same great things that attracted them in the first place, you are in the perfect place. You can now really focus on the customer and retain their business in the long term.

What do subscribers want – in simple terms?

* To be made a relevant and attractive offer
The initial hook should be true to the brand, and, for sustained subscription growth and profitability, shouldn’t be too much better than the price that existing customers enjoy. Many magazines that get given subscription incentives as freebies run offers that are worth more than the gift itself (beauty products in particular). No surprise here that renewals are low for this type of incentive-led offer. Conversely, a good gift that compliments the magazine (eg. cookware or garden tools in the food and gardening markets) can reinforce loyalty and continue to have positive brand and subscription experience association long after the subscription order was initially placed.

* To be appreciated
Subscription clubs, subscriber exclusive offers, subscriber hugs and cuddles can be hard to justify in scientific terms. The opportunities to test the value of these to individual subscribers is limited. Running statistically significant renewal tests is an uphill struggle. Proving uplift in exchange for the investment in these programmes will be complicated to set up and mean a long term (potentially three years plus) investment in the programme to gain meaningful results. However, qualitative feedback, whether gained through anecdotal feedback, talking to subscribers at shows, letters to the editor or a bespoke research project, will quickly tell you how much the exclusive programmes are appreciated.

* To be given a reason to respond
Sounds obvious, but even the most loyal of customers will welcome a reminder of what they get from you. An event-based prompt to get in touch; for example a last issue announcement giving them the chance to avoid missing future issues / a clever earlybird offer will always work well.

* To have life made easy for them
If one of the benefits of subscribing is convenience, one of the worst things that can happen to a subscriber is experiencing poor customer service. Non-delivery of an issue, or worse a number of issues, is a bad experience. Especially when you see copies of your favourite missing magazine in the shops. To have insult added to injury by failing to get your problems resolved when you contact the publisher, or have written correspondence ignored, is a relationship-ending moment for some subscribers.

* To have all their relationships recognised in a joined up way
If you subscribe to a magazine, buy tickets to its annual show, go online and sign up to a regular newsletter, give the same magazine to your mother and a sister magazine to your friend, it will be galling to make contact in relation to any one of these and find that the query is dealt with by someone who is completely ignorant of all the other transactions / interactions and does not recognize your importance as a customer.

Equally, without a single customer view, the publisher runs the risk of failing to recognise the real value of each individual who transacts with them.

Targeted, well-thought out marketing and communication programmes will generate good responses. The reverse is also true.

Recommendations

In summary, there is much to be gained by taking the marketing talent, creativity and marketing investment that is often more focused on acquisition and re-cutting the budget. For titles that have a long-term plan to grow and develop the subscriptions channel, switching investment and resource into retention, win-back and development will be a good move.

A few simple rules can make a big difference between a good performance over the years and a great one.

1. Know your subscribers
2. Invest in the relationship
3. Think long-term wherever possible