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This article was first published in:

InCirculation Magazine 01/09/2004

InCirculation Magazine Sep/Oct 2004

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Subs remedy for range review

Subscriptions only account for 11% of UK magazine sales. Royal Mail’s Tom Wasilewski says that, in the light of present and future range reviews, publishers need to focus on subscriptions more than ever before.

The recent news that WH Smith has reviewed the range of consumer magazines it currently carries in its stores has sent justifiable panic waves rippling through the publishing world. Initially the retailer announced that it would be downgrading, or dropping completely, over 70 per cent of its specialist title range in a bid to boost the chain’s drooping profits – evident by a number of store closures such as Sloane Square, one of its flagship sites. The magazine range reductions have emerged from a review instigated by WH Smith’s new chief executive, Kate Swann who is looking down the barrel of a reported £940 million take over bid.

WH Smith is currently Britain’s biggest magazine retailer and accounts for more than 40 per cent of magazines sold in the country. So the review is of particular concern to specialist titles not as strongly reliant on a large subscriber base, such as famous, but niche, film bible, Sight and Sound. If the review is implemented this title would only be available in forty of the biggest WH Smith stores, down from three hundred stores. It is thought that many small publishers will go out of business following the cull.

PPA concerns

The Periodical Publishers Association (PPA), which exists to promote and protect the interests of the magazine industry, has registered its concerns with WH Smith particularly taking issue with the fact that restricting routes to market will result in fewer titles being published, which in turn will result in fewer sales and fewer customers for the newsagent. Moreover, a survey conducted amongst publishers undertaken by the Optima Network, an independent group of publishing and advertising professionals has highlighted the alarm felt by UK publishers. Ninety per cent of respondents claimed to have a ‘great deal’ or ‘quite a lot’ of concern about the implications a change of shelf display would have on the sector. Amongst the ten per cent of respondents who claimed ‘not much’ or ‘no concern’, WH Smith represents less than ten per cent of their overall newstrade sales.

Sixty per cent of publishers questioned said they believed that being downgraded or dropped completely by WH Smith could affect their overall newstrade sales by 20 per cent or more. Seventeen per cent estimated that the move could reduce overall newstrade sales by more than 50 per cent. Furthermore, the majority of respondents believed that the review will affect the financial viability of at least one title in their stable. From a list of possible actions publishers might take to compensate for any drop in sales the biggest single action was determined to be developing / growing their subscription base (87 per cent).

WH Smith is going ahead with the review, although they recently announced that it will be less brutal than initially thought. It is thought that the new range will be implemented by mid-September. Yet, regardless that the cull has been relaxed publishers must face facts – magazine ranges are and will probably continue to be reduced by retailers. Consequently, subscription models and the benefits they can bring to publishers has been the most talked about solution within the industry to retain and acquire new customers. This sentiment was supported by the Optima Network research which suggested publishers must look towards improving their subscriptions marketing in order to stop retailers dictating reader choice. Readership stability is the name of the game.

Subscriptions have been massively under-utilised by UK publishers, generally being viewed as both difficult and expensive to obtain. However, the benefits (see table) of subscriptions far outweigh the negative perceptions. In summary, subscriptions are usually offered for one year or longer and readers are committed for the length of the subscription which they pay in advance. Consequently, they improve publishers’ cash flow, are an important source of revenue and can be extremely profitable. If marketed well, they can be a key element in building up a stable circulation base.

As a result of the increasingly volatile magazine market, publishers are in a sense being forced to place more emphasis on subscriptions marketing, but I believe this is a blessing in disguise as publishers increasingly recognise the attractions and benefits subscriptions bring: predictability, stability, building loyalty and positive cash flow.

Database opportunities

In response to marketers realising the benefits of subscriptions we have seen an increasing trend over the last couple of years of publishing companies looking at the way they collect, maintain and utilise their customer data. EMAP and The Telegraph for example have invested in database management solutions to facilitate this – and many more publishers are following suit. Subscription marketing is core to this strategy as it enables publishers to collect ‘real’ data about their customers and gives them the ability to cross-sell more products and services to them. It can also provide a valuable revenue stream. IPC Media, for example, has released its subscriptions data on to the list market to great success – increased revenue at little cost to the publisher.

British publishers have merely scratched the surface of subscription marketing. In the UK subscriptions account for just 11% of magazine sales. In comparison, the US market is almost totally reliant on subscriptions (84%). (Source PPA)

Flexible subs offer

Research by Wessenden Marketing for the PPA and Royal Mail points to some challenges ahead for the UK market. A central issue identified was that consumers might want to pay for their subscriptions in different ways; the US is a ‘bill-me later’ market, whereas UK consumers pay upfront for the year. Also, there are now so many magazines for consumers to choose from, why should they want to make the commitment of a subscription? One answer increasingly is to reward consumer loyalty with a subscription discount. An alternative would be for publishers to add value or service to the subscription offer, for example introducing an open-ended subscription where UK consumers would still pay upfront for a subscription, but would have complete flexibility to buy single issues; whereby they cherry pick the issues they wish to receive - for example missing out the June, July and December issues because they are on holiday, and receiving three additional issues once the subscription has effectively run out.

The research also suggests that consumers should also have more control over their subscriptions, being able to change the titles they subscribe to whenever they want and as often as they want. I believe the line between retail sales and subscription sales needs to become blurred in order for subscriptions to become more flexible and user-friendly.

The UK is still immature when it comes to subscription marketing. The focus is still on a title-by-tile basis, rather than being across a stable of publications. Each brand often has its own long and short term strategic plans, rather than a marketing plan that stretches across a stable of magazines. Consequently, it is the responsibility of circulation directors to educate the board on the importance of boosting subscriptions. It is common for publishing boards to compare subscription drives with other marketing techniques - and then write them off. They look at a subscription and see it costs £30. But if the average lifecycle of that subscription was six years and 72 editions, surely the £30 should be divided by 72 to find the true cost. This would mean that the subscription has cost a mere 42p per issue. Compare this with the price of methods to shift single issues – such as cover mounts. Subscription marketing is not only the more cost effective technique, but also has long-term benefits for the organisation.

Royal Mail has long been a supporter of the publishing industry. Consequently we recently introduced a 25% discount initiative for weekly magazine subscriptions. This promotion is just one of the initiatives we want to implement to champion the wider issue of the CRM benefits of growing magazine subscriptions. Subscriptions demand a consistent and long-term financial commitment in order to make them work. However, they also demand creative new techniques to hold the modern magazine consumer – who is, as we all know, notoriously fickle. All this makes for a real challenge. Yet the prize at the end will be worth it – unconvinced? Look at the US market.

Benefits of subscriptions
Revenue
1 Improved cash flow 
2 Reliable source of income
3 Reduced reliance on newsstand sales
4 Profit – will depend on run-on cost per copy, fulfillment charges, postage costs, marketing costs
Volume
1 Guarantees a sale for the length of the subscription 
2 Can alleviate seasonal fluctuations
3 Can provide a significant element of the total circulation
Reader/Publisher Relationship
1 Provides convenient and reliable method of purchase
2 Gives publishers improved profiles of readers and their requirements
3 Provides opportunity for ancillary sales and database marketing
(Sourced from PPA)

Eight steps for effective subscription marketing
1 Define strategy and budget
2 Consider which advertising channels will be the most effective and have the most reach
3 Calculate lifetime value
4 Consider payment options
5 Offer no quibble money back guarantee
6 Ensure good customer service
7 Introduction initiative such as an early-bird renewal offer
8 TEST, TEST, TEST

(Source: Jim Bilton, Wessenden Marketing)

About Tom Wasilewski
(Details last updated: 1 September 2004)

Tom Wasilewski took up the post of head of marketing for the publishing sector at Royal Mail in April, 2004. Tom has been with Royal Mail for nine years and has worked in both their international logistics and market development teams.

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