The combination of pressure at the newsstand and improved direct marketing skills has raised the standing of subs departments at many publishers. Subs are taking a bigger share of the marketing budget than ever before and are growing their share of total circulation, relative to newsstand. Bea Montoya looks at the trends affecting subs in the UK.
The growth of subscriptions has been central to the UK circulation industry’s strategies over the last decade – but will this growth continue? Are publishers still committed to investing in and maintaining the increased focus on subscriptions marketing? In my opinion, the short answer to this last question is ‘yes’.
Although the UK still lags well behind other countries, such as the US and Germany, in terms of subscriptions penetration, the growth in subscriptions has helped publishers to plug the hole that the newsstand decline has left in their ABCs. From 1994 to 2006, subscriptions have grown by 59%, and the growth has been more pronounced in the last six years (28%) than in the previous seven (20%). During this same 13-year period, the number of copies sold on the UK newsstand has fallen by 13% from sales of over 42.5 million in 1994 to just over 37 million in 2006 (Source: Circulation Briefing, June 2007).
Both of these factors have contributed to subscriptions penetration increasing from 8.1% to 13.8%, raising the importance of the subscriptions departments in most consumer publishing houses.
However, this trend has not been present in every market. When analysing 2007’s ABCs, there is a huge lag between monthly markets (for instance, the average subscriptions penetration in the homes market is 24% and in the women’s lifestyle and fashion market, 20%) and weekly markets (for instance, the celebrity weeklies sector only has a penetration of 1%).
The subscriptions margin for many weekly titles is much smaller than that achieved by monthlies due to the high cost base and, in most cases, the lower cover prices. For example, across IPC’s women’s portfolio, weeklies return six times less profit than monthlies. And, in spite of this, subscriptions to weekly titles are relatively high-priced, due to their increased frequency, which tends to make response rates to subs promotions lower. As a result, our subscriptions focus at IPC, and at many other publishers, puts more emphasis on monthly titles.
The increase in subscriptions has resulted from years of additional focus spent on this channel of circulation, due to:
* Pressure on the newsstand. Both the OFT review and the effect of covermounts on sales has put mounting pressure on the newstrade, turning publishers attention to subscriptions.
* The increased quality of subscriptions. The long term business that subscriptions bring results in improved sales stability and predictability which are key for publishers. The average life time of subscriptions at IPC is more than four years, and for one of our products is actually over 10 years – giving us a great advantage for securing good quality readers.
* Improved analysis and accountability in subscriptions. Subs teams have become much better at measuring the results of every pound they spend. And we now have more sophisticated models that look at the return we generate during the life time of subscriptions. The acceptance of the concept of life time value returns has demonstrated that in many cases the longer term return on investment on subscriptions is much greater than that of newstrade.
* Minimum risk. Direct marketers have a great advantage as we can test our ideas with minimal investment before having to go to our boss’ office to ask for more money. And this allows us to test new initiatives, helping us fuel future growth.
So all of these factors are resulting in increased focus, and therefore improved results, in this increasingly important form of circulation. The PPA’s recently renamed Customer Direct Committee has set itself the task of increasing subscriptions penetration to 20% by 2011. And they are taking important steps to achieve this objective. For example, they have run a PR campaign for the last two years to raise awareness of subscriptions amongst consumers. These campaigns have had a combined reach of 28 million people.
Other key trends are also emerging that augur well for the continued growth of the subscriptions industry, including:
1. Subscription budgets and resources are increasing
Publishers, IPC amongst them, are increasing the marketing spend on subscriptions. You only need to look at the additional activity in the UK to understand this. Subscription promotions using traditional channels like in-title have seen a significant boost, but there are many new routes to market that have been successfully introduced by subscription marketers.
And as a result of this extra activity, subscription departments have increased headcount by up to 50%, at a time where other departments have seen the opposite happening.
2. Our spend on out-of-title channels is increasing
Additional budgets mean that we are using less traditional routes to market to keep growing. Although these channels can be more expensive, they bring brand new people to our subscription files and our databases and increase the awareness of subscriptions amongst the UK population. Examples of this include:
* Promotions at retail: subscription packs can now be found at retailers such as M&S, Sainsbury’s, Tesco, Borders, Waterstones and WH Smith.
* We have also become more discerning at finding the right partners to do promotions with – promotions such as half price subscriptions during bonus times with specific cosmetic brands not only improve our volume but act as a great promotion of the subscriptions concept.
* Direct mail is back for at least some publishers. Luckily, we have found that more basic packs work better than more expensive complex packs, helping us to keep our cost per piece and cost per order down.
* Increased web presence. Not only have publishers now developed bigger and better websites, but they have also learnt how to promote subscriptions more effectively within them.
* Data driven marketing and CRM techniques are certainly increasing.
3. We are becoming more sophisticated with our data
We have started using CRM techniques in our marketing even if we do not have the sophisticated systems that other industries have invested in for many years. IPC’s first attempts in this area have been very successful, with encouraging early results. We certainly expect to do more of this in the future. Here are a few examples that you may want to consider:
* Using detailed analysis to offer our customers additional titles. Don’t forget, your customers are your best next customers – but be clever. Target them when they are at the top of their satisfaction curve (just before they are about to or as they have just finished purchasing). By using detailed analysis to predict what products sell well together and offering targeted additional titles to your customers, you can increase the average number of titles purchased per transaction considerably.
* Personalised emails. By using data to determine the subject line, from field, text and even images in the body of your emails, you can see significant increases in your response rates from this channel. Not only do more customers open emails, but also a higher percentage of them click through and purchase.
* Creative testing depending on previous purchase. You can take tailored creative one step further and change printed marketing material promoting several titles, based on the previous purchases that the customers viewing the inserts have made.
4. And above all, online
A recent Forrester report specified that the number of hours we spend on the internet has increased significantly and has now overtaken TV. The average time spent on the internet in Europe is 14.3 hours a week, higher than the 11.3 spent watching TV or the 4.4 spent reading magazines and newspapers.
Although at first glance this appears worrying for publishing, a recent survey conducted by Time Inc, ‘The Magazine Experience’, determined that magazines are here to stay and live alongside the web. It showed that 71% of magazine readers also visit magazine websites.
Publishers are taking full advantage of this and are using the power of their brands to create successful online propositions that offer great advertising opportunities. And subscription marketers are stepping up their game and using everything that the web can offer to convert more visitors to subscribers. With improved technology, our skills are changing and we are now at the forefront of our companies’ ecommerce strategies.
5. However, the model is changing… at least in some markets
To achieve volume targets and required response rates, many publishers have been discounting subscriptions heavily – She for just £1 a copy, Elle or InStyle for £12 a year and a gift worth £60 plus a discount for Grazia are just a few examples of offers in the subscriptions market. These offers are having a huge impact on subscriptions economics, with many publishers now running subscriptions to some titles at a loss solely with the objective of supporting advertising revenues. This is the model that has been followed in the US for many years; however, without the huge US advertising markets to support this in the UK, will the industry be able to maintain this level of investment in the next advertising downturn?
The consequences of this are not only the reduced profit, but also that customers are growing accustomed to very low prices and are expecting these to continue. As a result, publishers are having to increase their discounts at renewal too.
So far, the worst hit has been the women’s lifestyle and fashion markets – but will publishers start deep discounting techniques in other markets? I really hope that if this is done, it is done with extreme caution and that rigorous testing takes place to determine what the best price is to increase volume while maximising profitability.
As I have demonstrated in this article, the subscriptions industry is well placed to continue driving circulations in the UK. Our budgets are increasing, our volume trends are very impressive and our knowledge and tools are better than they have ever been. Although, in my opinion, it is key that we take an analytical and conscious approach to discounting, I fully expect to see the PPA objective met by 2011.