The big question for all publishers, both B2B and consumer, is whether they are up to the challenge of competing in an Amazon world? The PPA’s recent Subscription Futures 2016 project answers that question.
It is clear from the survey of 48 PPA members that subscriptions are approached in very different ways from publisher to publisher. We divided companies into three core types:
* Subscription Zealots, for whom subscriptions are the primary route to their audiences.
* Subscription Enthusiasts, where subscriptions are an important route, but not the dominant one.
* Subscription Dabblers, who regard subscriptions as very much secondary to other channels, usually retail.
Each type has a very different approach as to how they run their subscription operation (see table below).
There are several dynamics at work. The key factors include the trend in subscriber numbers, which is generally down, albeit with significant variation from company to company; and with the role of free growing in importance, especially in sampling and hybrid distribution. The review of internal company attitudes shows that subscriptions are widely accepted as an important channel, but that the understanding of how they actually work in practice has not filtered through all organisations.
Other key dynamics include:
* The steady shift in focus towards retention activity away from acquisition.
* Tightening profitability targets as the industry has moved to shorter breakeven periods – the average (and it is now the same across both consumer and B2B) is an 18-month breakeven.
* Strong and consistent internal company reasons for committing to the subscription channel.
Yet there are also some barriers – a key and growing one being the “Tech Gap” where there is a lack of confidence about the company’s technical ability to put many of its planned activities into practice fast enough with the technical resources currently to hand.
In addition, there is the “Data Protection Time Bomb”, where several publishers are simply not planning ahead for a more restricted world in terms of both Data Protection law and also growing consumer concerns about privacy.
The subscription organisation
Yet what unites every type of publisher is the challenge of structuring an organisation which can deliver the increasing range of activities required in a modern subscription marketing operation.
The first issue is remit: what does a subscription department actually do? This has changed significantly in B2B with the shift into corporate site licences: many traditional subscription departments have morphed into lead generation operations. Yet consumer publishers have changed too as they take on more roles in addition to the basic areas of acquisition, retention, customer service and operations. Insight and data analysis are now core functions. In addition, marketing automation, ecommerce, partnerships and membership and loyalty are coming on-stream. Some departments have also taken on events and creating social media content. On top of everything, there is also a drive to integrate the retail and subscription channels in a more holistic way.
These pressures all come to a head in five key staffing issues:
* Headcount: only 38% of publishers feel that they have sufficient staff numbers to run their departments.
* Staff Churn & New Talent: recruiting and retaining good staff.
* Job Skills: balancing retraining existing staff against hiring in the required new skills.
* Workplace Skills: learning to work in a fast-moving, cooperative, project-driven environment.
* Attitude: dealing with change, “mucking in” and having the patience to learn the basic skills.
All these factors then impact on the department structure, with 70% of publishers having some recent or current experience of reorganisation. The key variable is the balance between vertical structures (built around brands and audiences) and horizontal structures (constructed around processes and channels). Most organisations are a shifting mix of the two and are also shaped by the balance between (1) acquisition and retention and between (2) print and digital.
Sorting out the subscription organisation is the practical output of all the changes seen in the subscription marketplace and is the single biggest theme in the industry currently.
Another angle on the whole business of subscription marketing is to grade a range of subscription activities and issues to see what the industry thinks is important and also how proficient it feels it is in different areas.
There are four high-priority areas, all core subscription fundamentals: customer service; low-friction start-up; low-friction renewal; and faultless delivery of both print and digital products. Customer service is considered to be the most important area, but it is also one where the general view is that the industry is not as proficient at it as it should be – a major concern.
There is then a selection of mid-range priority activities before three low priority areas, with each one having a story behind it as to its low-ranking position: Article Atomisation, Membership Packages and Low-Friction Cancellation.
Yet there are two other areas where the Proficiency Scores are particularly low and where the industry should focus more attention:
* Using data to direct more tailored subscription activity.
* Having a more joined-up strategy and user experience which pulls together print + digital in particular into a seamless whole.
Mapping subscription marketing
The research provides detailed insights into a wide range of areas: marketing budgets (they have declined over the long-term), department sizes (holding steady), the balance between acquisition and retention activity (shifting into retention), payment mechanisms (now a real “front-end” marketing issue), digital applications and usage of external services (the fulfilment bureau market, in particular, is changing shape).
The future of subscriptions
Looking back to the PPA’s first subscription benchmark report in 2004, the industry was starting to experiment with digital in all its manifestations. This was seen – quite rightly – to be the main opportunity for the immediate future in the face of a retail channel which was coming under real pressure. Since then, the retail challenges have simply increased, but the application of digital has turned out to be much more complicated and problematic than was originally envisaged. Yet it still holds the biggest potential opportunities for the subscription.
Twelve years ago, the biggest threat was seen to be the cost and quality of the Royal Mail postal service. RM’s costs remain an issue, but have reduced in their significance, receding behind the intense competition for subscribers’ time and money, internal company budget constraints and the growing concern that the publishing industry is simply getting left behind in the increasing technical sophistication of other service providers such as Amazon, who are flexing and tailoring their service offers at a speed that leaves most publishers breathless.
What is also clear is that B2B and consumer have moved in different directions between 2004 and 2016. B2B, where it can, has gone multi-user and has developed workflow tools which are embedded in the working lives of its customers and for which users will pay much more than for a traditional magazine subscription. By contrast, consumer publishers are struggling to find a parallel route which leverages more value from a subscriber and which embeds its brand in the lives and minds of readers.
The big question for all publishers, both B2B and consumer, is whether they have the scale and resources to slug it out in a marketplace which has become much more tech-driven than could have been foreseen twelve years ago? To quote a publishing CEO in the most recent Publishing Futures survey: “When it comes to technical issues, we’re not stupid, but the blunt reality is that we don’t know what we don’t know. This company was built around a very different set of core skills. We are a content company, not a tech company.”
If it is tech that keeps CEOs awake at night, then what worries audience executives is organisation: how to apply the talent and knowledge already within the company to best effect? The immediate future of magazine subscription marketing lies in finding answers to both these questions.
Yet what shines through the whole report is the fact that there is no shortage of ideas and creativity in the industry, in terms of both content delivery and marketing. There may be some skills gaps to fill and tech challenges to resolve, but the industry is becoming increasingly agile, fast-moving and savvy; driven on by committed subscription professionals who feel passionately about the industry in which they work.
The full report is available free-of-charge to PPA members and for £495 to non-members. Contact Anne Hogarth.