The Future for the Subscriptions Marketeer

In 1977, Ken Olsen, president of Digital Equipment Corp, stated that, "There is no reason why anyone would want to have a computer in their home."

As a pioneer in the American computing industry, Olsen’s comment reminds us of the immense and unforeseen impact technology has had on our daily lives over the last few decades. It is sobering to think that Jerome McCarthy first published the 4 P’s (price, product, place and promotion) that represent the corner stone of modern marketing theory, 17 years prior to Olsen’s comment, in 1960.

Over the last 50 or so years, marketing theory has been tweaked and adjusted to evolve with changing times. However, the dramatic growth in internet and broadband access over the last five years has elicited nothing short of a revolution in the way consumers choose to spend their time and money today. Marketing theory is in danger of being left behind, in need of a new paradigm. In this article, rather than focusing too much on the theory, I will look at what this revolution means for magazine marketeers, and in particular the subscriptions marketeer.

We all want subscriptions growth

Magazine publishers are acutely aware of the fundamental shifts in consumer behaviour and how this is impacting and re-shaping our businesses. Consumers are less loyal, have shorter attention spans, are more savvy and demand appropriate content when and where they choose. Recent research undertaken by Brandlab, in conjunction with the PPA and Royal Mail, underlines this declining loyalty, pointing out that the average subscriber is only with a magazine for 3.1 years, compared to 3.4 years in 1998.

The proliferation of competition, in particular the free and "citizen published" content offered online, combined with a more fickle customer base has led many publishers to focus on strategies to grow frequency of purchase and loyalty for their magazines. The unrelenting growth in market share of the major grocers, combined with the potential impact of the OFT decision on the newsstand distribution channel, means that the subscription channel is growing in favour amongst senior management in many publishing companies.

Subscriptions – The Loyalty Tax

Brandlab highlighted that the increasingly savvy consumer is all too aware of the different business models employed in the market place. They distinguish between the loyalty-reward models used by motor insurers and Clubcard holders, and the models used by mortgage lenders and broadband suppliers that at best ignore, at worst penalise loyalty. Consumers surveyed were very clear that magazine subscription marketing falls within this latter category.

This understanding is endorsed on Martin Lewis’ consumer championing website www.moneysavingexpert.com. The proliferation of aggressive subs offers aimed at new customers has warranted considerable coverage within Lewis’ site. He clarifies for his users why so many consumer publishers offer such huge discounts, along the lines of 3 issues for £1:

"Their aim is you forget to cancel the DD (Direct Debit) whether you like the mag or not, after all a subscriber’s a subscriber."

Lewis then goes on to advise the user to take out a trial offer for the length of the trial period, cancel, then take out a new trial offer. Thus never paying the standard subs price.

Subscription promotion more often than not circumnavigates any attempt to woo new potential loyal readers; instead we focus on price discounts and incentives, establishing the purchase as a cold, transactional decision on behalf of the new subscriber. Any opportunities to enhance the emotional connection the reader has to their magazine through subscriptions marketing efforts are further undermined when existing subscribers see that offers to new subscribers are more favourable than their renewal efforts. No wonder many subscribers feel no remorse at playing the system for their own gain; in effect we have been charging for their loyalty.

So why is this loyalty issue so pertinent today? There are two key reasons. Firstly, subscriptions are in growth. The PPA Subscriptions Committee considers an increase from 13.5% to 15% of circulation over the next three years, not unrealistic. Retaining all these new subscribers is going to rapidly climb up the agenda of many publishers over the next few years. Secondly, as online exposes our portfolio of supply channels on request, and breaks down the barriers between peers, our marketing plans are becoming wholly transparent to our customers. After all, major websites like moneysavingexpert.com did not exist five years ago.

Who do you trust?

If there is one phrase to sum up the force that is shaking the foundations of marketing practise today, it is Word-Of-Mouth (WOM). Marketing Week reported on a survey in February 2006 that held that 68% of consumers said "a person like me" was the most credible source of information. This compares to just 20% in 2003. If our marketing efforts fail to reward loyalty then we should not be surprised if our customers trust other customers more than ourselves.

The internet has facilitated the conversation between a potential consumer and "a person like me" and made the dialogue visible. In fact WOM marketing has become content for other browsers to read. This means that the adverts we put out no longer contain the message, the response to those adverts is the message. A recent FHM subs incentive of an X-Box game sold out in just a few days. Why? Because it got picked up and talked about on some of the many online X-Box forums. In effect, these gamers did our marketing for us.

Nowhere is the new understanding that "winning content is conversational" more keenly felt than within the traditional publishing industry. First, we saw Rupert Murdoch purchase Myspace, then Natmags acquire Handbag.com and, more recently, Conde Nast took on Reddit.com. These social-networking sites create the platforms for WOM marketing, alongside generating commercial and advertising revenue streams.

The 4 P’s

The searchability aspect, or "long tail" of online, means that potential customers are able to interact with other customers on almost any subject to learn information and share advice. With this in mind, it’s fair to say that marketing models that rely on traditional price differentiation need to be reviewed within the context of a transparent online environment.

Products are no longer ‘owned’ and developed internally. Instead many companies, such as X-Box and Lego, invite their most vocal customers to develop and innovate alongside their in-house team. The command and control model where marketeers feel they have totalitarian ownership of the brand and its development is outdated.

Marketeers of the future will spend far less time identifying target customer groups and then marketing to them. Instead, customers identify themselves and marketeers need to promote where their customers go and at a time when they are in the right mind-set. Search engines, such as Google, are good examples of this effect. Marketing is moving from "push to pull". Decisions over place must be made through integrating virtual and offline distribution strategy.

The future for the subs marketeer

What we used to call one-to-one marketing, we now realise is a poor relation to the possibilities of dialogue on an individual level - be this tailoring content such as via RSS, or online social networks that facilitate personal interaction. If we view direct marketing from its infancy until now, the unconscious aspiration has surely always been to mature into communication on a truly individual level. That time is upon us and subscription marketeers have many of the skills to take this forward.

The subscription model itself is increasingly being used across different formats. One of many examples at Emap is Closerdiets.com, a site offering tailored recipes and weight-loss progress tracking in return for regular subscription payments. Many B2B publishers have been using paid for content models like this for some time. Aside from the actual subs model, direct marketing skills will become increasingly relevant within our industry. This is particularly true for those marketeers who tool themselves up with skills in data, digital, and practice at listening to and engaging with customers.

However, although the mind-set of the direct marketeer is appropriate, it would be wrong to think the existing theory is wholly transferable. A good example of this is testing. The concept of testing sample sets over a series of months before roll-out is becoming increasingly unrealistic in many areas. Innovative technologies and customer behavior are changing so rapidly that, by the time of roll-out, the learnings may well be out of date. It also represents an inward looking approach to innovation which is likely to mean only incremental change. Much testing may now be achieved in real time, with many websites such as Google and Hotmail in perpetual beta mode. Customers seem content with this and are beginning to expect to have a say in the future developments of their favourite products.

Then there is the other challenge - if we want to grow the subscriptions channel, we need to appeal to non-subscribers. These non subscribers have that loyalty-tax perception of our business model, greater visibility on our various offers and increasingly easy access to managing their bank accounts (cancelling their DDs). So, our life-time-value models are unlikely to be delivering what they used to on like-for-like magazines. Whilst there are many titles offering value-added to the subscription, typically through either exclusive content or relevant discounts, research shows us that the perception of the loyalty tax is still there. Management gurus such as Peter Drucker and Frederick Reichheld point out that loyalty is the primary driver of long term profitability. This is an industry concern.

So the barriers between marketing teams and their customers are coming down. Consumers are learning how to become brands themselves, which is what is happening on Myspace. They are personally guiding corporate innovations as well as positioning our products in the minds of other potential customers through WOM. In other words, we are no longer calling the shots, they are.

There is no text book to help direct marketeers navigate through this fundamental shift in the equation between customers and companies. Many mistakes will be made along the way. However, opportunities abound for those who embrace the new era of openness, flexibility and external focus. I can not think of a more exciting time to be working within DM. Peter Phippen, MD of BBC Magazines, echoed the views of many leading lights in the publishing industry at the PPA Subs Conference, Nov 2005, saying:

"To compete in the future we need to put our customers at the centre of our organisation. Direct marketing will be crucial to our future business strategy."