Shifting Sources

Circulation Management, May 1, 2003

Byline: DEBRA JUDGE SILBER

A demand for new, cost-effective ways to generate subscriptions is far from recent. But if the demise of stamp sheet agents, slippage on the newsstand and competition from new titles isn't enough, a declining advertising revenue base over the past several years makes it even more urgent for circulators step up to the plate.

"It's time to innovate," said Ann Moore, chairman and CEO of Time Inc., in answer to a question on circulation challenges, during a Magazine Publishers of America breakfast in January. "I think we have become very advertising-centric in the magazine market. In the last few years we could hardly chase the ad revenues fast enough. We've neglected to put the same kind of attention and investment in the circulation marketing side, and it's time to correct that emphasis."

But just how innovative have circulators become? Few truly "new" sources have emerged. The traditional sources still dominate.

Direct mail, which has taken its share of lumps because of increased costs and lower response, is still the most economical subscription source for many publications, particularly consumer magazines. Consumer magazine circulators continue to vigorously defend direct mail because "it pays" for them. Business magazines - especially controlled publications - have been able shake their dependence on direct mail to one degree or another.

Our first thought was to do an article completely on "new sources," but it quickly became clear that that would be a very short article. The idea was more wishful thinking - a hope that circulators might come up with some big breakthrough, although we'd have also settled for something small. Reality forced us to change our focus to "shifting sources."

Conversations with circulation directors and consumer marketers reveal they are driving existing sources harder than ever, through more aggressive testing, targeting and combining channels to maximize cost-effectiveness. Adjustments to the source mix, in some cases, have been marked - such as the shift from direct mail to telemarketing among controlled B-to-B titles. In other spaces, tried-and-true methods have remained the choice, at least until the next best thing comes along.

Addressing Source Shifts: Consumer Magazines

In the search for subscription sources that work, Bridget Wells, Hearst's director of partnership marketing, agency and ABC reporting, suggests a source mix of her own. It takes, she said, "a little bit of logic and a whole lot of luck." Throw in ample reinforcements of time and money, some ingenious creativity, and you'll have all the subscribers you need.

It's no wonder then, that discussions with consumer marketers over their best new-subscription sources revolve around their reliance on the tried-and-true. But there is also a nagging sense that there is something better out there. "Everybody's looking for the next big source possibility," Wells says.

The problem is, no one has quite found it yet.

DIRECT MAIL STILL DELIVERS

Given recent statistics on direct mail, magazine marketers might have the feeling they have been licked. Sixty-five percent of the respondents in CircTrack's 2002 survey reported their direct mail campaign performance had worsened in 2001, continuing a downward spiral that had begun two years prior. Nearly 80 percent said they lost money on direct mail; and that direct mail's contribution to overall new business also declined, to 20.9 percent from 24.4 percent in 2000.

But the view from marketers interviewed by CM is not nearly so bleak. "There aren't many avenues in which you can target your core audience so well," says Tom Slater, consumer marketing director for seven Conde Nast titles, including GQ, Lucky, Self and Golf Digest. "It renews better than other sources; you have much better lifetime value," he said. "Direct mail has actually been a very strong source for many of our titles here."

For one thing, the control publishers have with direct mail - from targeting to creative - is tough to replicate. "There is a reason it's tried-and-true," notes Susan Allyn, director of consumer marketing for EMAP-Metro, which publishes FHM. When you're comparing direct mail against other sources, she says, "You have to think, can I control it? Can I roll out with it? Can I budget when the orders come in?"

With steadily rising postal rates and only a marginal handle on printing costs, publishers see response rates as the variable that's key to making direct mail pay. "The trick is how, through aggressive marketing, you can keep the response up and the costs down as a company," Slater says.

Magazines may be doing just that. Although more magazines reported losing money on direct mail in the latest CircTrack survey, loss per order continued to fall - to $12.37 from $14.08 four years before. At the same time, direct mail average gross response rates crept up.

"Direct mail is a very important and effective way to reach consumers," said Steve Sachs, VP of consumer marketing for Time Inc.'s Real Simple and InStyle, as well as its Parenting Group. "While direct mail is expensive, it also generates very strong responses - so that on the basis of net income per order, it's very effective."