Squeezing more out of circulation: With advertising showing no signs of rebounding, publishers are seeking to help their bottom lines by paying more attention to the costs of acquiring and retaining readers

Folio: The Magazine for Magazine Management, Dec 15, 2001 by Sarah Gonser

Even before September II, publishers were making noises about getting more out of the circulation side of their businesses. A tourniquet had seemingly already been applied to the flow of advertising dollars--the lifeblood of the b-to-b world. Now, in the aftermath of the terrorist attacks, with no ad turnaround expected any time soon, the pressure has only increased.

Publishers of controlled-circulation magazines have always tried to make their circ files more than just a cost center. But list rentals, for example, are no longer enough. The trade world needs to take more drastic action if it wants to keep the bottom line healthy. Costs must be tackled more directly than ever--especially with direct mail results continuing to fall and postal rates heading up--and new revenue sources must be explored.

1. STAMP OUT CIRCULATION INFLATION

When ads are plentiful, growing that circ file seems eminently sensible; the costs are more than covered by the revenue flowing in from advertisers willing to reach however big an audience publishers deem appropriate. But when those dollars dry up, maintaining marginal circulation can quickly lose its profitable sheen.

Trade titles, in general, should lower their circulation by 5 to 10 percent, suggests Barry Green, vice president, director of circulation for Hearst Business Media. Frank Anton, president of Hanley-Wood, argues that publishers should hack as much as 25 percent. "Almost every magazine is over-circulated, which is to the detriment of the advertiser because they end up paying more, and to the publisher, because it costs more to send out magazines," says Anton.

While publishers are usually reticent about cutting, this may be a propitious time to act. "People have traditionally said, 'This is the universe,' and based on this universe, they've picked their circulation numbers," says Gloria Adams, PennWell Corporation's ATD (Advanced Technology Division) director for audience development. "Since then, there have been huge layoffs. Now you just don't have as many people in your universe."

But publishers have to proceed judiciously. Competitors will seize on your cuts, and advertisers may look askance at the moves unless publishers can back up their actions with new data that demonstrate market penetration or audience quality. "If a publication reduces circulation, I would expect that to follow the overall market trends," says Anne Liss, vice president, associate media director for Universal McCann. If a title is reducing circulation because it's padded, "they're going to have to do some tap-dancing around why it was inflated to begin with. They're going to have some credibility issues."

2. QUALIFY SOME OF YOUR FILES LESS OFTEN

Now may be the time to think about not qualifying all your subscribers each and every year. "If you're in a market with a lot of turnover, I think you have to have 100 percent one year, or very high one-year percentages," says PennWell's Adams. But if the magazine's readers tend to stay put, a publication can get away with carrying 20 percent two-year requals, she says.

The savings can be substantial. Take a magazine with a controlled circulation of 100,000. If the cost per name runs around $10 and you can wean 10 percent of your file from the yearly drill, you'll add $100,000 directly to your bottom line.

Many circulators, however, warn against three-year names. "You've been trying to get them to accept a free subscription for the last two years and they won't respond," says Scott Cravens, circulation director, Cygnus Business Media. "To me, that's a subscriber who's not very involved with the publication."

That attitude is echoed by Carol Lewis, vice president, group media director of McKinney & Silver. "Our clients are not charities," she says. "You need the publication to build your business, and if the publication is not viable because it's reaching subscribers that are two and three years old--just to save that bit of money--then why on earth would you devote your resources to that?"

3. GO HIGH END WITH SPIN-OFFS

On the wish list of many circulators plying the controlled-circulation trade is the desire to convert some of their files to paid. But it's a dream unlikely to come true. "It's expensive and the success ratio on that is very small," says Roland DeSilva, managing partner of investment bank DeSilva & Phillips.

Most b-to-b audiences have learned that they don't have to pay for magazines, making conversion not the most effective of quests. Instead, spin off high-priced paid products from your controlled title. "Maybe they won't pay for the magazines, but maybe they'll pay for an additional newsletter that's very tightly focused," says Nick Cavnar, vice president of circulation, Hanley-Wood.

Conversion can make sense, however, in some situations. Publishers looking to slash file inflation shouldn't just toss away those tangential readers; instead, they should try to get them to pay. While a I percent response would be considered great, it's worth at least testing these conversions.