On the Brink Of a Breakthrough

Folio: The Magazine for Magazine Management, May, 2000 by Mary Harvey

PUBLISHERS ARE MOVING CONTINUOUS SERVICE OUT OF THE TEST PHASE AND INTO PROGRAMS THAT PROMISE TO BOOST RENEWAL RATES AND SLASH COSTS. AS THIS APPROACH GOES MAINSTREAM, MANY BELIEVE IT WILL TRANSFORM CIRCULATION MARKETING.

PUBLISHERS HAVE BEEN DOING THEIR shares of mailbox stuffing: As response rates have gone down, the volume of promotional mail has gone up. Billing series are series are getting bigger without getting better. And when the time comes to renew, subscribers don't receive two or three gentle reminders--they get 15.

But the post office may soon be reevaluating publishers' best-customer status. Continuous service--a marketing tactic that offers termless, openended magazine subscriptions that are automatically billed to consumers, ideally to their credit cards--is gaining ground, say consumer marketers. The idea is to sell magazines as a service, like AOL or cable TV, rather than a product, like peanut butter or cereal. Under this arrangement, when a consumer signs on to receive the magazine, the subscription continues until the consumer says stop.

It's a scenario that offers something for everyone: The customer receives less unwanted mail, and the publisher maintains a subscriber base much more cost effectively, enjoys higher renewal rates and saves promotional costs.

"The industry has an enormous opportunity to transform itself," says Michael Loeb, president of subscription agent Synapse Group Inc. (formerly NewSub Services Inc.), a pioneer in marketing the concept of continuous service. The nine-year-old company now has tens of millions of customers who receive their magazines this way. And according to Loeb, it's an idea whose time has come. "This is not taking a little old lady and dragging her across the street," he recently said at a Magazine Publishers of America seminar. "It's something consumers want."

Continuous service, however, is not a new idea. American Express Publishing first began offering continuous service subscriptions to its card-holders 28 years ago, and Synapse's success in marketing subscriptions via credit card statements has been well documented since it began doing so in 1996. Over the last decade, more and more publishers began testing, and a handful were able to make the concept work--though they have been the exceptions, not the rule.

[gg]Time Inc. currently has 20 percent of its total subscriptions sold on continuous service and aims to have upwards of 40 percent by 2003, says Monika Winn, vice president, customer marketing. The cost savings are enormous, she says: Time Inc. estimates that a full-scale rollout of continuous service across all titles could mean a $50 million to $70 million improvement to its bottom line.

Now, however, it appears that continuous service is finally catching on. In FOLIO:'s 1999 consumer magazine circulation trends survey (May, page 49), 24.5 percent of respondents said they offered continuous service. Of those who had not yet offered the service, 35.1 percent said they were planning to do so within the following year--a jump from 19.2 percent in 1996. And a growing number of publishing powerhouses are now past the testing phase and are rolling out continuous service in various components of their circulation strategies:

[gg]Reader's Digest Association, which first started testing continuous service in 1993 and rolled out the program in 1996, is now expanding continuous service into other areas, such as its gift business.

[gg]American Express Publishing, which first began selling Travel & Leisure through continuous service to American Express credit card holders in 1972, now has between 30 and 70 percent its of magazine and book customers on this service, reports Mark Stanich, senior vice president of consumer marketing. The retention rates for these customers can be 5 to 15 points higher, he says.

[gg]IDG's PC World, which has been testing continuous service for four years, is now preparing to incorporate it in renewals, according to David Cobb, associate circulation director.

[gg]Hachette Filipacchi plans to roll out continuous service either later this year or in early 2001. The company's goal is to have 20 percent of its file on this service in the next two to three years.

While publishers are encouraged by the possibilities of continuous service, they acknowledge that there are still some kinks to be worked out. But to speed up the process, most publishers have been uncharacteristically open to the idea of sharing data. "It's a little bit of a radical approach to share information with our competitors," says Winn. "But this is something that's ultimately going to benefit the industry as a whole." With that in mind, a number of continuous service frontrunners offer lessons learned.

Offer a clear explanation

One of the most critical elements in getting a customer to sign on to continuous service, say consumer marketers, is a clear explanation of the program's concept and terms. Fearful of creating another debacle like the one shrouding sweepstakes in recent years, publishers are taking pains to present honest, straightforward language from the get-go.