Analyze This

Folio: The Magazine for Magazine Management, June 1, 2004

Byline: Susan Thea Posnock

Hairong Crigler, director of database marketing at TV Guide, has transformed the magazine's database from a basic list of names to a powerful relationship marketing tool that has saved the publisher millions and brought in incremental revenues.

Although the system cost $3 million to $4 million to build in 1999, it paid for itself in two years and led to an impressive 50 percent lift in response and a 10 percent lift in renewals. At the same time, the cost of acquisition has dropped 50 percent, to about $10 per customer.

"The modeling technique is not that complicated, but it's very powerful and gives you a view inside the customer," says Crigler. The new system has added analytic tools that allowed her to segment subscribers who had already renewed several times into four subgroups - high risk, low risk, middle high and middle low risk - based on factors such as loyalty, pricing sensitivity and response to previous offers.

"The high-risk group is very vulnerable to drop out if you raise the price," she says, "whereas low-risk clients are so loyal you don't have to do anything for them." In the past, all groups were treated equally, but now, marketers approach each segment with a different offer based on their classification. For example, they don't need to spend money on getting loyal subscribers to re-up. But for high-risk customers, they can drop the magazine renewal price but increase the length of the contract. "In the long run, we've kept the customer for a higher rate base," says Crigler. "This doesn't cannibalize revenues because the out-of-pocket is the same, and the renewal rate is increased." That saves publishers money because it's much cheaper to renew than to acquire new customers. Likewise, marketers can raise prices for the most loyal subscribers while offering premiums to make them feel appreciated.

The model has also helped Crigler recapture a lot of renewals from agencies, which keep a big chunk of the renewal fee for themselves. "One type of customer will actually renew through the agent even if that means paying more for the subscription," says Crigler. But the price-sensitive group are likely to respond if marketers explain to them that it's cheaper to renew through TV Guide directly. "We can determine who these people are in advance," she says, "and recommend to the marketing group to target them before they get the agency renewal."

Large companies that own databases should take advantage of such sophisticated tools, she says, but smaller publishers for whom it would be cost-prohibitive can start out small with acquistion modeling. "It's the lowest branch you can reach and see success in a shorter time. A small company can start with that and show management this can work," says Crigler.