Maximising the value from a recurring revenue model. 

Intermedia Brand Marketing’s Commercial and Marketing Director, Jamie Wren explores the opportunities that publishers have been presented in uncertain times to bolster and build on their subscription strategy. Covering three key elements: Prospecting and conversion to paid subscription; Onboarding & delivering subscriber satisfaction; Renewing & maximising lifetime value, Jamie reviews the key factors of each and offers some thoughts on how best to approach the stages through a subscription journey for any customer.  
 

PROSPECTING & CONVERSION TO PAID SUBSCRIPTION

Current thinking/trends

The COVID-19 Pandemic has changed the thinking of most businesses – regardless of size – across the world. Publishers are clearly not exempt from this and given these are, in the main, companies feeling the sharp impact from a drop in retail footfall there has never been a more important time to reflect on how we position our brands to new customers. Whilst the climate for consumers has changed – and continues to do so quickly – in recent months, 2020 has delivered the need for publishers to review how and where they can reach their target audience. 2020 has also delivered a whole new market of audience to publishers – a market of potential readers/consumers who may never have previously considered a subscription – in any format.

The opportunity should not be underestimated – how to best reach this audience and what offering to take to market are a critical decision that publishers have been required to get right – and quickly. How can you best maximise the opportunity in a pandemic?

For most, the opportunity to reach customers for sampling purposes has been curtailed. Events have been cancelled – newsstand sales (STILL a huge source of
subscription purchases) – were briefly decimated and customers were no longer transient – reaching a stationary customer was harder than ever in some sectors.

A world whose audience was seeking, more than ever, ways to while away endless hours was now locked behind their front doors – step in Social Media and the internet. Afterall marketing is about getting the right product to the right people in the right place and with the right promotion/price. The place was now their home, the rest is in the publishers’ control.

The customers are seeking a product that can be delivered to them – what is this if not a subscription! The customers are seeking a product to entertain them – a
subscription to a magazine they can engage with ticks this box. The customers are seeking to ensure they don’t overspend – a trial subscription is a great offering – or even better a free copy to sample… and a great offer to step up to.

More now than ever the frictionless process of an online sign up is key, this journey is at the heart of the prospecting, the conversion, the onboarding and the retention. At the centre of every marketing process sits the consumer and their experience. Understanding how best to convert a prospect is based upon an endless process of testing. Testing the price point, the sales message the proposition that is presented to the customer – and through what channel. Critical though to all of these is ensuring again that the right message is put in front of the right person – knowing the customer and what they are looking for is central to this.

Trends within the prospecting phase have differed widely by sector through 2020. Whilst the consumer-facing business has seen a surge in demand for products an
understandable apathy for business to business magazines has seen a reduction of copies being printed regardless of the interest sector, the opportunity in the last
quarter to once again grow the audience remains limited with restrictions in place. The shift in recent years to digital/online content in the B2B market has been
intensified through the period – but for many publishers, the printed word remains core to their offering and the ABC’s decision to adjust the certification through this period underlines just how much of a focus the publisher place on their printed media with advertisers and audience reach alike.

What does optimum performance look like?

Optimum performance for any campaign/strategy or circulation model will differ by publishing house, or even brand, and is dictated almost entirely by the publishers own business goals. Is the strategy volume, revenue, audience reach across multiple channels? These questions are at the core of any performance review. Before any campaign is undertaken it is critical to understand what the customer wants and their levers for purchase. Knowing this will help to ensure that the conversion performance has a chance to be is optimised for whichever model a publisher is working towards.

Setting a target regardless of the publishing model is critical to establish the performance and highlight lessons to be learned for the next campaign. What does good performance look like when establishing conversion rates? Where revenue is a critical element of success this can be driven by the cost per acquisition, the costs to print and mail the copies versus the initial revenue generated through conversion – is there a need for short term volume or an immediate return on any investment. Regardless of this, the key metric over time will be the lifetime value extracted from the consumer – how the campaign is targeted is likely to be influenced by these core strategies.

Common misconceptions / reasons for underperformance

The most common mistake any marketer can make is to lose sight of their understanding of the consumer. Core to any strategy is the customer at the centre of it. The product remains fully in the control of the publisher – however, this is irrelevant if the consumer’s needs, requirements, wishes and interests are overlooked. This may take the form of the payment methods offered at sign up – are we giving them the choices they desire, is it what they are used to across other service offerings. Are we offering them the payment terms they desire – do they have a large outlay upfront or can we offer a simpler solution, recurring payment methods to match their Amazon Prime account for example? Testing these service provisions should be at the heart of any process to ensure that the customer feels empowered to decide what they want to do and how they wish to do it.

Customers want to feel important – they want to feel loved. Asking a customer to give their opinion is often feared by any service provider – what if they complain,
aren’t we just inviting negative feedback. This is a common misconception and can fail the customer and the publisher in two ways.

1.) A lack of engagement with the customer pushes the brand down the list of their priorities. Receiving a magazine every month is no longer enough to keep us at the forefront of their minds – you can guarantee that Amazon, Netflix, their print cartridge provider or their grocery delivery service is getting in touch with them on a regular basis – so should we!

2.) A lack of understanding regards the customers feeling towards our brands reduces the understanding of what other customers may want. As previously mentioned how can we target a successful campaign if we don’t know anything about what makes our customers tick?

Now more than in any year I can remember our consumers purchase habits have changed – and are unlikely to ever change back. Habits are hard to form but even harder to break. Asking our customers this year what makes them buy from us, and what would make them continue to purchase is more critical than ever before – because it will no longer be the answer we have from the previous survey, it will be in stark contrast potentially.

What can publishers do to improve their performance?

I have already touched on a number of the points regards this question but they are worth repeating. In the modern world of marketing, it is easier than ever to ensure that the messages and campaigns are reaching the correct audience. The best campaign ever created will fail if it is not reaching the desired eyeballs – this should be the starting point for any strategy.

Understand the consumer – know the audience and what is important to them. Be that price, content, frequency, delivery platform.

Ensure that your prospecting and acquisition work is reaching the right audience. If the magazine is a parental purchase then this audience can be identified through PPC campaigns on social media, through specific groups on these platforms and based entirely on the digital profile of the demographic.

Newsstand remains a key driver for sampling of products and potential subscription conversions. As the retail landscape welcomes back its customer base all publishers should ensure that any copy bought in any store contains a subscription offer that is too good to refuse. The customer has invested in a single copy purchase, they are already halfway there. A strong offer with reasons to purchase framed around the publisher’s consumer insight will help grow the conversion rate.

ONBOARDING & DELIVERING SUBSCRIBER SATISFACTION

Current thinking / trends

Amid the recent turmoil, it is safe to say that consumers are – more than ever – judging the service they receive instantly. Consumers are under pressure from external factors beyond their control and the patience that they show towards service providers has never been under more strain. However, when an onboarding process for a service or product is seamless and delivered well there has never been a better time to gain trust and loyalty from a consumer base seeking a reason to feel positive. So we have reached our desired audience, we have converted them to a paying subscriber and they have now received an order confirmation page on the website. The hard work is done? This is just the start...! Onboarding a client has often been seen as part of the acquisition strategy – in my view, this is absolutely the start of a retention strategy. How the customer feels in the first days/weeks or even month of their customer journey is critical to their decision making as they reach the point of choice at the end of their first term, be that a step up form a trial or the end of their first year.

More than ever the customer base of any industry is seeking immediate gratification. They have invested in us so we now need to deliver the goods – and in some cases quickly! Through lockdown, the delivery of goods was more important than ever, in a modern world of e-commerce we are up against the Amazon affect. Order now deliver this evening. Expectations have changed and are unlikely to revert. Print publishing does not lend itself to delivering against these expectations easily however open dialogue, honest information and quick communication can help to manage expectations – even turning them into a positive if phrased correctly. Once we have converted a prospect to a customer it is critical that they feel their decision to purchase has been rewarded with dialogue from the publisher that is delivered swiftly and underlines, even solidifies their decision.

What does optimum performance look like?

As with any performance review, it is critical to know the metrics that we are using to gauge the success and as with the review of the conversions, the metrics will tell a different story depending on the targets set by the publisher at the outset. Goal setting should be used at every stage of a subscription strategy. The success of the onboarding process can be judged in a number of ways, all of which can give quick indications of any bumps in the road.

Firstly – if things are not working well you will know about it quickly – the customer service phones will be ringing and the email inbox will be filling up quickly. It is soon clear on a Monday morning if there has been an issue over the weekend on the website order process or if copies that should have been delivered on a Saturday have not arrived.

Understanding the trends through these communications and putting in place measures to resolve the issues is key, on this basis, optimum performance looks like a quiet inbox and a customer service team looking serene! It is fair to say that neither end of this spectrum is likely in most instances – customer by their nature will complain, that’s what we do. So optimum performance is likely to be somewhere between the two.

A bigger indication of the success of your onboarding process is the rate on which customers may cancel their subscription to your services. This metric is easily recorded and when compared by campaign can give a huge level of insight into what is working well – and what needs tweaking.

Social Media – for all its sins – can be a huge pool of learning about your customers’ thoughts regards your processes and your product. They will be quick to complain – as per the customer service teams experience – however customers are increasingly eager to share their positive opinions. Highlighting your social media handles in your onboarding communications and welcoming their feedback – or even incentivising them to share their thoughts can be a very positive way to gauge the performance of your activity.

Common misconceptions / reasons for underperformance

The most critical point in the journey of a subscriber is the point just after they have pressed the “buy” button. They have taken on board the messages that have been sent to them, made a conscious decision to buy into the product and the oer they have been sent and have now become a customer, not a prospect. This is the point that many publishers now move onto their next target – this is a battle they have won….right? No!

It is absolutely essential that during the initial phase of a customers lifecycle with any product they feel informed. Informed about the delivery timelines, informed about their payment plan – dates and amounts, Informed that what they believed they purchased is correct and in line with their expectations.

It is very simplistic to review any subscription strategy based on the number of people that you “won” or acquired versus the number of people that you “lost” or churned at the end of their contract. This simplistic view is too often the metric that is looked at after the campaign has reached the end of its first term... at this point, it is too late. Decisions by a customer about their satisfaction are shaped and formed in these early stages and the performance of the onboarding process is critical to making sure that acquisition does not turn into the need to re-engage with a lapsed subscriber down the line.

What can publishers do to improve their performance?

Historically the main reason for a publisher feeling unable to maximise the performance for onboarding has been the delay in the delivery of the product. An order is placed, the next issue is printed in a week and delivered 3 days after that. As previously mentioned, in the word of the Amazon consumer this is simply not good enough.

Through the pandemic, we worked with clients to assist in the delivery of digital content through web URLs embedded in the welcome email. The next issue may well be with you in 2 weeks we would confirm – honest and clear engagement in their welcome pack – but click here to enjoy the latest issue and at no extra cost! In a world where finding something, anything in the case of children’s magazine, to do instantly this is an option that should be explored by any publisher and ensures that the instant gratification is felt – albeit through the digital delivery if not in print.

Instant delivery can serve another purpose. It builds a habit of interacting with the content of the product instantly. Another misconception often made in a world where magazines are now just “another” subscription product along with inkjet cartridges, razor blades and washing machine capsules is that magazines are now less habitual. They are not. Building this habit quickly with a consumer – ensuring that between delivery of the print product there are touchpoints to maintain that habit – is critical to ensuring the onboarding process is a success.

Communication through this process is critical. Delivery of information to the customer quickly, clearly and ensuring the information manages any expectations is critical to building trust with the newly acquired “brand ambassador”. As previously mentioned customers want to feel special. They have placed their money with your brand – likely deciding to choose you over another alternative. We need to repay that faith and ensure they feel suitably rewarded. The language we use can help this process, when describing a consumer as a brand ambassador it is important to remember they are just that – if we ask them to be and treat them as such.
 

RENEWING & MAXIMISING LIFETIME VALUE

Current thinking / trends

It is a common theme in this document but it is worth repeating. A retention strategy for any publisher should start at point the subscriber is acquired. Experience of the onboarding process sets the tone for the remainder of the relationship, builds trust and in turn loyalty. Any subscription manager will tell you that a keyword in any retention strategy is loyalty.

In a world where customers are used to switching on a service and switching it off just as quickly through their monthly billing cycle a subscription to magazine carries with it what can seem like a very old fashioned retention cycle be it quarterly, bi-annually or – can you imagine it – a yearly renewal. Amongst all other subscriptions that a consumer may be signed up to the way in which a magazine sub operates is now likely to be the anomaly rather than the rule.

All this said the retention rate for a publisher remains the absolute critical indicator of success – and with it carries the highest value to the business. Get retention right and the file will grow, get it wrong and it is nigh on impossible to fill the gap left by the churn if you are not able to keep the customers you have already won over then the business model will soon break.

It has always been the case that in any model that relies on recurring revenue the key to profitable growth is to keep hold of the existing customer base. They are less expensive to maintain than a brand new customer is to acquire, over time the loner they are retained the more likely they are to stay with you term after term – so an exponentially positive impact on the growth of a file is possible and a loyal customer base is increasingly more likely to deliver revenue to a publisher through the purchase of other products in a portfolio – be that printed material or associated products/experiences.

Whichever way you look at it, at the heart of any subscription and circulation strategy should sit the question about how to keep your current customer base.

That is not to say that you always want to keep every customer – more to follow in that!

In a period where the country is facing uncertainty and recession is likely the retention of customers will inevitably form a big part of the publishers business plan.
Subscriptions are – by their nature – a more stable form of revenue during recession than stand-alone, single purchases. The nature of a subscription model is its
predictable revenue from a (hopefully) stable base of customers. With positive retention performance any subscription business can be protected from the downturn – and in some cases even thrive. At a time where budgets may be looked at closely the cost of retention versus acquisition has never been under more scrutiny.

What does optimum performance look like?

The optimum performance for retention, like the other areas in this document, can vary depending on the strategic direction of the publisher however it is realistic to suggest that the optimal performance should be broken down by the age of the subscriber and the payment method through which they subscribe – by which I mean how long in years or how many contracts they have served with the brand and if their payment is continuous or manual.

Critical to either of these splits of data is the lifetime value of a subscriber to the publisher. The value attached to the full lifespan of a customer is the single most
important metric for retention marketing, any decisions should be based on maximising this value.

Retention at the end of the first contract falls into two categories, a standard first term and a trial term. Typically the trial offer will result in a higher churn – this is
difficult to avoid given the mentality of a trialist shopper, and there are plenty of these around in the current climate.

Churn rates typically for a trial offer (short-term low cost to regular longer-term contract at higher value) will often sit between 30% and 50% for continuous payment methods. In such instances the volume of the trialists can often be the key to a successful campaign – 50% of a higher volume to convert to second term and beyond stands the lifetime value model in good stead. This is only at the optimum performance if the cost to acquire is in sync with the revenues of course – often an optimum performance for triallists is more dictated by the CPA than any other factor.

The second example, a standard first term renewal is often the absolute key to the publishers lifetime value. Failure to retain customers beyond the first contract term limits the value of the customer and in most cases will push the net revenue for the subscriber below zero (or loss-making). It should also be noted that beyond the first contract renewal the expected percentage of customers renewing will increase as their loyalty to the brand grows – in some cases significantly.

When reviewing “optimum performance” of retention a publisher should take into account the value of retained subscribers. Losing a large number of subscribers with low value but retaining a smaller number of subscribers of high value can in some metrics look like a failed retention strategy in percentage terms. For the bottom line, this would be considered a success, particularly if the lifetime value of the lower revenue subscribers is not projected to increase.

It should always be understood that in any walk of life, customers will at some point choose not to renew– this is just life – understanding why can shape a retention strategy and help to reduce similar potential losses however there is always a requirement to accept the fact that regardless of what you do, optimum performance will never be 100% retention...

Common misconceptions / reasons for underperformance

The most common misconception in retention marketing is that any lost subscriber is a bad thing. As mentioned above there are a number of instances – particularly if the pricing on acquisition is wrong – where a customer will be loss making. Costs attached to production/postage/distribution can also change leading to a number of subscribers in a file becoming lossmaking when previously revenue generating. Losing such subscribers from a file can, in effect, benefit the bottom line. It is absolutely essential that the subscription value of a customer is understood to ensure that contract pricing can be adjusted accordingly as part of the retention process. Publishers – and in particular those seeking value over volume strategies should not be afraid to ask a customer to pay a profitable price and should not fear losing these subscribers if they choose to decline the offer.

Performance of renewals is easily tracked through numerous methods and reporting templates. Understanding the contract end dates and the volume of contracts is key to monitoring the performance. This performance can be poor based on any number of the moving parts within the process failing which is why there is such an importance on accurate reporting to identify issues quickly and resolve them effectively

As previously discussed the onboarding process may be a key factor in the retention rates falling below par, if not recognised early the first point at which a publisher will know of this failure will be when the subscribers turn their back at expiry. Beyond this the communication through the contract term can lead to a poor retention rate – timing of renewal notifications, the delivery method of the renewal notification and the pricing within the notifications can all play a part in a subscriber deciding against a renewed term.

Regardless of the timings, the price and the customers perception of the value external factors can of course play a major part in retention. Not least of all in the current climate where cost savings are sought by any individual. It is at this point when a customer is reviewing their outgoings and their direct debits on the bank statement that we need more than ever to maintain the trust in the brand.

Editorial shifts in a magazine, price rises to cover increasing costs or changes in frequency of publication due to external factors will all play a part in retention rates
potentially falling below expectations. In recent months publishers have written to customers to confirm suspension of the production of the magazine, this combined with the tightening of belts can prompt a cancellation by an otherwise content subscriber.

What can publishers do to improve their performance?

There are always ways that a publisher can review their performance and improve upon their retention, any publisher that stands still and admires their retention rate will soon enough be scurrying to ensure they can get them back up to their previous levels – the change in consumption habits and shopping behaviour will always ensure that treading water is a fool’s game. At the centre – as ever – of any improvement in retention is a full and complete understanding of the customer.

If a publisher does not know the customer then areas of underperformance in the retention strategy may be easy to identify but are far more complicated to resolve. How can we improve the response rates to renewal efforts if we do not know if our customers open their emails, do we know if our customers have responded to written letters previously, do we know if the customers believe the product to be good value – these can all play a part in deciding how, when and at what price to ask customers to re-subscribe. Added to this an understanding of what customers enjoy about the product and what they believe to be the most important aspects of their relationship with the brand can dictate the language we use in the communications – a letter stating “if you don’t renew you won’t continue to benefit from X, Y and Z” can be more powerful than the price point. A renewal price is only too expensive if the customer deems the product to be worthless.

Customer surveys are a simple way to learn more about the consumers who are buying our products. As previously stated – reaching out to the customer base and
asking them to tell us what they think of the product can very quickly enhance the engagement level. Making the customer feel like they are at the centre of the product is key and will deliver far more insight than any marketing team can gather – straight from the horse’s mouth.

What publishers do with this data and insight is the most fundamental part of the process. Using the information to tailor the communications, outline the benefits of a subscription and hammer home the many reasons to continue to subscribe. This can be achieved through segmenting the subscription file based on the channel through which they subscribed, how long they have subscribed and the price they are paying – then tailoring the communications based on this segmentation. This ensures you speak, for example, to your most loyal customers with a different message to those that have reached the end of their first contract. The message, price and reasons to renew may well differ and thus should be conveyed accordingly.

Thinking outside of a pure magazine subscription customer base is a further key step to shifting how the customer perceives their relationship with the brand. A
customer will feel a far greater affinity with a brand if they believe themselves to be part of something greater than receiving a print product every week or month.
Offering the customer an opportunity to take advantage of “VIP” discounts for products/tickets/affiliated items can further deepen the engagement. Suddenly cancelling a subscription is no longer about simply stopping a magazine hitting the doormat, no longer being a member of an exclusive network, a club or the access to such discounts is a far greater pull – and if presented in the right way will have an immediate impact on retention rates and for most publishers, will carry limited cost provided the component parts of the package are organised in the right way and with the right partners.