Circulation executives, whether consumer or b-to-b, are all too familiar with the list and overall acquisition challenges that come with a dismal economy. Advertising declines spur cuts in circulation marketing budgets just at the time when marketing may be needed most. Smaller and fewer mailings result, which in turn mean fewer new names coming onto fi les. Over time, this lowers response rates, making it tougher to make rental lists work from a P&L standpoint. At the same time, marketers may be forced to cut back on the list testing that’s important for uncovering responsive new files.
As many marketers note, it’s a vicious cycle. Still, circulators are nothing if not resourceful. Here’s a report on how consumer and b-to-b publishers are adapting their strategies to leverage names and budgets to the max.
Cost Pressures, Smaller Mailings Depressing Consumer List Rentals
In-house publishing list managers report that consumer magazine list rental revenue is down signifi cantly—meaning, in some cases, by 20 percent or more.
Bonnier Corp.’s mailings are less aggressive lately, and the company has cut back on list rental expenditures, says consumer marketing director Robert Cohn. “When we do rent, we’re focusing on lists that fall within the top 75 percent in terms of performance,” he adds. “We’ve stopped using the lowest-tier lists.” As for list testing, Boardroom Inc.’s current model is typical. “We of course still do list testing, but we’ve been doing far less since the economic downturn began,” says director of marketing Rita Shankewitz. “Particularly if it’s a rental, we have to feel very confi dent about a list’s potential universe to be willing to test it. If it’s an exchange, we’re more likely to consider testing.”
In short, tighter targeting and sticking with the “sure bet” are the name of the game—and publishers are far from alone in this. In fact, catalogers, facing a far-from-merry Christmas in the current environment, are as a group pulling back on mailings more than their publishing counterparts. And while the sure-bet dynamic has made publishers more inclined than ever to largely confine rentals to other magazine subscriber lists, reduced catalog mailings contribute to a smaller overall pool of new hotline names, further narrowing all marketers’ options. Widespread marketing budget cutbacks underlie the shift to more conservative mailing practices, of course. However, other factors are also at play.
Some publishers—including some with higher-than-average sub prices (though financial magazines, among others, are reportedly doing well)—report that response rates are suffering from consumers’ discretionary-spend cutbacks and heightened resistance.
“At this fall’s DMA conference, everyone was talking about response being down,” relates one consumer marketer of publications that fall in that higher-than-average price category. “Many, including some publishers, were citing declines of 10 percent to 20 percent, which jives with our own recent experience, at least for some products. If you’ve been mailing twice a year, you’re maybe deciding that you’ll only do one this year."
The good news is that magazines in the mainstream subscription price range—roughly $10 to $15—report that new business mailing response rates have remained steady despite the economy.
“Our mailings have been doing well, including our September mailings,” says David Ball, vice president, consumer marketing for the Meredith Publishing Group. “In fact, September mailings came in a little above budget.” Most consumer marketers attending a recent industry meeting also reported that their subscription programs were holding up, he says.
“We didn’t experience any significant attrition in mailing response from January through most of September,” concurs Bonnier’s Cohn. “However, we saw a definite impact on a mailing that dropped at the end of September, the week before the news hit about the credit crisis. Our first-week flash counts were very strong, but response died after that news, and we ended up falling short of projections by about 20 percent. Still, a mailing we \ dropped in October is doing very well.”
Consumer marketers say that gross response to new-business mailings has remained in the roughly 2 percent to 5 percent range, with hard offers generally pulling between 1.5 percent to 4 percent (with pay-up of 90 percent or better) and soft offers pulling 3 percent to 5 percent (with perhaps 50 percent to 55 percent pay-up).
Still, virtually all consumer marketers acknowledge that they’re nervous each time a mailing goes out in this economy, and particularly anxious to see whether response rates will continue to hold through gift sub series and the all-important post holiday acquisition mailings.
And let’s not forget the impact of hikes in paper, postage and other direct mail costs. “Even if you can pull the same response, the costs of mailing are so high now that the P&L is not as good,” points out Boardroom’s Shankewitz.
As for email, while savvy multi-title consumer publishers are working hard at cross-marketing subs between sister magazines with affinity via promotions/ads in opt-ins for their e-newsletters and collecting more emails through site registrations, most interviewed report that renting opt-in email lists doesn’t work for them.
Base prices for consumer email opt-in lists have dropped from about $250 per thousand five years ago to between $100 and $125 per thousand currently, according to Bonnier director of list management Mary Pizzarelli. Still, adds Cohn, in Bonnier’s experience, this hasn’t made them cost-effective from a subscription marketing standpoint, except in cases where a joint sponsorship enables putting the list owner’s name on the email.
B-to-Bs Still Rely on Telemarketing, but Challenges Grow
Relatively few of the controlled-circulation publications that dominate the b-to-b arena use direct mail these days— although list managers and brokers say that direct mail and list rentals continue to be very key in certain markets. For instance, direct mail is critical in reaching medical and legal professionals who tend not to spend much time at computers or be reachable via email.
For most controlled titles, however, heavy dependence on telemarketing for both new subscriptions and requalifications is the rule. In fact, in many cases, 60 percent or more of a controlled magazine’s total circulation file, and even higher percentages of new subscribers, are telemarketing-generated.
This means paying a compiler to append phone numbers to lists or renting telemarketing lists—one reason that rental business is healthier on the b-to-b than consumer side.
But even telemarketing response rates aren’t what they used to be. “It’s harder to directly reach primary qualified prospects and requals, in part because people are being laid off and not being replaced,” says Jerry Okabe, VP, audience marketing/circulation for Penton. “With qualified universes shrinking, and publishers holding off even longer before going to telemarketing because of budgeting challenges, calls are even more concentrated during the two pre-audit periods each year. That means people are more likely to receive calls from multiple publications within a small window of time. So even though they rely on these publications, some get frustrated and either stop taking calls or say they’re unwilling to spend time answering qualification questions.”
“Response rates for telemarketing—and pretty much all sources—are down,” agrees Gloria Adams, senior VP, audience development and book publishing, PennWell. “Business people are more time-challenged than ever, and many information sources are competing for their time and attention.” Telemarketing acquisition campaigns are now pulling about 20 percent to 30 percent response (some controlled campaigns used to pull a 50 percent response).
“Some b-to-b publishers are cutting back on their telemarketing budgets” due to a combination of lower budgets, rising costs and response challenges, adds Elaine Tyson, president of Tyson Associates, which manages circulation for b-to-b and consumer magazine clients.
Still, it’s tough to reduce telemarketing, because readers acquired or requalified even once by phone are subsequently less responsive to written or email overtures. Okabe says there may be a way to turn this to an advantage, however, by analyzing the response patterns of the most critical qualified segments, in particular, and going directly to the phones on these names rather than spending money on other efforts first.
List pros say that demand for b-to-b multi-channel lists, such as lists with both phone and postal contacts, has increased, as some circulators seek to boost response by following up phone efforts with written efforts, or vice-versa. But while multi-channel approaches might pan out on P&L, the lists are of course more costly.
“With new budget cuts coming down on a routine basis, we’re all working on a one-campaign-at-a-time basis,” says one chief b-to-b circulator. “Planning in advance becomes futile, so you just say, ‘OK, I know for sure now that I have this $5,000,’ and then decide how you’re going to use it.”
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According to one list management and brokerage firm, more b-to-b publishers are setting up private databases or using public databases that provide ongoing access to outside lists. Usage is reported and paid for on an as-mailed basis. This enables volume price discounts, as well the flexibility of having names ready on demand.
List managers say that b-to-b email lists continue to be in demand, but audience development execs interviewed for this report say they rarely, if ever, do straight rentals on such lists, at least for controlled publications. “We would rent more email lists for controlled if the response rates were better but we haven’t found them to be cost-effective,” says one circulator.
The marketing economics and list scenarios are quite different for paid business publications, which continue to be much more engaged in direct mail and apt to buy targeted direct mail and email lists, as well as telemarketing names.
“Even in this economy, b-to-b rentals are holding up very well—in fact, they’re holding the business together,” says one broker, who emphasized the demand for the name segmentation capabilities possible with email lists generated through vertical b-to-b Web sites.
However, both the current economy and ongoing cost and response pressures are posing increasing direct mail P&L challenges for some paid b-to-bs.
For example, at Bobit Business Media, director of marketing and e-media Christine Oldenbrook reports she’s finding it increasingly difficult to make direct mail to rental lists work cost-effectively for Police, a business title that costs $25 for 11 issues and employs a one-free-trial-issue offer on its Web site. Police, the only Bobit title using direct mail, has seen declining results, says Oldenbrook. “If profitability doesn’t improve over the next couple of years, we may have to move to other sources.”
Order-by-Order Negotiation the Rule
As always, less demand leads to lower prices—and lists are no exception. Nevertheless, the latest results from Worldata’s List Price Index—showing, for the first time, a decline in average price in every list category—made headlines in the direct marketing trade press.
Worldata’s tracking index results for this October versus October 2007 showed substantial average CPM declines for some list categories. Permission-based b-to-b lists saw the greatest drop in average price in dollar terms (-$12 CPM), though even with a 4 percent decline to $293, this category still commands by far the highest pricing. The average for permission-based b-to-c email dropped by $11, or nearly 7 percent, to $150.
Magazine direct mail lists, particularly b-to-b, fared considerably better. The average controlled business list price declined by $3 or 1.9 percent, to $153, while the average for paid business lists was down by only $2 or 1.4 percent, to $142.
“These are rate-card prices, which of course don’t reflect behind-the-scenes negotiation,” points out one list executive.“With rental revenue declining, more list owners are willing to discount base prices to get orders. The longer-term wisdom of this is questionable, but with advertising suffering, they need the immediate list revenue.”
Magazine list managers acknowledge intensified pressure for base-price deals, but most maintain that they’re staying firm on base for the most part, and have instead become increasingly open to negotiating other terms on a case-by-case basis.
“We’re not lowering base prices to get orders, with the exception of catalogers or fundraisers who can’t afford to rent at the standard price,” says one consumer publishing list manager, whose magazines’ base CPMs range between about $80 to $100. “But yes, we do negotiate other terms case-by-case.
Today, we’re all more open to dropping the $10 to $15 select charge, reducing minimums or even negotiating the upcharge on hotmail names.”
One in-house list manager notes that some consumer magazine publishers are now offering permission-based email names for rental, although they may rent only or primarily to advertisers. “There’s advertiser demand for permission emails, so it’s smart to have these lists in shape for rental as an extra source of income,” says this manager.
B-to-Bs: Even Greater Internal Cross-Marketing
The obvious question: If many magazine publishers are reducing the sizes of mailings and other efforts, sometimes cutting campaigns, and for the most
part buying fewer outside lists, how are they meeting rate bases? On the consumer side, some are turning to agents and/or developing direct-topublisher partnership marketing programs. (And some who’ve been forced to fold titles are finding an upside in the ability to transfer those subscribers to a sister title’s file.) Meanwhile, b-to-b circulators acknowledge that the cost/response crunch has, in some cases, made it necessary to put more names on a file that don’t fall within a title’s primary target qualification groups, or add directory or other sources to
supplement gaps in individual request.
However, a big part of the answer for many—consumer, as well as b-to-b—is leveraging house lists and cross-marketing to maximum advantage.
Multi-title b-to-bs have been building internal email databases for years. But today’s publishing climate has ratcheted up these activities. Circulators report that email-generated names generally make up about 10 percent to 15 percent of controlled files.
“We have several databases of both controlled and paid names within given markets,” says PennWell’s Adams. “We build these through circulation, events, enewsletter registrations, Webcast participants, whitepaper downloads, you name it. And we mine them heavily.”
But cross-marketing can breed fatigue. The potential for email fatigue “is the number-one concern that keeps me up at night,” says Adams. “You have to think about how you can continue to use the same names for multiple internal marketing purposes, and still be able to rent them and have those users yield the response rates they need.”
Mining House Files,Modelling Outside Names
Consumer marketers always exercised due diligence in testing lists, negotiating where possible and ranking performance to cull out the worst-performers.
However, the significant sums dedicated to renting direct mail lists that were once routinely built into consumer marketing plans are being reduced through a variety of strategies, starting with an emphasis on cross-marketing among sister titles.
Modeling has been a key component in the success of crossmarketing. “Most of what we do internally is modeled,” says Meredith’s Ball. Indeed, new positions dedicated primarily to modeling are becoming more common. Traditional internal list management jobs are “evolving into database modeling jobs,” notes Bonnier’s Pizzarelli.
Modeling against outside lists—particularly in the context of co-ops that employ transactional modeling to identify and match up mailers with affinity— is an option that’s become increasingly attractive because it enables mailing to fewer but more responsive names. Bonnier, for instance, is working with a modeling/co-op database vendor to identify responsive names, cull out bad payers and even resurrect expires going back as far as five to seven years. “Outside modeling used to be too expensive, because you’d have to invest maybe $5,000 or $10,000 to build the model, but now you can just commit to buying a certain number of names, and your test volumes usually cover the costs of model building,” says Pizzarelli.
Bonnier has also used a catalog co-op database. Consumers who have purchased products at least twice from catalogs with affinity to Bonnier’s special interest magazines have proven responsive enough to fall into the “mid range” in terms of the publisher’s overall list performance rankings, reports Cohn.
Exchanges have also become an increasingly important, or even dominant, practice when it comes to filling outside name needs. While Meredith does rent lists to a degree, the company relies on exchanges (mostly with other publishers) for a “dramatic” portion of its outside names, Ball reports. “Our biggest concern is that our exchange partners are cutting back on mailings, which results in fewer names available for exchange,” he says.
Circulators may be more budget-challenged, but their motto in regard to names—actually, their motto in general—continues to be “where there’s a will, there’s a way.” |
