“Bifocal management” is a neat phrase which captures the current need to keep a long-term strategy in view at the same time as still trying to do the basics of the “day job”

That double perspective is a theme which runs through the PPA’s Publishing Futures 2013 report where magazine publishers are trying to manage costs tightly at the same time as investing in new platforms: where marketing budgets are rising, but are being spread more thinly across more channels; and where the retail channel requires more focus, but where the real return on investment from that focus is becoming harder to quantify and justify.

Bifocal management is seen in every link in the chain.  Regional newspapers are driving down retail margins (in percentage terms at least) as they seek retailers’ support to develop their sales.  The wholesalers are diversifying their businesses into new areas while driving ongoing efficiencies from their core businesses.  Here, Smiths News is pushing towards its 2016 target of having 50% of its profits coming from outside News & Magazines while it is edging up margins in its news wholesaling operation.

In retail, it is the same mix of strategy and day-to-day.  On one hand, there is multichannel retailing, the dash to small stores and convenience; and Tesco is clearly planning an entertainment presence to offer a credible challenge to Apple and Amazon.  At the other extreme is the reality of damp newspapers and magazines being delivered in wet tote boxes which has given rise to the Home & Dry campaign.  Add in the Scan Based Trading debate over in the USA, which is a curious mix of the strategic and operational, but with massive financial implications for the whole supply chain.

Digital, in turn, is not offering any easy solutions.  As Dovetail’s Digital Subscriber Survey shows, the emerging digital landscape is complicated.  The supposed “digital market” is actually made up of a series of micromarkets running at different speeds and with different pools of consumers who want different things from their digital products and services.

And just when you were thinking that there must be a logic and a strategy behind every major development, along comes TV Pick.  Whatever the original reasons for launching it (and there are some intriguing explanations for that!), it has turned into a good, old-fashioned street fight between two privately-owned companies with deep pockets who will keep on hitting each other until the other one caves in.  Sometimes, business can be as simple as that!

“A nice, long, slow transition into digital.”  That is the forecast for magazines from the person at Amazon who looks after content for the Kindle – Russ Grandinetti. 

While the transition – if that is what it actually is – may not feel as though it is nice, long and slow, it is reassuring that someone responsible for filling the Kindle with content sees some mileage left in print.  Yet on the other hand,  a number of publishers would prefer the transition to be as short and fast as possible when they see their print circulations declining. 

The year has started with manic activity, including the collapse of three substantial retailers in HMV, Jessops and Blockbuster.  This has focused attention on the need for a balanced channel strategy.  That is not just about balancing independents against the retail multiples (a theme in the news); nor just about balancing convenience against high street (another theme).  It is also looking at subscriptions, where sales are sliding faster at the moment, but which are going to be the long-term future for many titles.

Yet obviously the big channel strategy issue for 2013 is balancing digital against print; and much of that comes down to price.  Should digital be price-discounted, as common wisdom suggests?  Or should it be premium-priced above print, as a number of US magazine publishers are trying at the moment?  And how high can cover prices go anyway, whether print or digital?

Yet even within digital itself, there is channel balancing to be done, primarily with the dangerous power that Apple Newsstand has developed.  How can publisher-direct business be built up to counter that?  The changing device market shares, in both tablets and smartphones, are altering the look of the landscape and must erode Apple’s power in the long-term.  So, there are some major digital channel management issues emerging and not just technological ones.

Yet despite all this, there seems to be a more confident mood in the industry, which is coming through the results from the PPA’s new Publishing Futures survey.  While none of the challenges are going away or getting any simpler, the publishing business appears to be more matter-of-fact about getting on with it all and having a bit more self-belief in being able to cope, even though it may not have all the answers at the moment.

The ongoing changes in the industry will most definitely not be nice, long and slow, but they do feel a bit more manageable than even a few months’ ago.

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That is Tesco’s summary of their recovery plan.  It also captures the current mood of the whole supply chain from publisher through to retailer. 

While there are some very small signs that the UK may be starting to edge out of recession, ongoing cost control and the headache of managing multiple channels are the dominant issues running through this issue…..

With a new wave of digital kit on the way, the options are becoming wider and even more confusing for consumers as they are for publishers.

The fact that Tesco needs a recovery plan at all is a sign of just how tough the environment is, but also of the grocer’s own obsessively high standards which will ultimately drive more change in retailing.

Retailers are experimenting with a whole range of formats and innovations aimed at making shopping more convenient, exciting and engaging: from click-and-collect through to virtual stores.

Booksellers are trying to mix ebooks and print books in-store into a bigger “book buying experience.”  HMV’s new lifestyle format may crash and burn, but is there a similar vision of how to make buying newspapers and magazines more exciting?

News International, often the radical game-changer, has played safe with its wholesale contracts which now stretch out to 2019, giving Smiths and Menzies more leverage and all the remaining publishers and distributors less room to manoeuvre.

In the USA, Time is taking a massive risk in trying to drive up the retail sales of People magazine – and with it, the rest of the magazine business is the hope.  Where is there a similar boldness in the UK?  What has happened to the flow of big launches which once powered the UK magazine business both in terms of sales and creative drive?

Behind all this publishing-related activity, companies such as Amazon and Spotify are shaping the consumer landscape, sometimes in a dangerously haphazard way.  Yet there is nothing haphazard about Amazon’s tiny 1.3% profit margin as it continues to take a frighteningly long-term view and to drive its progress through scale and professionalism.

“Doing a thousand things one percent better” is a practical and sensible approach: a good place to start.  Yet on its own, it could become a recipe for mediocrity, driven by an obsession with the bottom line and the short-term view.  The genius of Amazon is to combine doing a thousand little things well in addition to doing a few big things brilliantly.

Does publishing need a few more of its own “big things”?

A turbulent year ends with great uncertainty about what lies ahead in the New Year as all the key indicators continue to wobble.  Yet there are still some recurring themes running through the activities this month…..

Consolidation is clearly seen in the launch of Local World and the merger of Random House and Penguin.  Scale is clearly one way to face up to the challenges of the digital world, but not the only one; and size alone does not guarantee success as the spectacular failure of the all-digital The Daily demonstrates.

Bolting down what is stable and understood rather than taking unnecessary risks – that seems to be very much the thinking behind Marketforce’s long-term commitment to the current wholesale players in its recent contract negotiations.  For publishers, there are simply too many digital plates to keep spinning to be taking unnecessary risks with a supply chain which is far from perfect, but which works passably well, even though it still needs ongoing tweaks to squeeze more economies as retail sales continue to slide.

Yet change is evident at every turn elsewhere….the impact of digital in every aspect of everyone’s business; rapidly shifting market shares; the imperative to think more internationally and reducing lifecycles, with the death of the print versions of The Dandy and Newsweek being high profile examples of the need to stay relevant as consumer tastes and practices change.

At the core of the “New Austerity” lies the issue of price, for publishers through to retailers.  As the YouGov research on magazine consumption demonstrates, it is the cost of magazines more than anything else which is hitting print sales rather than digital competition.  There is also the massive issue of getting the pricing architecture right in balancing print against digital and single copies against subscriptions.  The pricing decisions made in 2013 will have to be lived with forever after.

With so many things to juggle at the same time, there is a real need to focus.  HIM warn that the retail multiples’ enthusiasm for convenience and Click & Collect has led to a lack of focus on small supermarkets and CTNs, even though they remain valid and robust channels.  Maintaining focus is a real issue for everyone in 2013.

“Positive disruption” is an expression being used by Asda a lot at the moment.  What they mean is the need to interrupt the settled shopping patterns of their consumers in order to drive up their basket size: whether that is through better in-store displays or interactive smartphone apps.  Simply getting in the face of the consumer more.

With so much digital static, getting in readers’ faces must be a real aim and challenge for the coming year.

A Merry Christmas and a happy and prosperous (if slightly austere!) New Year.

News Review: the month’s key events in focus

• Key indicators
• Publishing
• Middlemen
• Retailing
• Direct + digital
• Finance round-up

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Magazine Shrink in the USA

A major project assessing the scale and causes of magazine shrink in the US supply chain is the backdrop to a bigger debate about Scan Based Trading.  What is happening and why?  And does it matter to the UK?

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Digital Subscriber Service Survey

Almost 71,000 magazine subscribers responded to a survey about their print and digital reading habits.  What is really going on?  Is there a coherent picture? And what should publishers do?

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Circulation Futures 

The PPA Publishing Futures survey has a detailed section on circulation issues.  What do publishers see as the key opportunities and challenges in retail, subscriptions and free distribution?

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The full story is in “Wessenden Briefing” No.162

“Disruptive technology” is how digital media are often described. Yet they are disrupting much more than publishers’ businesses.

As the analyses in this issue of “Wessenden Briefing” demonstrate, digital is also rippling across Royal Mail, helping to drive up its prices to publishers, wholesalers, forcing them to diversify out of newspapers + magazines and retailers, with Click & Collect emerging as a major new battleground to serve the consumer better and faster. All of these developments impact on publishers who are on their own digital journey.

The Ofcom report shows that this journey varies markedly between books, newspapers and magazines…..

• Books are switching from print to digital very quickly, but positively.
• Newspapers are also migrating quickly, but – for many titles – into a revenue black hole.
• Magazines are more perplexing as they are in danger of simply getting drowned out in the background noise of the digital world.

Yet the most fundamental digital disruption is among the various digital media themselves. The penetration and applications of smartphones seem to have taken most people by surprise, even Facebook. The tablet/ereader market is about to fragment with more devices and operating systems challenging the dominance of the iPad and Kindle. The dividing line between a tablet and a smartphone will become increasingly blurred – and confusing to the consumer. So, the digital landscape is becoming ever more complex, not simpler.

There are some key digital milestones reported this month. Both the Financial Times and Amazon have just hit “digital crossover” where their digital businesses have overtaken their print operations. PwC is predicting that “digital balance,” where the digital gains compensate for the print losses, will be reached for consumer magazines in 2015, but with digital accounting for only 7% of total circulation revenues by 2016: not very much and a long time off.

Enter magazine bagging: a prime example of publishers just getting on with the day job, simply and aggressively, and trying to protect their print revenues, which are going to continue to fund everything for the time being. The pricing of Times Newspapers subscription packages shows some more strategic thinking about pricing-by-channel starting to emerge. Yet central to any pricing strategy is publishers’ continued control over the consumer price itself – something that is coming under increasing pressure.

As the PPA’s new Business Models for a Digital World report shows, publishers are trying to hold on to what still works now while juggling with what might work in the future. A digital agency working for Tesco recently described its own business model as “pre-revenue”: in other words, it is not yet charging clients for its work! Publishers are worrying about drifting into a “post-revenue” model. The Guardian’s management has publicly given four years as a target date to break even on their newspapers which are currently losing £44m per year and rising. Whether they perfect a “post revenue” model is of more than passing interest to the rest of the media business.

The full article appeared in “Wessenden Briefing” No.162.

*  Fnac, the French-based music, books, magazines and electronics retailer, has developed a small format store (1,130 sq ft) for travel locations. The first outlet is in Roissy Charles de Gaulle airport in Paris. The retailer expects to open seven airport stores by 2013 under a contract with Lagardere Services. Fnac has already partnered with Lagardere to rebrand five Virgin stores located at railway stations.

*  Lagardere itself has increased sales by 8% last year at its travel retail division, driven by solid results for Re-lay and Aelia in France and strong increases at airport locations in Poland and the Czech Republic. The re-tailer re-entered the market in the UK recently with the opening of a Relay convenience store and a Watermark bookstore, both located at London railway stations.

*  Swiss travel retailer Dufry is also expanding and this year plans to enter several emerging markets and to open 48 news stores at metro stations in India.

“Multi-channel” is the phrase on everyone’s lips, whether you are a publisher, a retailer or an FMCG manufacturer. Delivering a service via all the platforms that are available to consumers is a real front-end marketing challenge. Yet it is also having a massive impact on the back-end customer service – this is one of the biggest issues currently facing a subscription fulfilment operation like Dovetail. All this is why this year’s Subscriber Service Survey is so important in trying to track the fast-moving reader of the magazines we service; joining up the dots in an increasingly complex subscription picture.

What is the Subscriber Service Survey?

Each year, the Subscriber Service Survey (SSS) gathers the views of active magazine subscribers, both in the UK and overseas. Managed by Dovetail and with Demographix providing the online survey tools and Wessenden Marketing the detailed analysis, the survey has grown from its start-point in 2007 as an internal Dovetail initiative with five of our own clients into an annual, industry-wide project. Now in its fifth year, 65 publishers with 487 titles participated, polling the views of a massive 125,000 active magazine subscribers.

Multichannel contact

The shift in how subscribers want to contact us with their queries and problems has been moving steadily from year to year, with letter and phone contact dropping as email and website usage increases. This move has had a major impact on our staff – how we train them and how we structure our customer service teams. At Dovetail, we have found the handling of emails to be a difficult skill to get right, but as the latest survey shows, we have managed to pull our email service back into line with the other established contact channels and slightly above the industry average with a satisfaction score of 8.4 out of 10.

Website usage

While our subscribers are generally moving to more digital contact, this is not universal as the data on website usage shows…

* Magazine brand sites. For the first time in this year’s survey, we asked about subscribers’ usage of magazines’ own editorial brand-sites. Overall, 29% of active subscribers use it regularly and 38% occasionally. So, this means that 67% of subscribers ever use the site, leaving a significant 33% who never use it. Predictably, subscribers to Computing titles come out top as the biggest users of the brand sites with 76% who ever use them, closely followed by Trade (76%), General (75%), Women’s Craft (75%), Sport (74%) and Music (73%). At the other extreme are Puzzle titles (only 39% ever using), Children’s (45%) and TV Guides (48%).

* Self-service subscriber areas. We have been monitoring this for three years. After seeing some growth in awareness and usage, this year’s survey shows that awareness levels have plateaued at 60% of subscribers who know that their magazine has a self-service area with 28% (up by two percentage points on last year) actually using the site – the most common task is renewing the subscription with 48% of self-serve customers using the site for this. So, both awareness and usage are solid, but could do with extra profile-raising among non-users and with more pushing among users so that they undertake more tasks on the site.

Future contact channels

We also asked what new contact channels subscribers would like to use in the future in order to manage their subscription. The clear winner was Facebook (22% of subscribers finding this potential service appealing), followed by live chat (16%) and Twitter (11%). So, while the demand for these new channels is not overwhelming, it is significant and growing and is already a very important request for particular pockets of the subscriber audience.

Usage of electronic readers and magazines

This is a growing area that the SSS covers (and which will be the subject of a separate article in the next issue of InPublishing), but the penetration of electronic devices is growing (13% of total subscribers claim to have an iPad and 14% a Kindle) as is their usage of electronic magazines (12% read them). Yet the overall impression is that it is books and newspapers which are making the digital running with magazines producing solid but luke-warm satisfaction scores in terms of their electronic reading experience.

Rising levels of customer service

Yet at the core of the SSS project is tracking subscriber satisfaction levels with the core subscription service. Here, there are some subtle, but real changes from last year…

* A small (13.2%), but rising (+0.4%) proportion of subscribers have had problems with their subscription over the last twelve months, the majority of these relating to late delivery of the postal subscription copy.

* More subscribers are reporting these problems than a year ago, rising by +1.1% to 68.9%.

* Subscriber satisfaction with the problem resolution has risen year-on-year (by +1.2% points to 65.3%). Yet fail to satisfy the consumer and that has a dramatic impact on renewal intentions. 85% of consumers who were “very satisfied” with their problem resolution intend to renew their subscription as opposed to only 27% who were “very dissatisfied”. If ever there was any doubt, these figures demonstrate just how critical first-rate customer service actually is.

The overall picture is that the incidence of subscription problems is rising and that the more critical consumer is reporting more of these incidences. Yet the quality of problem resolution has also improved. The net effect is that when asked to say whether they agreed with the statement “I have been impressed by the high quality service from the magazine”, 73% agreed, up by a massive 12% points year-on-year.

Creating a subscription toolkit

The SSS survey creates such a mass of rich and deep data where publishers can drill down to track the detailed customer journey of individual titles that Dovetail has created a “toolkit” which it has already trialled with some of its own clients. This allows our account management team to zoom in on what really matters and to have a more structured discussion in client planning meetings and to “join up the dots” in creating a practical action plan. The toolkit takes twenty key parameters from the survey and compares each title within the client’s portfolio against each other as well as against the market sector and the industry averages – the industry averages from the latest survey are shown in the table below.

The key measure running through the whole survey is renewal intention – the percentage of active subscribers who intend to renew their subscription. “Intention” is different from actual “live” renewal rates (a big gap between the two would suggest something amiss with the renewal series), but it is a very good indicator of the strength of the bond, or the “brand glue”, between the subscriber and the magazine. At an industry level, there has been little change in renewal intentions from year to year – just a slight edging down from 75.8% a year ago to 75.5% currently. Yet this topline stability conceals some major changes by title from year to year and a massive range in performance by market and title – the magazine with the lowest renewal intention figure (34%) is a major lifestyle brand and the highest (96%) is a countryside magazine – the biggest range we have seen in recent surveys and an indication that the market is actually quite volatile.

We have picked out three key factors in the profile of the subscriber file which have a material effect on the subscription marketing plan – the age of the subscriber, direct debit penetration and the average lifetime of a magazine’s subscription. Moving to subscription intake, how and why subscribers subscribe in the first place will shape their behaviour forever after. The subscription experience itself is an obvious area which will impact on renewal rates as is the ease of the renewal process and the relevance of the renewal communication with the subscriber. Website usage and digital editions are two additional elements which are becoming more and more important in the whole subscription package.

So what does it all mean?

Modern magazine customer service is now about a lot more than just answering the phone within three rings. The subscription package itself has become more complex: print + digital bundles, variable pricing, an increasing range of services and products which can be cross-sold and up-sold at various stages of the customer journey – all these elements make each contact with the customer both more valuable and more complicated. Also, customer service is now seen as part of the “product experience” itself rather than a separate after-sales add-on. With the increasing variety of channels that subscribers want to use on their subscription contacts, this means we have so many more dots to join up to make a coherent and workable customer service package. Add in the fact that consumer expectations are being driven upwards by the superb service of companies like Amazon online and John Lewis in retail and the magazine business has a major customer service challenge on its hands. The evidence from the SSS project is that the industry is rising to that challenge, but only by constantly adapting and improving – and that can never stop!

The Subscriber Service Survey Methodology

Random selections of email addresses were taken from the active subscriber files of the participating titles and an email, sent with the individual title’s branding, was broadcast to the names, driving them to an online self-completion questionnaire. In addition, the URL of the online questionnaire was printed on the carrier sheets of subscription copies. An incentive was offered to the consumer to complete the survey: entry into a prize draw where 10 cash prizes of £100 each were available to be won. Respondents had to elect to be entered with over 98% choosing to do so. Collectively, 125,176 completed questionnaires were generated over a period running from October 7th, 2011 through to January 1st, 2012. These responses came from across 487 titles, published by 65 publishers.

For a free copy of the full report go to www.dovetailservices.com or for more background about the Subscriber Service Survey, please contact Jim Bilton at Wessenden Marketing. jim@wessenden.com / 01483 421690