Audience Development Challenges in 2008

By Chandra Johnson-Greene and Bill Mickey
Friday, August 29, 2008

CM: Describe where you’re seeing particular pain points or stress points in your circ and audience development operation.

JAY ANNIS: I’d say one of the biggest challenges we’re facing is direct mail response continues to decline, while postage costs go up. About two-thirds of our circulation at Taunton is subscription. On the newsstand, we have some serious challenges between wholesalers and retailers. Retailer demands and wholesaler profitability continue to be a question mark. And all of that’s putting pressure on us to find new sources of circulation.

KELSEY VOSS: One of our biggest challenges is the drop in print advertising, and that leads to the challenge of keeping the books open. Fortunately, my management understands the value of the publications because of the audience they bring in. Because we’re controlled circ, we bring in a highly qualified audience that then can be used as lead-gen for other advertisers of e-seminars, events, newsletters and white papers. So it’s a challenge to keep the books open, but the benefit of having those names and bringing them in the door through the publications leads to revenue generating leads for the company.

CM: So it’s sounding like the pressure is on to make sure you get those folks involved in other products.

KELSEY VOSS: Exactly. If they just get the magazine they’re not as useful.

BOB COHN: I would say the fact that this is a difficult year for print advertising has put more pressure on rate bases. Together with the increase in paper and ink and postage, it’s really made us refocus on many of our titles on whether we can or should continue to justify our present rate bases or winnow them down somewhat. The second is demographics. We found actually through a lot of investment, creative and experimenting, that we’ve been able to hold up our direct mail response rates. But we tend to be bringing in older audiences. We are having trouble bringing in the younger audiences our advertising sales staffs want to have. And yet we haven’t been able to capitalize on online to be anywhere near as potent a source.

SCOTT POPOWITZ: The challenge we have is finding other sources of names, which is the currency in the b-to-b space. And in our market, it is often email. But we’re involved and connected with content management teams, with IT, and utilizing some of our other assets, such as the TechWeb digital library, and newsletters and alerts to try to bring in names and get our communities engaged. Engagement is the key. If you just get names, they’re not worth as much unless they’re engaged with other products. Are they attending your events? Are they commenting on your articles? I think engagement plus opt-in permission emails are probably the two biggest challenges.

DENISE ROBBINS: I have both controlled and paid titles, consumer and b-to-b. So I know that newsstand consolidation is hurting us in our draw. We’re fortunate, we haven’t really seen a drop off in our direct mail, but we’ve also staved off a lot of the drop off by doing things with Google and Google AdWords. We also got our audience younger by doing that as well.

On the trade side, the print advertising is down significantly, and we are looking at cutting the rate bases. And the budgetary constraints on us, even though we’re making our list rental numbers and we’re making our subscriber and newsstand numbers, we still have to make considerable cuts in my department, both to staffing and rate bases and overhead and marketing, because we have to make up for the shortfall in advertising. And so that’s been a real challenge—how to get everything done with less and less and less money.

Budgets

CM: How are things going with your budgets? Where is the greatest scrutiny from corporate?

BOB COHN: A couple of months ago, all our titles did re-forecasts based on the advertising slowness. It’s no big secret, most titles are significantly off budget and off of last year in print advertising volume.

CM: Are we talking single digits, double digits?

BOB COHN: High single to low double. It varies tremendously by title. Some of them are between 7-8 and 12-14 percent off in ad revenue, off of our budgets.

So we had to pull in a lot of our other resources. Fortunately, we haven’t had to do any headcount reductions or significant promotion investments, because our management realizes if we’re short-term cost cutters it’s going to hurt us a year or two from now, when the economy will hopefully turn around. But we have cut out a lot of the things that we’d like to do but can’t—creative, for example. We had a lot of money invested for new creative and direct mail and renewals, which has been reduced. We reduced the size of some mailings. We cut back one effort in our renewal series to some sources.

CM: Is that typically what tends to get hit first, when you start to trim a little bit in those areas?

BOB COHN: Testing, creative, all those kinds of things, yes.

DENISE ROBBINS: In our case, we re-forecast every month. So every month I get a knock on my door, ‘How much can you cut out?’ Because we do a lot of analysis, both on the controlled side and on the paid side, I can go to a publisher and say, ‘I can cut $7,000 out of your marketing budget, but you’ll lose X number of re-qualifications. Or we’ll lose this much off the rate base.’ And generally, rationally, they say, ‘Okay, never mind.’ So now they’re coming back to me and saying, ‘Well, listen, I’m just going to cut 5,000 off the rate base, so let’s cut out all the marketing for that.’ So they’re really tipping every sacred cow. I mean, things that we’ve never touched before, they’re just completely pulling out of the lineup.

There’s a lot of stuff that we would like to do. I’ve just integrated about 40 titles into the same database. We’ve got this great integrated database now that I want to build out and I want to do some cross-tabbing and have some programming done. We can do a lot more research. And potentially that could be a million dollar business, but we can’t make that investment now.

SCOTT POPOWITZ: The list of possibilities and projects that you want to work on is always growing, and the ones you’re checking off are very few—especially with Web 2.0 and social networking. We’re talking to various partners to figure out how can we use some of these free sources and inexpensive sources to communicate with our audience, to grow our audience and engage with them. And I think there’s a challenge in finding enough resources to fulfill all of these various needs, so you have to pick and choose and test where you can.

But we’ve had to look within our department, try to re-prioritize and utilize any resources, and wear multiple hats to get involved in search engine marketing, and design the creative ourselves. And we’ve had some success, but I think there’s a lot of projects, including enhancing our new integrated database that we’re building, and not having enough resources to utilize it.

But we have done some things successfully. In some of the live events, where we used to send out various direct mail packages, we’ve cut them out and we’ve still been able to hit our goals. We utilize Facebook and certain networks that have an affinity toward our live events, which people, when they’re registering, use to connect with each other. We’re also messaging to them through those channels. I think where it’s less successful is trying to drive new names and new opt-ins in a large capacity.

But I think at least it’s an effective communication tool where you don’t have to rely on direct mail and sending emails.

JAY ANNIS: We’ve found in my area the greatest scrutiny has come with promotional budgets, whether for wholesalers or retailers. Our circulation is a profit center, so we’re not rate base driven. So if we’re not making money on promotion, we’re not going to do it. And we’ve found over the past few years, but especially the last year or so, that the money we’re spending on promotions is not generating the same kind of results that it did a few years ago. So our promotional budgets are being cut.

KELSEY VOSS: I do find that sometimes the challenges that we face, all of us face, with our budgets do lead us to be more creative. We discover new ways of doing things that we would have otherwise completely missed. We would have been doing the same direct mail piece over and over.

Solutions

CM: So what can be done about all this?

BOB COHN: Our titles were formerly owned by Time Inc. And in, I believe it was late 2005, the CEO of Time Inc. decided that none of their titles should use cash field agency or door-to-door subscription agents anymore. I don’t disagree with that, but it was done abruptly without looking at the impact on different titles. But what it forced us to do was to be creative in opening up and expanding our partnership sources. We started working with our advertisers to create quick liaisons. And that’s actually been very productive. We don’t get a lot of revenue but we get much more targeted readers who are much more interested in our editorial than we would with the traditional third-party agents.

DENISE ROBBINS: That’s very true. We don’t use agents for our consumer titles right now, but a few years ago, when people were going out and purchasing these big sponsored programs, I thought we could do this with our advertisers and get a much more engaged audience. And it’s great for our advertisers because they get to send it to all of their best clients or best customers, and they get to see their advertisements right in our magazine. It’s a great marketing piece for them.

BOB COHN: We’ve done more merchandising opportunities, then they can help sell schedules as a result. So it’s really made the two departments much friendlier with each other.

KELSEY VOSS: It’s led our company as well to break down the department silos, because you have to work together. You have to strategize together to succeed. So online works with print, works with advertising, works with editorial. And as much as possible you try to keep that communication going and thinking of ideas and ways of engaging the audience.

SCOTT POPOWITZ: On the budget side, we’ve taken an interesting approach this year. Previously, there was always a circulation audience development budget, and there were separate budgets for some of the events and Webcasts. Now there’s a database budget and there are different allocations given to various programs, so that P&Ls are truer. It’s not just a Webinar, a seminar or an event P&L that sometimes may not account for the database usage, which everyone thought was free. Now, everyone pays a charge based on their usage, and they’re building that into their programs so that we’re profitable and we’re spreading it back into investing into the database.

DENISE ROBBINS: That’s a really good idea. Because one of the problems that I’m facing is that we do have a million-plus opt-in emails and my sales team is hammering them. And so we’re constantly doing 30, 40, 50 email blasts a year and our opt-in rates are going down the tubes. So we do rent those. We do get about $400 per thousand on those, and that’s a significant source of revenue for my department.

SCOTT POPOWITZ: It is not free—it is not $400 a thousand—but at least they all have that built into their program. Some frequent users have steady allocation and there’s a lot of variable. So suddenly they will be more mindful of their selects and programs, instead of just saying, ‘Give me everybody on the East Coast for a New York event.’ It is helping to at least spread the pain across the various programs, to be more selective. And then we are trying to sync that up with an inventory calendar system with our emails, so you can’t just send as many as you want. We break it up and manage that.

And it’s by product type. So people can opt in or opt out of whether it’s online events or lead-gen, white paper programs or live events. So we protect that and limit that based on that type of vehicle, so they’re not just getting dozens of emails about the same type of products. Because in the long run, that’s going to hurt your business and hurt your reputation, and it’s going to be a downward spiral.

BOB COHN: We’ve gone the other way, probably not using email as much as we should because of a fear of annoying people too much.

DENISE ROBBINS: I think it’s harder on consumer titles, though. The B-to-B side is where we’re getting hit the most. The consumer titles we don’t get as many opt-in names because it’s not required. And you do want to be a little more cautious with them because they are giving you money.

Engagement

CM: Kelsey, can you describe how you’re drawing your customers in from print and making sure they’re engaging with other products?

KELSEY VOSS: This goes with the integrated database that we have. People come in through print. And once they come in the door we can track their behavior—not their online behavior, but their interaction and their engagement and whether they would attend an e-seminar or get a newsletter or download a whitepaper. What subjects are they interested in? Is it networking, is it security, is it infrastructure? And the database can score them on a level of 1-10, 10 representing a very deep engagement with a product. It’s still new, but we’ll be able to see the arc of their interest and then possibly the decline of that interest once they’ve bought whatever hardware they need, and then move onto the next topic.

But what it allows us to do then is tailor our email messages and our marketing, and help tailor the selects for advertisers to know who they should be reaching out to in our database. So that lifetime value of a print subscriber can be really high and worth a lot of money when you have advertisers paying quite a bit for one lead. And that one lead, if you’re targeting and watching their behavior and their engagement, can be very profitable.

CM: Do you have different pricing levels for leads according to that arc?

KELSEY VOSS: Not at this moment, but that would be a great thing to be able to do. At the moment it’s still in sales’ hands, what they charge for the lead and whatever they work out with the advertiser.

SCOTT POPOWITZ: I think we have that same wish—to have the one-to-one reach. But I think we have made some progress using Omniture and CID codes and tracking some of the user behavior, including some subscribers, because we now have utilized a password. So if you come in and you’re new to our magazine, we give you a password and you check the box so that you’re recognized automatically. We can then see what they’re doing on the site. And if they click on various placements, we can have contextual advertising—or we’ll put a relevant whitepaper or a Webcast based on the article they’re reading. And we can monitor to see how they’re performing. We’re just starting with this, but being at the same table with the content team and the online team we can work to make sure there’s direct marketing, tracking and analytics in place.

Right now it’s based on taxonomy. But I think the long-term wish is to really get it to the one-to-one ratio. But that’ll be down the road.

Newsstand and Distribution

CM: Talk more about the pressure coming from wholesaler consolidation and newsstand issues. What’s your perspective?

JAY ANNIS: A couple of things are happening. Some of them are a continuation of what’s gone on in the last two years, but the current economic situation has pushed it a little higher up on the radar screen. Some of the wholesalers still claim to be losing money, so they’re still pushing for more discounts. They’re still pushing to cut their own costs, which in many cases affect sales. The retailers, Wal-Mart in particular, are demanding a 50 percent sell-through. CVS is asking for a 60 percent sell-through, which they’re probably never going to achieve. And, again, obviously in this economic environment newsstand sales are not flying through the roof. So you’re getting a lot of downward pressure on print orders.

The other interesting thing that we’ve started to see, especially in the last few months, is a shift in where people are buying magazines. With gas prices being what they are, people are not making those extra trips to a bookstore. They might buy online, where they haven’t done that before. So we’re seeing bookstore sales starting to decline, and the Costcos, Wal-Marts and Sam’s Clubs, where they’re counted as discounters, sales are actually increasing. So we’re seeing a shift of where consumers are buying the magazines and we’re trying to adapt to that.

CM: How are you treating your cover prices? Are you planning to raise or lower them?

BOB COHN: Our biggest selling title on the newsstand is Popular Science. We used to sell 175,000 to 200,000 copies per issue. We now sell 140,000 to 165,000 copies. We redesigned the magazine in 2006 and newsstand sales jumped. So we were feeling bullish. We increased our cover price from $3.99 to $4.99 and the amount of revenue has definitely been a positive. We had a little dip in sell-through on and off for a couple months, depending on the cover. But this year, it’s crawling back. It started in May—so starting with December-January, our sales levels are as good or better than they were before the price increase.

Now, we aren’t able to do that in subscription marketing at all. It’s incredibly price sensitive if you go from a $10 offer to a $12 offer. But the newsstand somehow doesn’t seem to be as price sensitive. So in 2009 we’re thinking pretty seriously about raising the cover prices of some of our other titles.

DENISE ROBBINS: We’re thinking of increasing them as well. In 2006 we tested 50 cents lower and 50 cents higher on Guitar Player. We’re at $6.50 now. And the sales went up just enough to make it flat if we lowered it and they went down just enough to make it flat if we raised the price. So we kept it stable at that point. But our biggest competitor raised their price from $4.99 to $7.99 and included a CD with the magazine. But if we took some of our back content, and we have a ton of it, put it on a DVD, and poly-bagged it with the magazine, we could probably bump it up $3 or $4.

KELSEY VOSS: What would the production costs be to add that DVD?

DENISE ROBBINS: Minimal. The poly-bagging and the DVD might be around 68 cents. I don’t know if the distributors would charge us extra for the poly bags, but we’re considering that for 2009. We’re testing that as part of our model.

JAY ANNIS: We tend to be the higher priced titles in our categories, so we don’t have any immediate plans for raising prices. But what we have done successfully is come out with some new formats on our SIPs, where we’ve added pages, we’ve increased the paper weight, and we’ve increased the prices. And we didn’t have much of a drop in sales. So we’ve been able to raise revenue by coming up with new formats. And those have ranged anywhere from $9.99 to $12.99.

CM: When CVS says they want to see 60 percent sell-through, are they offering any ideas on how that can happen?

JAY ANNIS: No, they’re just demanding it of their wholesaler, and then their wholesaler is then using that to come back to the publishers and distributors and saying, ‘Okay, I have to cut you out of these stores’ or ‘I have to cut your allotment down to this.’ But the average drug chain store doesn’t sell more than 1-1/2 to 2 copies a store, so how far can you really go? They’re dropping the allotments; they’re dropping titles off the rack. So they might be bringing their sales up from 35 to 40 percent but they’re never going to hit 60.

BOB COHN: And as publishers and national distributors, it’s very difficult for you to try and get involved with that because every wholesaler has a different computer system and a different way of regulating how they’re going to try to get to that 60 percent. So it’s not something you could do across the board with all your wholesalers—you have to actually hit each one individually.

Auditing

CM: In terms of having customers audited across platforms, across different brands, is there more a holistic brand view that auditors can take?

KELSEY VOSS: The auditing of brand extensions and formulating just how it will be done to benefit the publishers’ needs and educating the publishers on what’s available and what they can do, and somehow regulating that. Because right now it’s a bit of a free-for-all of what you can add and how you can add it. I think there’s a lot more that can be done with that.

DENISE ROBBINS: You’re right, it’s weird. We’re doing a lot of migration to digital editions. And on controlled titles traditionally you can add other sources—you can use business directories, or internal lists or whatever. And as long as you can qualify that those people are qualified recipients, they get it.

BPA is not doing that with the digital editions, which I don’t understand because ABC is. For example, if I have a list of newsletter subscribers and I want to add 20,000 to my readership, I can’t add them as digital subscribers, even if they’ve opted in to receive the newsletter of the same brand. I can only add them as qualified subscribers if they request the digital edition. So they basically only allow you to add direct requesters as digital subscribers.

Technology and Learning is one of our trade titles, and it’s ABC audited. We just increased our circulation by 30,000 readers because we had about 50,000 to 60,000 e-newsletter subscribers—not e-newsletter names, but subscriber emails—and a lot of those people had already expressed an interest in receiving the digital edition, but some had not. We just gave them all digital editions. We migrated them all from print to digital—same exact product. We deliver it, we have audit logs, and ABC is fine with that. And they just fall under qualified circulation, non-requesters.

It’s difficult because on our consumer titles we’ve just migrated a bunch of sponsors. A lot of our advertisers are more interested in having either email names or digital or being able to deliver their product in a more interactive format because our customers are programmers or they’re electronic musicians. So we’ve added digital editions for our electronic musician titles and we’ve dropped out all the print sponsored and put them on as sponsored by the advertiser, and they’re able to enhance the edition that they’re sending to readers. But we can’t count them on our circulation right now, which is really frustrating.

KELSEY VOSS: I definitely have found that to be true. In fact, I have stayed away from a lot of the brand extension auditing altogether just because it doesn’t seem like it is regulated and organized in a meaningful way. So I’m just sticking with the standard procedures—“This is our circulation, this is our total qualified, this is how many digital we have, and they’re all direct request.”

SCOTT POPOWITZ: Maybe there’s a way to be a true database auditor. So instead of having to complete a form and give a personal identifier, they could actually audit the database, the data and the quality. That would probably be a truer value to the advertisers. It’s not like this person’s eye color is blue and so on.

KELSEY VOSS: It’s the fact that they’re opted in.

SCOTT POPOWITZ: They’re opted in. I’ve had discussions with them about why I need to ask a personal identifier. When someone’s coming through the Web, they’ve given me an email, I have an IP address—it’s an online transaction. But we still now have to ask them how many siblings they have or whatever. And it’s offensive to people. No matter what question you choose, some people are going to be offended. And they’re still not willing to accept an email address or a transaction log to qualify as a personal identifier.