Partnership Marketing Heats Up
The modulation of the new subscriber source mix rises and falls according to any number of influences—from macro economics to internal budget flexibility. Lately, however, one source has grown its profile in the mix in a particularly dramatic way. Partnership marketing for many publishers has moved to the center ring as a successful and potent source of new subscriptions and single-copy business. Partnership deductible subs, for example, doubled from first half 2006 to second half 2007, per ABC numbers. And these types of partnerships are only the beginning.
“Partnerships have always been valuable sources, and they’ve become much more important in the past few years,” sums up Marti Schiff, who worked on partnerships at Time Inc. and Synapse for 12 years before launching Strategic Media LLC, a custom partnership development consultancy, in 2001. “Declining response rates and increasing costs for traditional direct-to-publisher sources, declining newsstand sales, and the shift of public place from paid to verified are all making paid partnership sources increasingly attractive.”
“Our direct mail and other traditional subscription source volumes are not declining, and our consumer marketers continue to achieve breakthroughs along the way. Still, traditional sources are more or less flat, whereas partnerships, along with the Internet, are our fastest-growing sources,” says Mike Burnette, director of partnership marketing for Meredith Corp., which began ratcheting up partnership development about four years ago.
There’s ample evidence of the growing focus on subscription and single-copy partnerships. One indicator: Virtually all major publishers—and some mid-sized ones—now have staff positions dedicated to developing partnerships, in the broadest sense of that word—meaning not just sources that qualify as ABC “partnership deductible,” but many kinds of synergistic DTP and agent programs with product marketers, retailers and even other media.
Increased publisher demand is also spawning more partnership-focused consultants and agents, and new partnership programs from existing agents.
Moreover, ABC data confirms the trend. Among all ABC consumer magazines, partnership deductible (PD) subs alone increased from 3.4 million reported by 181 titles in first-half 2006 (1 percent of total paid and verified circulation) to 6.6 million reported by 195 titles in second-half 2007 (2 percent of total paid/verified). That’s a 94 percent unit jump in 18 months.
While 2 percent of total circulation and fewer than 200 magazines (among ABC’s approximately 800 consumer titles) may sound like drops in the bucket, PD numbers among large titles have shown even greater momentum. As consultant Baird Davis recently reported in CM, among titles with at least 2 million circulation, PDs leapt from 3.9 million to 5.6 million between the second halves of 2006 and 2007, or 44 percent. This means that PD grew from 1.9 percent to 2.7 percent of total verified/paid circ (estimated at about 209 million) for these titles.
Further, PD subs—those bundled with another marketer’s products or services, with disclosure of the declared value of the magazine portion and a refund option for the consumer—are the proverbial tip of the iceberg.
There’s no easy way to quantify the exact numbers of paid, non-PD subs generated through various types of marketing partnerships that are reported, in line with ABC rules, as part of other Paragraph 6 sources, including individual paid, combination, loyalty, club/membership and paid sponsored. Still, their scope is clear when you consider that “partnership-generated” subs would technically include all of those produced by longstanding agent sources based on relationships with third parties, as well as various types of DTP partnerships developed over the years. And there’s no question that new partnership programs are contributing—to an increasing degree—to individual paid numbers, as well as to the growth of various other non-DP source lines.
Economics: Good and Getting Better
Along with their scale and growth potential, strong partnerships are cost-effective. At minimum, these programs are viable at some level within the overall source mix and publishing P&L model—and in a growing number of cases, they’re fairly or even very high up in the source pecking order.
While many DTP programs involve a per-sub commission or fee to the marketing partner, savvy publishers are focused on finding partners who value the customer loyalty and sales-enhancing benefits that can be realized through associating their brands with magazine brands.
Depending on the agreement, per-sub acquisition economics for a DTP program can range all the way from costing several dollars to yielding several dollars in revenue out of the gate. Which means, of course, that stressing affinity in developing partnerships is as critical to maximizing publishers’ circulation profitability as it is to ensuring that partnership sources deliver desirable readers for advertisers.
“The better the match between the magazine and the marketer’s customer base, the better the subscription conversions, subsequent renewals and overall economics of the program,” sums up Bob Cohn, consumer marketing director for Bonnier, which has four executives working on partnerships and has developed these programs into significant, cost-effective sources for many of its special interest titles.
First-year renewal rates for DTP and agent partnership subs can range anywhere from low single digits to 20 percent—again depending largely on the affinity—performance in line with other sources outside of direct mail/core DTP sources. And publishers report that experience, testing and source-specific renewal programs for partnership sources are enhancing renewal performance and lifetime value.
Using agent programs in addition or as an alternative to DTP programs makes sense for many publishers. For all of the advantages of DTP programs—including the synergies possible through ongoing, direct relationships with other marketers—their development and management are very time- and resource-intensive. Further, projecting volumes and controlling their timing can be tricky. These realities have limited some publishers’ ability to focus on home-grown partnerships over the years.
Agents do the legwork of building partner relationships and ensuring programs’ audit compliance on an ongoing basis. Multiple-partner structures (as with DP agents) and program history/tracking enable them to rotate offers, produce reliable volumes and smooth production flow. In DP programs, the agent also bears all or most of the costs associated with consumer refunds—although very few consumers who buy a package actually request refunds (generally under 2 percent).
DP agent ValueMags, for instance, receives a flat, per-order fee on the net, fixed-term subs that it generates. Rolled into that fee are services that include matching titles with appropriate online retailer sites from among its partners (such as e.l.f. cosmetics, Art.com and AllPosters.com); program set-up; customer service; handling the interfaces with audit and fulfillment bureaus; and issuing rebate checks, according to VM president Andrew Degenholtz.
Other growing sources that fall into the broadly defined partnership-based bucket include club/membership programs developed by agents in conjunction with affinity marketers, such as Affinion Group and Brand Affinity Marketing. M2 Group, for instance, partners with Affinion, and also has programs with site partners such as Expedia, Orbitz and Match.com. Synapse is broadening its partnership source portfolio with new DP programs in conjunction with a major affinity marketer, as well as working with individual publishers to develop custom retail and other partnerships. New agency Radius Media Group is partnering with catalogers on inbound magazine upsell programs.
Agent fees vary by type of program and/or case-by-case negotiations. However, publishers who use DP agents report that per-sub fees are currently running in the general neighborhood of $2.
High Advertiser Acceptance
Along with P&L performance and worthwhile volumes, the fit for advertisers is the acid test of a source. And all indications point to high advertiser acceptance of circulation born of partnerships with clear affinity.
“As long as there’s a logical fit, and a magazine doesn’t have excessive volumes from one source, advertisers see the value of partnership sources,” says Diane Potter, consumer marketing director for Working Mother. “Based on what we hear, most media buyers view partnership sources very positively,” concurs Meredith’s Burnette.
Consumer marketers and agents say that ABC’s rules and implementation guidance have helped ensure PD sources’ value to advertisers. Affinity is one key requirement for PD sources (see audit rules sidebar), and ABC has reemphasized this, along with other points, in recent member communications. However, ABC “doesn’t see many programs that lack affinity, because partners are typically not interested in participating in such programs,” says Teresa Perry, SVP publisher member audit and report processing.
Whichever source line a partnership program falls under, consumers are clearly demonstrating “wantedness” by paying for the magazine (alone or as part of a package), or otherwise demonstrating desire to receive a specific title. In part for logistical reasons, declared subscription value in PD-based acquisition programs rarely exceed $10; however, the overall values of purchased packages tend to be quite high. (Schiff reports that the average overall retail value purchase associated with the PD fixed-term sub programs she develops is in the $50 to $150 range.) Further, buyers’ income and other audience demographics also tend to be high, whether subs are agent- or DTP-generated. All of which seems to resonate with advertisers.
In fact, in many cases, advertisers are the partners. The most successful partnerships often come out of advertiser relationships, and circ partnerships also frequently springboard or enhance broader relationships with outside marketers. Publishing executives report that partners pleased with circulation programs often subsequently sign on as advertisers, increase their ad schedules and/or evolve the relationship into other cooperative ventures.
For instance, one specialty beauty products retailer has chosen to use the commission revenue it realizes from its in-store subscription upsell partnership with InStyle to significantly expand its paid advertising with the title, in part because the sub partnership has demonstrated that the retailer’s own customers value the magazine, according to Stephanie Chen, partnership director for the InStyle group. The overall partnership also includes co-sponsorship of events and other marketing efforts.
Partners Yield a Variety of Benefits
What do retailers and consumer product/service marketers yield from these partnerships? For starters, many see significant value in associating their brands in consumers’ minds with well-known, influential magazines. “There’s the ‘glamour’ factor, along with implied endorsement from a trusted magazine brand,” notes one partnership executive.
As for more tangible benefits, depending on their objectives, partners may seek to negotiate for advertising considerations or, increasingly, rights to use content.
“Agreements are evolving and getting more creative, in part because marketing budgets are tighter at all types of companies now,” says Patti Devine of Devine & Company, a firm that develops targeted partnerships for publishers. “Interest in building microsites or landing pages using publisher content is increasing, because relevant, robust magazine content improves sites’ search engine rankings.”
For many retailers/product marketers, leveraging the value of magazines to increase overall order size is a key goal. Often, partners pay to offer a magazine subscription of interest to their customers as an incentive or thank-you to consumers who order goods/services exceeding a certain value threshold. Where the offer requires an opt-in or redemption process on the part of the consumer, the partner is paying only for accepted/redeemed subscriptions, but gaining a goodwill benefit for its brand simply by making the offer.
In addition to ABC’s consumer disclosure requirements, retailers/consumer goods marketers sometimes build opt-in or added consumer action steps into a program to provide added assurance of “wantedness” and awareness of the source of the sub. For publishers, such added steps reduce up-front volumes, but generally enhance renewability.
Average order/sales lifts from offering customer-relevant magazines to customers can be substantial: Some partners report revenue gains of 20 percent or 30 percent, according to one publishing executive.
The Wide World of Partnership Programs
Here’s a roundup of a few examples of existing and new DTP partnership programs yielding win/win/wins for publishers, partners and advertisers:
The Classroom Connection
At Bonnier, Popular Science has had a partnership with classroom science equipment marketer Boreal/Science Kit for more than 10 years. Teachers or others who buy $100 worth of equipment can opt in to receive a PS subscription paid for by Boreal. In addition to a per-sub remit, PS benefits from exposure to students via teachers’ in-class mentions of PS articles. And when Bonnier launched Science Illustrated last year, Boreal polybagged a mini-magazine sample with its fall catalog. “This helped build awareness of the launch for us, and for Boreal, the magazine sampler represented another reason for customers to open the catalog mailing,” points out Cohn.
In another Bonnier program, consumers who have paid with their credit cards for a national/state park reservation on Reserve America’s Web site see a one-year sub offer for Field & Stream. This program includes an added up-front opt-in/opt-out mechanism. In a partnership with a hunting/fishing show, a subscription to F&S or Outdoor Life helps incentivize consumers to buy their tickets online, in advance.
Bonnier’s marine and skiing titles have a variety of partnerships with boating and skiing shows and ski resorts, and the publisher also has programs with equipment manufacturers in its magazines’ interest categories.
All About Cash-Positive
Meredith, which is focused on cash-positive sub programs and is “pushing away” from programs that involve fees or other considerations to partners, according to Burnette, has several major existing and new programs. One is a DP partnership with Target, in which toys at a certain price level within the Parents-branded toy line include a one-year Parents sub redeemable by mailing in the card showing proof of purchase.
Coupon Madness
Hearst Magazines’ Good Housekeeping Coupons & Cash Back Rewards site, whose backend is provided by Affinity Solutions, offers coupons to consumers who register to shop more than 200 popular retailers and brands through the GH site, as well as up to 20 percent in cash-back rewards on purchases, distributed quarterly. Consumers can test the site free during a 90-day trial period; thereafter, they must subscribe to GH ($10 for 12 issues) to continue to use the site at no additional cost. (Non-subscribers can pay to continue using the site.) Subscribers get cash back in checks or prepaid MasterCards.
In addition to providing consumers with a compelling benefit for trying the magazine and renewing, the program provides email addresses and other information for marketing purposes, notes Tammy Laspalakis, director of multichannel marketing for Hearst.
In an in-store program with Kroger that started last fall, consumers who buy products bearing the Good Housekeeping Seal receive a scan-generated coupon for a one-year (paid sponsored) Good Housekeeping subscription courtesy of Kroger. The coupons are redeemed by mail or online with the proof-of-purchase code. Laspalakis reports that both redemption and conversion rates have been “very high.” And of course, there’s also the online email/mail address registration component. Moreover, Kroger is now starting to provide GH with high-value coupons to insert in renewal packages.
“Overall, this program has great benefits for the retailer—including driving traffic back to their stores—and it’s great for us because it has scale and will also enhance subscriber lifetime value because it offers consumers real value,” Laspalakis says.
In a partnership with Stampin’ Up!, which markets decorative rubber stamps for use in crafts projects through home-based parties, consumer hosts give out discounted (paid individual) sub offers to Country Living. The program’s success also prompted Stampin Up! to collaborate with CL editors to create CL-branded stamp kits, which include sub-offer inserts. CL also yields sub orders from offers on the product marketer’s Web sites and email efforts.
The Art of Synergy
At HFM, Elle implemented a profitable individual paid partnership program with Home Shopping Network, in which special offers for subscriptions were promoted during on-air programming featuring Elle representatives and designers during last fall’s New York Fashion Week, reports Suzanne Nicholas, HFM director, partnerships & agency. A similar program, which include both Elle and Elle Décor, is scheduled for this fall.
A PD program with the upscale online/catalog merchant Frontgate, in which customers buying $100 or more in merchandise are eligible for a subscription to Elle Décor, has been very successful since launch late last year, and a similar program for Metropolitan Home was run this summer. Nicholas attributes the success of these both to affinity and to using the marketer’s dominant channel—the Internet—as the program channel.
Risk-Free at the Register
InStyle’s aforementioned program with the specialty beauty products retailer is akin in structure to the Best Buy program involving other Time Inc. titles that’s been underway for several years now. At the register, customers paying for merchandise with credit cards are presented with a two risk-free-issues InStyle sub offer. The subscriptions continue and convert to continuous service at term’s end unless a consumer opts to cancel after the two issues.
Chen stresses that InStyle works closely with the retailer to ensure that store staff are trained in presenting the offers thoroughly and accurately. Interested consumers are also given a brochure detailing the offer terms and must sign a form within the piece to confirm acceptance of the offer. (They take the informational portion of the brochure with them, for subsequent reference). Time Inc.’s customer service reps are also thoroughly trained to handle all inquiries about such programs. “At the end of the day, we of course want subscribers who value our content and will have ongoing relationships with our brands,” Chen says.
Chen describes the overall partnership, including circulation revenues/volumes and other cooperative ventures, as “significant” for InStyle.
InStyle and People StyleWatch are now also launching a single copy-based partnership with a specialty retailer in which the two titles are the only magazines sold in the stores (the chain has not sold magazines up to now). In addition to in-store displays/signage, staff at the registers will point out the availability of the magazines.
No subscription upsell is involved in this program at present, but it could eventually evolve in that direction, says Chen. Once a magazine’s match with customers and benefits to a retailer have been demonstrated through a relatively uncomplicated program like this single-copy one, retailers are more likely to be open to subscription programs that may require new system capabilities and procedures, she notes.
Key Partnership Audit Rules
ABC defines partnership deductible subs as “involving the bundling of a magazine (either single copy or subscription) with other goods or services.” (The category of nondeductible partnership subs was eliminated as of July 2007.)
To qualify partnership sales as paid circulation, the consumer must be given “clear and conspicuous” notification that the magazine is included with the bundled good or service, along with the amount allocated for the cost of the magazine. (Online partnership sales require notification at point of purchase, as well as in the offer promotion.) The consumer must also be given clear and reasonable information about how to obtain a refund in lieu of receiving the magazine. The refund must be the same amount as for the “allocated” value. The value identified as deductible is included in the reported average price calculation for the period.
In addition, the offer to the consumer must position the good or service as the primary item being purchased. (If not, the source falls under ABC’s premium rules). Only one magazine (single issue or sub) may be included with a partnership sale, although a choice of magazines may be provided as long as only one selection is actually included in the purchase. The good or service purchased should be homogenous in nature (have affinity) with the editorial content of the magazine.
None of the promotional materials used for the partnership sale may state or imply that the magazine is free, at no additional cost, complimentary or other synonymous language.
Consumer marketers strongly advise submitting a planned partnership program for ABC pre-qualification.
For more on ABC’s partnership rules and policies specifics, click into the following areas of its site: Rules (F 2.6); Rules & Resources; and the Promotions Guide for Consumer Magazines.
BPA International classifies partnership sales as part of its combination sales category and defines combination sales as “subscriptions to multiple publications or publications and products or services sold at a special rate.”
There is no deductibility requirement. These sales must be noted in Paragraph 8 and cross-referenced to Paragraph 3d, with details provided on the number of copies of each magazine sold in combination with another magazine/product/service.
Publishers may choose to disclose the price of each item of the combination sale or just the value of the subscription. If one of these options is chosen, the disclosed value of the subscription is used in determining and reporting average annual subscription order price for the period. The disclosed value cannot be in excess of the total price to be paid for the entire package offered.
In the absence of individual item or magazine price disclosures, BPA provides a formula for calculating the value of the subscription.
For more specifics, click into BPA’s Consumer Magazine Rules and review C7.8, C9.22 and C9.25.
Ed. note: This is only Part I of Karlene’s epic report on partnership marketing. Be sure to check out CM’s October issue for Part II of her examination of partnership sources, which will offer detailed advice and case studies from experienced marketers on creating and managing successful partnership programs.
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