The marketing director for one of the larger trade magazine publishers drew up a plan for re-launching an ailing weekly subscription-based financial newsletter. At the all-important presentation meeting he showed the plan to his managing director and the prospective publisher.
The managing director was dismissive. â€˜Iâ€™ve never seen a budget like that,â€™ he said. â€˜All that marketing expenditure â€“ itâ€™s far too high.â€™ Dismayed, the marketing director explained that, for a subscription title, money is only spent if enough revenue comes in. The expenditure is always matched by the income.
The market was fast growing and there was a potentially lucrative gap to be filled. But, unconvinced, the managing director turned the project down.
In the (true) story above, the prospective publisher, who had maintained a curious silence throughout the discussions, left the following month to start up the magazine with a major competitor. He phoned the marketing director from his new office to thank and congratulate him on coming up with a great concept.
The title became the leading finance title in its market. It attracted a great deal of recruitment advertising and three rival publishing companies copied the idea.
Was the marketing expenditure too high? No. Would the marketing director receive the same negative response from his managing director today?
Iâ€™m afraid to say he probably would.
Subscriptions are the safest business model
If you show a plan containing high subscriptions marketing expenditure to one of the main trade or consumer publishers, it will probably be turned down. But the fact is that a well-planned subscription title has a far safer business model than either a controlled-circulation or a newstrade publication.
Let me state now that I have nothing against newstrade or controlled circulation magazines. I have spent an equal amount of exciting times publishing both. But isnâ€™t there more than just a hint of insanity in both worlds today?
The madness of newstrade publishing
Is madness too strong a word? Lets examine the facts and please write if you feel Iâ€™m going too far:
- The average number of titles handled by independent newsagents is less than 285. They donâ€™t have room for more, so unless yours is a big budget launch prepare for some pretty anxious times.
- Wholesalers send newsagents hundreds of magazines without first getting their agreement. So many are just sent back.
- Up to 30% of your magazines will be returned without ever going on the shelf â€“ and in some cases, many more. One publisher has complained that, in a recent promotion, Tesco sent back 25,000 copies without them ever going on display.
If you run a smaller consumer publishing house, prepare to be squeezed by the big boys very hard indeed. They get most space on the shelves.
Very few specialist magazine publishers have the manpower to visit wholesalers regularly – but if they did theyâ€™d be horrified to find hundreds of packs of their magazines returned unopened, despite having paid for in-store promotions in supermarkets and newsagents.
With an open mind, you have an open market
The relevance to this on saving money is: think laterally, and out of the wholesale box. Spend your budget where itâ€™s accountable.
With subscriptions, you only invest when you are certain the revenue will come in. No income? No expenditure.
You will probably have an open market waiting for you. You will be free to try almost anything you wish. Because very few UK publishers are comfortable with a proper subscriptions marketing budget, an aggressive publisher has great freedom to manoeuvre. There is just no competition. Direct marketing is very discreet so you can build circulation without anyone ever knowing.
And with subscriptions, unlike newsstand sales, a marketer can provide watertight evidence that a promotional program will work. He will run a test first. He can promise, up front, that marketing expenditure will only be used if â€˜the fish are bitingâ€™; in other words, when a test shows the revenue from new subscribers meets set targets.
By its character, however, this is not an easy kind of budget to formalise. Itâ€™s a moving and changing thing and itâ€™s probably this that puts managing and financial directors off.
Looking at various magazinesâ€™ ABC figures, Iâ€™m always amazed at the number of bulk copies that are given away free of charge, rather than sold through subscription. Surely, any income is better than none? Think of the extra advertising that comes in through higher paid subscription sales.
And when you realise that most publishers pay a â€˜placement feeâ€™ for each copy to be distributed in airports, hotels and trains etc, it makes financial sense to get what you can from a subscriber in the knowledge you can upgrade them once they are aboard (more about this later).
Whatâ€™s your experience? How do you approach your management with this kind of response-based budgeting? Is it accepted? Is a limit placed on what you can spend no matter what return you achieve on your investment? Are you told to send out free bulk or postal copies instead?
This isnâ€™t a rhetorical question. Do write in and let me know your experiences on this important subject.