Keeping print costs low
Why must your promotion be cheap to print? The answer lies in one of the fundamentals of marketing. A good marketer first spends his time and money finding the right message to bring in more business. He does this by running tests on his best (usually in-house) list until he hits gold.
What comes next? Some will roll out to their remaining databases; others will negotiate joint deals with other media owners or rent outside lists. But this is where even experienced marketers get it wrong: the next step should be to run a series of price tests to your own list to decide what subscription rate you are able to charge.
If your production costs are too high then printing small numbers of between 1,000 and 5,000 names for each test group will be too costly to make money. Enthusiasm will evaporate and you will find it difficult to justify continued use of your expensive mailing pack.
This is why some publishers refer to their promotional activity as a â€˜campaignâ€™. Itâ€™s usually timed to run at a certain time of year to a fixed budget. But this is the wrong attitude. A campaign is what an above-the-line advertiser manages. We marketers create and organise subscription-building programmes in order to establish a profitable long-term business. Thatâ€™s the difference.
Driving down costs
This brings us to the other important aspect of marketing: reducing costs. Even those who have cleverly begun by designing a promotion with low-cost production values can usually reduce costs further (often by avoiding the mistakes other publishers are making all around you).
Reducing costs and increasing income and are the two principle aims of successful business management — and the results go straight to the bottom line of your trading statement.
You can picture the astonished faces around the boardroom as you say:
â€˜We donâ€™t need any more marketing money.
Our income is exceeding expenditure.â€™
When to price test
The best time to run a price test is before launch. Thatâ€™s probably a bit too late for most of you. Your publication may have been around for ages, but it doesnâ€™t really matter. You just need to find a new way to sell it.
There are many cases, as above, where companies have acquired other publishers in the knowledge they were charging too little for their products. Following the acquisition, profits were increased immediately simply by applying the pricing strategies explained in this article.
Before we price test we must ask some basic questions to determine the best way forward:
â€¢ How do we arrive at a subscription rate in the first place?
â€¢ What are the common errors we should avoid in setting a price?
The answers lie in the definition of a price test, which is:
A means to discover what price the market will bear.
The result of our test will enable us to decide the profit / volume parameters. For example, it may be in a newsletter publisherâ€™s interest to bring in the most profit he can from his subscribers, because thatâ€™s where most of his revenue comes from. A magazine publisher, on the other hand, is more likely to rely on advertising â€“ and he will want a higher circulation (volume) to enable him to maintain or increase his advertising rate base.
Itâ€™s rarely that simple, however. Most top subscription publishers now rely on ancillary products (back-end sales) to make up a large proportion of their income. They will therefore want a high volume to ensure their customer base is large enough to bring in enough additional revenue.
Whatever category you fall in, a price test can usually show the way to lift revenue exponentially.
What to test
If we accept that most publishers are already in the market and simply want to make more money in 2004, hereâ€™s how to go about it.
If your annual rate is currently, say, Â£40 and you would like more profit (rather than volume), you should price test at Â£80 or higher. This kind of price hike will come as a shock to most publishers. They will bring to bear many solid-sounding reasons why their market could not pay the high price.
The first answer to these objections is: â€˜How did you decide the subscription rate in the first place?â€™ Iâ€™m afraid gut instinct, as with most subscriptions marketing matters, doesnâ€™t work here. Most of what we do is counter-intuitive.
The second answer is to simply go ahead and test the Â£80 price anyway. Once you have positive results the various arguments tend to change to: â€˜How do we implement the rate increase?â€™ This, of course, is another problem with another answer. But like most problems in this field there are tried and tested solutions you can employ.
If no price test has taken place in the last 12 months, then it is unlikely that the publisher will have any logical or scientific basis for not carrying out a price test at double the current rate.
The battleship test
The way to view a price test is as a sighting shot on an enemy ship. When the captain of a battleship fires on an enemy boat in the distance, he first orders two sighting shots to straddle the boat. He can then measure the distances involved and sight his next shot to land on the target.
A marketer must remain in touch with the nature and size of his market in order to set his price. He does this by regular sighting shots, otherwise he cannot have an accurate measure.
*This is a true story with changes made to protect those involved.