Around ten years ago two men had an idea for a magazine for local government employees. It was to be sold by subscription.
They knew their market and the launch was immediately successful. Over the coming years they launched other local government magazines and their business grew until it caught the eye of a larger publisher.
The two men decided to sell out. Although demand existed for their publications, they knew local government had to be careful with public funds — and therefore subscription rates had to be kept low. They were working hard for very little return. The new publisher would find it a tough market, but then that’s business.
Once the new publishing company took control, however, they ran some tests and lifted subscription rates across the titles by 50%. Their new division went into immediate profit. And as subscribers renewed over the coming year, profits increased by 400%.
The two men had shrewdly identified a new market. But it was the application of the scientific principles of price testing that brought in the profits. The two men weren’t to know – after all they were not subscriptions marketers. *
Assessing the value of a publication
‘The value of a product is measured by how much someone is prepared to pay for it.’
Although most of us have will have heard that age-old maxim, it is, unfortunately, almost universally ignored by publishers.
The chances are, unless you have carried out a price test in the last 12 months, you probably don’t know how much your subscribers are prepared to pay for their annual subscription.
In fact, it’s very likely your annual subscription rate is lower than it could be. In every subscription price test I’ve carried out for publishers over the past year, I’ve found that subscribers were willing to pay more.
Price testing is integral to the fascinating world of subscriptions marketing. Subscriptions work in the same way most businesses do: you have a product or service that people want and you make a profit out of providing it. The fascinating bit is how you go about increasing that profit.
Let’s suppose, as in our example above, you suddenly discover a way to increase the price you charge for your product by 50% without incurring any extra on-going costs and without reducing demand. What would happen then? In most cases the person who made the discovery would be a hero. And that person would be you.
In fact, current price testing shows that subscribers are willing to pay up to 100% more for the same publication. All you need to do is ask in the right way.
Why ignore extra profits?
Very few publishers carry out price tests. But why do companies neglect this easy source of extra profit? This apparent mystery can be easily explained.
For subscriptions marketing to be effective, the managing director must lead. Success is the result of the person at the top having some enthusiasm for the process.
Unfortunately, this often isn’t the case. That’s why so many so-called ‘marketing managers’ are nothing of the kind. They are so restricted in what they can do they spend their time creating loose inserts and in-house promotions to appear in their own magazines.
This isn’t marketing, of course. An effective marketer will have a simple brief:
‘Find where the money is and bring it in.’
A real marketer is measured on a simple comparison of revenue versus marketing costs. If the marketer wants to spend his budget on newspaper advertisements or building a new website to capture names, then it’s up to him.
In any well-run business the M.D. simply wants to know how much money has been brought in and what profit can be expected over the agreed term – one, two or three years. If the marketing department is making more money than it spends, let it keep on spending.
A sure sign that something is wrong is if the marketing brief goes to too many pages, or sounds complicated.
Price testing tactics
If you have ever briefed an advertising agency to come up with an idea for a subscription promotion, you will have seen some pretty fancy production work. This is because production is where many agencies make their money and get their awards. High production values are, however, something we must resist.
When we organise a marketing programme the promotion should have two qualities. It must be:
• Highly responsive
• Cheap to print
Let’s look at why these two ingredients are necessary.
It’s no good carrying out a price test with a promotion that is not highly responsive. The copy and proposition must convince the reader that he has little option but to subscribe to your publication. Any objections he may have must be handled up front, at the top of the letter. If, for example, your publication is available at newsagents, or he can borrow it from a friend, or the content is available elsewhere, you must give him a good reason to ignore these alternatives.
The benefits of subscribing must be so strong they are almost irresistible. However, most promotions simply state:
‘This is the publication and here is what you pay’
Some testimonials and a discount may be thrown in to spice the message up, but that’s as far as it goes. This kind of offer-led approach will not work as well as a benefit-led message. What’s worse is that the offer-led message will work against you because the last thing you want in a price test is your prospect focussing on the cost of the subscription!
Your concept — the idea behind the message — must drive readers towards the coupon with determination and proficiency, and without diversions. When they get to the coupon the price must match the value you have established for the benefits available. That’s the price of your product and that’s why it’s wrong to charge any less.
In the second part of this article, I look at why it’s vital to keep your print costs low, and when to price test.