Are the boys at the Economist still getting their sums wrong?
The Economist carried out a multi-media marketing campaign in the USA. The campaign has been the subject of a great deal of head scratching among marketers who just cannot work out the maths.
There is little doubt The Economist stood to loose around half of the $500,000 they intend to spend on the promotion.
Competitors to The Economist such as Time and Newsweek run their marketing programs to carefully formulated principles. The Economistâ€™s plan, however, follows no known rules of testing.
Nor would I think the people who planned this marketing exercise expect much back. â€˜Awarenessâ€™ advertising, which forms part of their marketing blitz, does not provide the kind of returns or metrics direct marketing enjoys.
The purpose of a Coca Cola or McDonaldâ€™s advertising campaign is to create a positive image of their product in enough minds so the target market will eventually reach for the brand when the opportunity rises. Magazine publishers donâ€™t spend their money this way because it doesnâ€™t sell enough copies.
Launching a publication is an exception to that rule. A big new consumer magazine or newspaper needs an image so people will buy it when offered. That doesnâ€™t apply after the launch however: news trade sales usually slip back to previous levels, or lower, when the advertising campaign stops.
The Economist’s new plan
The question is, of course, why bother with the marketing if it is unlikely to bring many subscriptions in? It appears The Economist is flush with funds for â€˜awareness advertisingâ€™ and can afford to lose much of their $500,000 on this huge â€˜testâ€™.
The truth is, you canâ€™t run an awareness campaign test on small budgets.
The Economist in 1996
The first article shown below is from Subscriptions Strategy issue 14, published in 1996.
At that time, The Economist had 58,000 subscriptions in the UK. These have risen to just below 90,000 today.
A major problem The Economist had back in 1996 was that 80% of subscribers were paying the discounted rate.
Things havenâ€™t changed for the better. Currently, 87% of subscribers are paying the discounted rate.
Here are the main points from Subscription Strategyâ€™s investigation into promotions from The Economist:
1. The Economist boys canâ€™t add up
2. First year renewals are below 50%
3. Thousands of subscribers renew using â€˜introductory offersâ€™ meant for new subscribers only
4. The Economist promotions compare badly with Time magazinesâ€™
5. The Economist magazine is poorly written and boring
6. Marketing has always comprised of awareness advertising combined with direct marketing
7. Just 20% of subscribers pay the full annual rate
I sum up the whole approach at the end of this piece. Read on, because I wonder what our readers would do if presented with $500,000 to spend on a test? Not this, I hope!
TACTICS FOLLOW STRATEGY
A good example of a promotion that straddles both consumer and business sectors is produced by The Economist. So weâ€™ll look at its best in-magazine promotion to show how it managed to build 58,000 subscriptions in the UK.
The Economistâ€™s tactical loose insert promotions link with their poster advertising campaigns which appear in bigger cities. This creative cross-promotion branding has added enormously to The Economist’s perceived value.
SUBSCRIPTIONS SUCCESS DOESN’T DEPEND ON EDITORIAL CONTENT
The Economist’s success with subscriptions is a triumph of image over content. This statement will shock those who believe The Economist is the best magazine in its class. But much of each issue’s 70 pages of solid grey content is incomprehensible and soporific with its ‘ifs, buts, or, maybe, perhaps, might, meanwhiles and possibilitiesâ€™.
This is relevant because it shows certain publications such as The Economist seem to get away with weaknesses simply because of their image.
Most of us, even those who subscribe, don’t have time to read The Economist.
To show what I mean, here are the opening lines from a single paragraph in the current issue:
“One difficulty is that…
Another is that….
That does not mean….
It also means….”
This kind of editorial wind will have a reducing effect, not on initial response to promotions, but on renewals.
Certain intellectuals and theorists enjoy this kind of inconsequential reading, but why should the ordinary subscriber put up with it? In fact, he will only put up with it until renewal time, when the combination of the request for the full rate, plus the fact that he hasn’t been able to read much of the magazine, means that more than half of all first year subscribers won’t renew.
It’s with poor renewals that The Economist will have most of its subscription problems.
ECONOMIST LOOSE INSERT
The first insert we examine is titled “Insider reading”. It is one of The Economist’s better attempts.
Here are the points that make this a good promotion:
1. A generous offer: 50% off the cover price is a big inducement. Even though this is for a three year term, it makes a good headline and pulls the reader into the promotion.
2. Two options: restricting payment options to ‘Invoice me’ and ‘Invoice my company’ will lift response by a substantial margin.
3. Visual impact: the strong red colour will contrast with the black and white pages of text in the magazine.
4. Easy response: this pre-paid card is simple — one of the big tests of this kind of news trade offer. Payment is by cheque or ‘Invoice me’.
There is no credit card option. Readers don’t like to advertise their credit card numbers in the open post. This restriction actually helps the promotion a great deal, and the response to this card will be far greater than to the bound-in card analysed later.
The reason The Economist calls this an ‘Introductory offer’ is that a high percentage of current subscribers will be tempted to ignore their renewal notices, let their subscription lapse and renew using one of these cards from a news trade copy. Tut tut. This will dampen renewal rates considerably so the ‘introductory offer’ headline discourages this.
If you didn’t think an Economist reader would bother doing this, think again. There’s a good chance you are in this market. Would you like to save 50%?
This card can be adapted to suit almost any business or consumer publication to good effect. Once again there are aspects that can be improved, but response to this promotion will be so high it will be worth inserting two or three cards within each issue. Each card will make a profit.
There are four elements that ensure that The Economist promotion will perform at a significantly higher rate than other UK promotions.
Here are the essential ingredients:
â€¢ The ‘Invoice me’ option
â€¢ A simple order form
â€¢ Good use of colour (no expensive full colour used)
â€¢ Stronger offer – ‘Save up to 50%’
THE UNECONOMICAL BOUND-IN INSERT
The promotion currently running and is not one of The Economist’s better attempts. Someone’s taken their eye off the ball.
Sign up for free access to our confidential area to view this promotion.
Half the form is about payment options. And it’s looking quite involved, which is a bad sign.
Worst of all, the sums don’t add up! The full subscription price as advertised at the front of the magazine is Â£84.
Â£67 is not a 40% saving; it’s a 20% saving. And the three year price saves just 33%, not 50%.
TICK FOR TIME MAGAZINE
The Economist can learn from Time International’s excellent magazine insert.
The difference is that the Time insert is really compelling! This is because it has cleverly used the available space to actually sell subscriptions! There are four methods used to do this:
1. A big discount: you save at least 53% off the cover price (far stronger wording than The Economist’s ‘save up to’). In fact the saving in the UK is more than 60% off the cover price.
2. An appealing free gift: this has a high perceived value and would be of interest to almost any reader.
3. Simplicity: there are just two payment options: ‘Payment enclosed’ and ‘Invoice me later’
4. The selling message: the card is primarily designed to sell, not to collect money.
The free gift is given around half the available space. The rest is taken up with what the reader saves. About a quarter of the card contains a simple order coupon.
Time International is very effective in discovering free gifts that will appeal to its prospects. Current best performers are:
â€¢ Hold-all bag
â€¢ Executive brief-case bag
â€¢ Suit carrier
â€¢ Battery wrist watch
â€¢ Travel alarm clock
The Time magazine ‘premia buyer’ negotiates prices down to ensure every promotion that appears makes a profit.
Time magazine is concerned with selling. The subscriptions rates and payment details in the Time promotion are moved to the address side of the card, out of the way of the sales message which is:
Never mind about money now. Look at the deal!
What a difference this makes to the message!
Â©Peter Hobday, Subscriptions Strategy 2006
Contact Peter Hobday at Subscriptions Strategy if you would like a pdf of the promotions described in this article.
Final words from Peter Hobday
For many years now, The Economist has combined awareness advertising with direct response subscriptions marketing. Their familiar red promotional leaflets appear regularly, loose inserted in our national newspapers. Their current examples offer a low-cost trial linked to a direct debit payment.
Meanwhile, their posters appear in major cities, pushing the message that you canâ€™t really move up the corporate ladder if you are uninformed, which is what will happen if you donâ€™t read The Economist. The strategy is to sell the idea of advancement on one hand while threatening job stagnation on the other.
How the chain of action works
The strategy works in London, for example, because the poster advertisements create a demand and The Economist sells thousands of copies from the hundreds of newsstands in the streets, tube and train stations around the city. Those newsstand copies all contain cut price subscription offers, so the chain of action works pretty well.
However, remove that concentration of newsstand availability and the chain stops moving. The Economist currently sells around 38,000 (24%) of its 158,000 total circulation through the newsstand, an important chunk.
The people who planned the Baltimore campaign arenâ€™t stupid, but big money can have an exhilarating effect and, of course, that money must be spent. But the objective is to win new readers for The Economist, not to win huge commission payments for oneâ€™s agency. A field trip to Baltimore will have been made to see how the availability of newsstand distribution for the magazine would supply the demand created by the advertising. There will also be loose inserts and mailings.
Objectives such as these must be established before the creative approaches are settled. Objectives are also the standard by which you should evaluate proposed concepts and measure a campaign’s success. As advertising agencies work to completely different principles to direct marketing agencies, I can imagine the potential exists for some major disagreements over this.
If advertisers do not establish objectives to guide their work and, later, to evaluate them, and things go horribly wrong, the agencies and probably The Economistâ€™s marketing supremo will be fired. Unless, of course, the objective is to run a $500,000 test and to write off the money if the test shows the concept doesnâ€™t work in Baltimore.
If that is the case, then it really is simply a test (although the biggest one I have ever come across) and it will help formulate future marketing strategy, which is what a test is supposed to do.
If awareness, recognition and public favour are essential parts of your marketing plan, then awareness advertising fits. If your objective is to gather quantifiable leads, sales or dialog with customers and prospects, you should use direct response advertising.
If your objectives fall in both areas, youâ€™ll need both. But remember, with awareness advertising, itâ€™s difficult to keep costs down, which is the primary purpose of any test.
P.S. Some readers may take great glee from my description of The Economistâ€™s â€˜windy and purposelessâ€™ editorial. So to put it into perspective, lets look at Time, too.
My feeling is both these magazines need to communicate better, and need something better to communicate (but that has been said before). I find them awkward, over-edited and needing de-coding. For example, many of Time magazineâ€™s international readers will not understand:
â€˜Inside-the-Beltway carping had sparked a staff shuffleâ€™.
Time magazine: awkward, over-edited and needing decoding
I have reproduced below the opening paragraph of a leading article from Time magazine to show how long and awkward some opening sentences are:
Among insiders, it’s being called “the reboot.” Although President George W. Bush stuck close to home when he chose Budget Director Josh Bolten to succeed chief of staff Andrew H. Card Jr. last week, officials consulted by the White House said the overhaul will be more consequential than it looked at first. These officials said Bolten, who comes on board April 15, plans to put some new faces in front of the public and on Capitol Hill. Bush, who retired to his Texas ranch for the weekend after a summit in CancÃºn, did not want it to appear that inside-the-Beltway carping had sparked a staff shuffle. Now it can be attributed to Bolten, who will add some meat to an election-year agenda that has disappointed even some of the President’s most fervent supporters. Speaking of Bush’s team, a Bolten friend said, “Josh thinks they need to communicate better, and need something better to communicate.”
Â© Time magazine
The whole article, plus others can be seen at:
The Week: condensed, intelligent and all you need to know
Here is an opening paragraph from the UK magazine The Week, to show you how they handle a rubbish story:
Fifty years ago, our dustbins were full of ashes from domestic coal fires, on which much household rubbish was burnt. Now, due to clean air rules and central heating, we burn nothing at home. Instead, every man, woman and child in Britain chucks away half a ton of rubbish a year, the weight of a small car; London fills an Olympic-size swimming pool with rubbish every half-hour.
The Week is far more readable than its competitors, but is hugely more expensive at Â£79.99 for 52 issues (March 07 – that’s around US$156) and, propably because of that has a much smaller readership. See the price comparison below.
But then a more widely read publication couldnâ€™t claim a London Olympic swimming pool (which one would that be?) is being filled with rubbish every half-hour without readers demanding the Sports minister and the Mayor put a stop to it.
Use the link below to go to The Week’s website:
Use this link to see the International Herald Tribune article on The Economist:
How the subscriptions are priced:
USA offer: 25 issues for $49.90
UK offer: 52 issues for Â£94.40 UK, paid by direct debit (Mar 07)
A. 84 (28 free) issues for $20.00 by credit/debit card or Paypal
B. 20 for $56 ‘bill me’
A. 54 issues for Â£34.99
B. 81 for Â£34.99 credit card
UK offer: 52 issues for Â£79.99
UK offer: 52 issues for Â£82