Strategies to increase your subscription price - Folio: Special Source Book Issue 1993

5 ways to raise prices and still maintain value

Costs are going up across the board. Publishers are all too familiar with the increase in postage, as well as the spiraling costs of production and circulation acquisition. It even costs more these days to sell ad pages, if you take into account value-added services and the debilitating effects of rate negotiations.

Worse, the current industry drop in advertising doesn't look like it will soon improve. And in contrast to past downturns, when this one does finally end, magazines will probably emerge with their place in the media mix fundamentally altered. Rather than a bad tropical storm, magazines appear to be in the middle of a force-five hurricane.

True, emerging technologies have cut costs in some areas. But not all technologies are equally available to all magazines. And some technologies, while promising publishers better profits in the long term, require significant added investment up front.

For the past two years, magazines have responded to the call for better margins by cutting staff, streamlining procedures and consolidating. As this phase evolves to its point of diminishing returns, the next place to look in the battle for sustainable margins is circulation--namely, an increase in subscription prices.

Build editorial value

For many magazines the difference between staying in business and folding will hinge on the ability to raise subscription prices.

Raising subscription prices now is complicated by tactics publishers have used in the past to pursue subscribers. Basic marketing often relief on strategies inviting consumers to think of magazines as a cheap product. New subscribers have been enticed by every manner of pitch--63 percent off to digital clocks or telephones (premiums that, some said, were sometimes worth more in dollars than the magazine itself). With this history, attempting to raise magazine margins by asking consumers to pay more won't work unless we use methods that build the perception of editorial value.

Here are five suggestions to do just that.

1. Make the magazine worthy of its price.

This is the editor's job, and it's a three-step process. First, the editor must deal consistently with a clearly defined subject that his or her market wants to read about. Second, the editor must develop a look, style, design, format and voice for the magazine that is consistently presented. And third, the editor must develop an aura of believability and authority for the magazine so that it becomes the source for what the magazine's readers want to know.

Such a magazine, with its clear purpose and distinct editorial approach, can be described in circulation promotions in terms that attract readers. Such a publication can justify increases in its subscription price because it offers a good value. And, most important, such a magazine can also earn high pay-up and high renewals for publishers because the magazine has a high perceived value to readers, and it fulfills its promise.

2. Promote what you have to offer.

Simply tacking a higher subscription price onto your magazine won't work. In fact, it's sure to be a shortcut to disaster.

Price increases are most likely to be acceptable when you have done something different and promoted it effectively. It might be anything from new writers or new departments to a new design or higher frequency. But whatever it is, your readers deserve an explanation of what you have done in your direct mail and in editor's notes in the publication.

If they like what you have done, readers will be more willing to pay the increased subscription price.

3. Look for specific opportunities to increase price

Obvious reasons to increase price include new special sections, a big anniversary issue, upgraded paper or graphics, and so on. Less obvious opportunities come into play as magazines fold within a market. The recent demise of Homeowner, for example, may present an interesting opportunity for competitors such as Family Handyman and others to cash in on the pool of interested readers.

There are two possible strategies.

One is the old, tried-and-true method, left from the days when advertising pages ran deep and dependably, of increasing the number of your readers--that is, raising your rate base. The other is to charge more for each subscription but leave your rate base essentially the same. In today's market, the latter could prove a lot more profitable, and less risky, since the widened pool of potential subscribers/readers for a particular magazine allows the rate base to remain the same as the price readers pay is increased.

Charging more has the added attraction of increasing the proportion of committed readers who are likely to spend more time with the publication and be more advertising-responsive. As advertisers look for proof of reader loyalty, raising price could be vital to building just such a desirable base.

4. Change the definition of circulation value

The old saw "We can charge anything for circulation and make up the difference in ad sales" has proven risky indeed, since it neglects to credit circulation as a viable revenue source.

Instead of looking at circulation simply s the measure of a magazine's vitality, attention should be focused on what revenue contribution circulation might be expected to make. This imposes a completely different discipline on the margin each circulation unit delivers. Subscription and cover prices become much more a function of margin targets and acquisition costs--and less a consequence of what everyone else is charging.

5. Change your offer

When the Audit Bureau of Circulations relaxed its rules and allowed a subscription offer to be compared only to the single copy price (rather than to the basic price as well), circulation departments everywhere kept the subscription price the same, but hawked greater savings and discounts.

Because cover prices are generally higher than subscription prices, being able to offer, say, 63 percent off the cover price sounded like a great deal--but where was the statement that said, "Hey, this magazine is worth something"? What's left to counter the impression that you're offering a fire sale, not a valuable magazine?

A more profitable approach would be to raise the effective introductory subscription price, thus lowering the percent-off that you use to "sell" the subscription. You can still compare savings to the cover price with some effect.

There are many other ways to make subscription offers and still maintain value. The point is to identify editorial value, to be bold about promoting it, and then to charge an appropriate price that reflects your true margin requirements.

These five suggestions should start you thinking about a strategy for increasing your magazine's margins by raising subscription prices.

David Foster is vice president/general manager of Electronic News Publishing Corporation.

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