Get more from you renewals - Circulation

Renewals is a game of inches in which a small percentage point gain can have dramatic effects on long-term profits.

The single most important step you can take to increase circulation profitability is to reduce the number of new subscriptions you have to sell in any given year in order to achieve your magazine's circulation goals. Imagine if you could magically stop using your 10 most marginal direct-mail lists and still meet rate-base, You can do it, of course, by increasing direct-mail response and pay-up. But the surest route to lowering your new-business requirement fast is to improve your conversion and renewal rates.

Many publishers believe that there is very little that can be done to affect renewal response, since they assume that readers renew based on editorial or some other factor unrelated to circulation strategy. There is some truth to this argument - especially in the sense that breakthrough results, such as a 20 or 30 percent lift in response that we sometimes see with a successful direct-mail package, are unlikely in renewal promotion. Renewals is a game of inches in which a 3 or 4 percentage point gain in conversion response will have dramatic positive effects on the long-term profitability of any source. so it's always in a magazine's best interests to keep fine-tuning the creative, the offer, the timing and so forth to maximize renewal response.

Among the important factors affecting renewal response are three often overlooked tactics that represent fairly low-cost ways to get more impact from your renewal series. These are (1) mailing enough notices, (2) mailing early enough, and (3) mailing often enough. Here are ways to analyze and take action on these potential methods to increase renewal response.

How many efforts should I mail? Efforts analysis, in which we calculate the revenue, expense and profit of each renewal notice in the series, is an invaluable tool for determining the optimal number of efforts to mail. In renewal promotion, the basic idea is to continue to add marginal efforts until the net profit per sub produced by the last effort in the series is equal to the net per sub from your least profitable source (usually Your lowest response direct-mail list).

Let's look at an example: Soft-offer direct mail for our hypothetical Magazine X (see chart, left) receives an average 3.0 percent gross response and 30 percent pay-up from its low-response lists, and a 2.5 percent response, on average, from the sixth effort of the renewal series. Should the publisher add or reduce) a renewal effort?

     Should you mail another effort?

                           Direct mail        Renewal:
                       (low-response list)   6th effort

Annual mail volume (000)       40                30

Gross response                3.0%              2.5%
Cash with order               0.0%             25.0%
Credit pay-up                  30%               70%
Net response                 0.9%             1.94%

Sub revenue per order         $18               $21
Promotion cost per M          390               310
Reply costs/gross  order     0.40              0.40
Billing cost/credit order       1                 1
Bad debt cost/bad pay order     1                 1

These computations derive from straightfo-rward efforts analysis and show that, whereas the publisher loses $33 per net subscription from marginal direct mail, he Profits $3 per net subscription from his sixth effort of the renewal series. The $36 spread between these two figures is a rough approximation of the profit leverage the publisher has if he increases the number of renewal efforts and decreases his direct mail to those marginal lists. A seventh renewal effort, for example, is more than likely to produce a net per sub at either a slight profit or a marginal loss - still far better than the minus $33 from direct mail. In fact, this analysis suggests that the publisher should test a seventh and even an eighth effort.

     The analysis looks like this:

Promotion costs           $15,600    $9,300
Reply costs                   480       300
Billing costs               1,440       674
Bad-debt costs                840       169
Total costs               $18,360   $10,443

Net subscriptions             360       581

Cost per net sub              $51    $17.97
Revenue per order              18        21
Net profit (loss) per sub    $(33)    $3.03

When should I start mailing? Depending on the source, sometimes immediately. This is especially true with business from direct-mail agents because you want the subscriber to renew with your offer before he has the opportunity to renew through the agent.

Most publishers wait too long. Four months prior to expire is the absolute latest, and many of our clients begin six or seven months prior. The logic behind an early start is that reader response declines dramatically after expire. Those of you who track response by effort can verify this from your own data. One reason is that your strongest selling point - renew now to avoid expiration - is no longer available once a subscriber expires.

Yes, some readers will complain about receiving notices so early. Human nature being what it is, however, I know of no publisher who has been successful with a single-notice system mailed out one month prior to expire. Readers need to be reminded to renew - again and again. And you will maximize renewal response by getting as many notices as possible into readers' hands prior to expire.

Keep in mind that renewal promotion does not always mean a conventional effort with order form, BRE, and so forth. Everything a publisher does to promote reader satisfaction and loyalty, from customer service procedures to a free gift sent to the reader prior to the start of renewal promotion (often called a cultivation effort), is part of the renewal process.

How frequently should I mail? Greater frequency equals higher response. It conveys a sense of urgency. Even publishers who start mailing six months prior to expire but wait two months between efforts to process returns are cheating themselves out of response.

Start early and maintain a tight 30-day (or four-week) interval between efforts. One successful exception I sometimes see is to increase the interval only between the first and second efforts. Since most responses come from your first effort, there may be some savings from this approach because it avoids duplicate mailings. But remember, it's worth it only if it does not depress overall response to the series.

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