As global publishers continue to face uncertain futures and search for financial stability, many have determined that a business driven by digital subscription revenue instead of advertising revenues is the best path forward.
Our team at FTI Consulting has worked with hundreds of publishers around the world to facilitate these business transformations, and most publishers have the same initial questions: Where do we begin? Where should we focus our resources to make the biggest initial impact?
Before we get into those questions, here is a short recap of the seven-lever digital subscription framework we outlined in our previous blog post.
This blog will focus on that first of seven steps — strategic direction — for developing and implementing a sustainable business model driven by reader revenue.
Strategic direction is about determining what you are trying to accomplish and how you can create the optimal path to get there. How can your organisation move most efficiently from a print-centric, advertising-focused business like many local publishers have to one with enough relative digital audience scale and subscription revenue to be a consumer-led business like The New York Times or The Wall Street Journal?
No publisher has the same path, but the best-in-class publishers have a clearly outlined, defined, and well communicated subscription model strategy.
A meticulously developed strategic direction enables organisations to set a vision for the future and frame decisions around that vision. This means effectively prioritising alignment with strategic objectives, increasing the efficiency and effectiveness of resources, and investing in key growth areas to maximise market potential.
Furthermore, it enables an organisation to clarify the interaction between print and digital subscribers and determine the optimal digital audience monetisation balance between advertising and consumer.
What is the key to starting to develop your strategic direction? Begin by taking a long inward look — an internal audit. Observe what has been successful and scrutinise necessary changes as they relate to four categories: audience acquisition, product, conversion, and retention.
Some questions to consider include:
- Audience acquision: Are you efficiently driving the “right” inbound traffic? Are traffic key performance indicators simply measuring quantity of audience or determining quality of audience with subscriber potential? How do you define and then attract the right customer segments?
- Product: What is your value proposition? What content would your audience be willing to pay for? What are the value-added benefits that potential subscribers value most?
- Conversion: Do you have the right balance between content sampling and the paywall? Have you removed as much friction as possible from the checkout process? Is the value of subscription clearly communicated and easy to understand? Have you created the right incentives to subscribe?
- Retention: How are you onboarding customers? Do you continue to engage and confirm value for subscribers? What is the mix of term selected at sign-up? How do you minimise non-pay churn?
By evaluating the organisation’s approach to these various stops along the customer journey, you can critically and comprehensively evaluate where your organization stands.
With your findings from this internal audit, the organisation should develop an aspirational goal. This “north star” should be ambitious and quantifiable, yet attainable with the proper commitment, focus, and organisational buy-in. After solidifying your goal, set three to five actionable objectives that will enable you to reach your goal and potential experiments to support these objectives.
To illustrate each of the seven steps, we will use future posts to guide you through the journey of one of our recent engagements. When faced with declining advertising and digital subscription revenues, this publisher knew it needed a new approach to its business, one that would build a solid digital subscription revenue foundation to propel growth for years to come.
As we do with all publishers, our first step was to determine a strategic direction. After a comprehensive audit, the company recognised it had done a good job of recruiting an audience to its site, but the organisation’s one-size-fits-all metre model was outdated and ineffective in converting readers into subscribers.
Therefore, the publisher set an aspirational goal of achieving a digital subscriber penetration of 4.5% in three years (most U.S. local news publishers are between 0.5% and 2% subscriber penetration). In the long-term, scale is expected to be achieved by building a dynamic, machine-learning-based subscription model to better target the audience most likely to convert.
However, to reach that goal by 2021, it set three objectives that could be achieved by maximising the current metre model:
- Intercept rate (unique paywall hits divided by total unique visitors) of 6%.
- Average monthly digital-only subscriber growth rate of 3.9%.
- Average monthly digital-only starts growth rate of 4.5%.
Additionally, to continue to develop its top-of-funnel audience, the publisher determined it needed to grow core site content views, penetrate additional audiences, and strengthen subscriber retention and loyalty.
However, what this publisher soon found out is that while developing a strategic direction is hard, creating the cultural shift necessary to get your entire organisation working toward one goal is even harder. Developing your strategic direction takes significant effort and critical thinking but rallying everyone from the newsroom to the c-suite around a singular mission takes a complete transformation of mentality.
We will dive into how to gain the trust, support, and buy-in of your organisation when we visit the topic of organisational alignment.