Every industry has its own unique version of audience measurement.
But are these the key performance indicators (KPIs) helping to grow the business?
For many years, the Audit Bureau was the guidance for daily working life at our Amsterdam-based news organisation NRC. Everybody worked their hands to the bones for a little growth in the official audience measurement. But to be honest, the singular focus on that metric made us do strange things.
Because we were so focused on growth in circulation, as calculated by the Audit Bureau standard, every single marketing promotion had to result in extra paper out of the printing house. That was the main goal of what we did. We did not really care if anybody actually wanted the newspaper. Sometimes we even pushed stuff to people who didn’t want it, just to grow the official numbers.
Here are four examples of bad decisions we made because of the focus on audience measurement standards.
1. At NRC, it was possible to get a two-day subscription, with home delivery of just the Friday and Saturday newspapers. Subscribers who chose this product probably did so for a reason. But we, being clever marketing guys, just gave them an extra day.
We told these customers, “Your subscription will be extended. From now on, you will get the newspaper on Thursday as well. We are sure you will love it. In the first couple of months, you don’t have to pay for it. Enjoy!”
Nothing illegal happened, but it was a bad decision because many customers were offended, and we ended up losing so much business that we even went down in audit bureau circulation for that particular group.
2. Another example is the reward for sales agents. The full six-day product would bring in a very nice bonus — much higher than for a weekend subscription — because it meant more paper out of the factory, which in turn was good for audit bureau standards.
You can imagine what happened. With the higher bonus in mind, sales agents were pushing the six-day subscriptions no matter what. Even if potential subscribers told salespeople that they only wanted to read the newspaper on weekends, the agent would tell them, “This is a killer deal; just throw those unread weekday newspapers in the dustbin.”
3. Sometimes, we were even hurting our very valuable loyal subscribers. We made it as hard as possible to temporarily pause delivery when on holiday. We hid the pausing option on the Web site and started asking an administrative fee of €10.
That stopped many from pausing delivery, which again was good for the official audience numbers. But at the same time many subscribers complained they had to pay us for not delivering the newspaper.
4. Last but not least, we delivered our newspaper to people who were not really interested. We used the amazing power of free. You could get our newspaper for free, on trial. A lot of people will take everything when the word free is involved, so this looked like quite a successful way to get more paper out of the printing house.
With the benefit of hindsight, it seems clear that these actions don’t make sense. The voice of the customer is completely ignored, and you don’t have to be a professor in statistics to predict that this kind of behaviour will backfire in the long term.
And backfire it did:
- One-third of the two-day subscribers stopped, because they didn’t want a third day pushed down their throat.
- The newly acquired six-day customers stopped as soon as their contract ended, because they were tired of throwing away five newspapers a week.
- The free trials didn’t take root and were actually costing us money due to acquisition cost, and variable printing and distribution costs.
- Finally, loyal readers who didn’t want to pay for the holiday service just ended their subscription before they went on vacation. Many times, they didn’t reactivate after their holiday and were lost.
Maybe the weirdest thing of all is that it took us years to realise these actions were not helping the company. Circulation was temporarily going up, official audience measurement numbers were green, graphs on the wall were going the right way, and editors were cheering. Everybody was happy.
It was only after a couple of years, when we realised we were running out of tricks to inflate circulation numbers, that we had to face the truth about our actions. What could we do?
Find KPIs that represent company health
When this brutal question struck us, we had to re-think our one and only KPI.
Was it really true circulation was the one thing that drove our newspaper business? We came to the conclusion this was not the case, because when we drive a lot of newspapers out of the printing house, that doesn’t necessarily mean we are earning a lot of money in the long term. It does not mean people are reading those newspapers.
The correlation between newspaper circulation and company health was only true in the old days, when everybody had the same six-day subscription, and everybody was paying the full price.
These days, circulation can consist of a lot of different kinds of subscriptions with a lot of different margins. A full-priced weekend subscription brings in a lot more money than a “five weeks for €10” trial subscription. But in terms of circulation numbers, the trial for the full week is six times better than full price for the Saturday.
In the old days, more paper out of the factory meant more reach and more advertising money. Nowadays, the sad truth is that advertising income is down for newspapers when circulation is down and when circulation is up. The correlation is weak.
So, we finally waved goodbye to our one and only KPI, which had driven our company since 1828.
Then the hardest part started: defining new KPIs. We sat in a room for hours, asking ourselves, “What is really driving the value of this company when it’s not circulation, as defined by the Audit Bureau?” We tried to frame it into a golden rule that is simple and always works.
We couldn’t get away with saying we need a healthy financial margin, mostly expressed in EBITDA (earnings before interest, taxes, depreciation, and amortisation). That makes perfect sense, but you can’t tell a marketing department to go out and earn some EBITDA. So, what’s below the surface?
That’s where we came up with relationships. The real value in our company comes from the relationships we are building with our readers. And those relationships have to be real. It doesn’t count if you push the newspaper into a letter box and nothing happens. It has to be a serious, two-sided relationship, just like the ones you cherish in your personal life.
From that perspective, the term core relationship was born. A core relationship has a positive value both for the customer and for the company. The calculation is simple: count all your subscribers as one subscriber. Don’t divide a Saturday subscription by six, as many circulation audit bureaus do. And don’t count subscriptions with higher costs than revenue, like trials that stop automatically.
KPIs drive culture
The change seems to be very subtle. Core relationships or Audit Bureau standards — it’s just another calculation of the same thing. But the impact on the company has been huge.
The change in weekly reporting did all the work and changed the organisational culture. From the moment we started to report on core relationships, the mindset started to shift. The marketing department, traditionally driven by the sales charts of the day, started to worry about building relationships with new and current subscribers.
Suddenly, our call centre was more interesting than any other department. We saw its true potential. Sales employees were building relationships with our subscribers all day long. We wanted to get rid of stupid rules instead of hurting our customers with annoying fees or crappy service.
Every individual subscriber counted, not just the six-day subscribers, who accounted for more in Audit Bureau measurement.
The holiday service became free of charge, and we started to promote it in the newspaper and with e-mails.
Bonuses for sales agents became equal for every subscription form. Like Starbucks, we introduced our own kind of LATTE system for sales reps. We asked them to listen to customers, acknowledge their needs and take action by selling the subscription that fit their lives, thank them, and explain what the further steps are. This reduced cancellations and increased long-term retention.
We started to look for patterns in the data about what kind of products or promotions were building real relationships. For the first time, we analysed what happened after a subscriber came in. It turned out that 20,000 customers per year change their subscription because the package doesn’t fit their needs anymore.
We also found the acquired weekend subscribers stayed much longer than the full-week subscribers, because a single newspaper per week was just better for their busy lives.
Sales numbers were also not as clear as they seemed.
Because of the pushy behaviour of the sales agents, more than 10% of subscribers cancelled their order within a month. We started to understand how we could listen to our customers through the data. If six-day subscribers had a lower retention, then we had sold the wrong subscription in the first place. We hadn’t listened properly to customers’ needs.
In summary, the new KPI started a culture in which we listened to what our customers wanted instead of trying to enforce what we needed. And from then on, we worked our hands to the bone to optimise customer experience and grow the number of core relationships.
We started thinking of the longer term. How do we maximise the number of healthy relationships? It wasn’t by endlessly hunting for new relationships but by making existing customers happy. To do this, we had to understand their needs. The table below illustrates how a new KPI drives a cultural change in many parts of an organisation.
Bite the bullet
At the same time, some dramatic things happened to our circulation numbers as measured by the Audit Bureau. We stopped selling automatically stopping trials, because our data told us these were not building real relationships. So, after a couple of weeks, a huge trial bubble burst, and we lost tens of thousands in the audience measurement standards.
We knew this was going to happen, and we were quite sure it wouldn’t really hurt our company financially, because automatically stopping trials had a negative value. But beyond a group of insiders, there were hundreds of employees and people outside the business who were not aware of the change in policy.
And how could they have been? Even if we had told them with press releases and memos stating, “We changed our KPIs,” it takes a while for every person to say goodbye to a 189-year-old legacy — especially if your newspaper is the only one in the Netherlands to stop selling trials, and it is imploding in the quarterly industry reports.
We had to bite a very big bullet. The editorial department questioned the capacities of the circulation department. How could the best newspaper in the country have the worst circulation numbers?
That is why you need top management support. In every market and at every company, the ride will be bumpy if you introduce new KPIs at the expense of the figures the rest of the company grew up with. You will need a very strong umbrella to protect you from the heavy rains pouring down.
Eventually our focus on relationships drove us to better informed decisions, with customer needs in mind. And instead of going down in readership, we managed to turn the tide and grow substantially.
KPIs drive organisational cultures all around you and reveal how businesses are managed. Dare to question those KPIs, and ask yourself if the KPIs you use are the core drivers of value for your financials and your customers.
If they are not, and you have figured out which KPIs are the right ones, don’t hesitate to change your systems, data, reports, and analyses. You will be amazed by the impact. Just don’t forget your umbrella.