On a recent visit to a large regional newspaper in the United States, we observed a successful digital subscription operation. It was inspiring to see how the team, a relatively small group, positioned the publisher over several years to grow digital subscriptions at a rate supporting a sustainable business model with significant digital audience revenue.
We have worked with this publisher for about six years, starting in 2013. Over that time, it has taken on a series of initiatives along the journey to a digital-audience revenue model. The process started long before the market was ready to pay for online news content. Some of the investments were hard to make, such as revising the technology stack to remove applications not primarily digital in focus. Others were evolutionary, such as changing the publisher’s product and metre settings as the market adapted.
This publisher has also focused on keeping its print subscription business strong. Audience revenue is 62% of this publisher’s total revenue, and print is still 87% of the audience revenue. There is a clear line-of-sight to a sustainable audience revenue model where digital reader revenue replaces the print revenue when it ultimately moves to a less-than-seven-day print product.
As we discussed the publisher’s current operations and priorities for 2019, our agenda followed a logical path for any publisher seeking to grow audience revenue — both digital or print — and I wanted to share it with readers of this blog.
It is a simple but effective framework. Sometimes business fundamentals get lost in the cacophony of buzzwords and acronyms. So here is a brief synopsis of how this publisher is seeing success with its overall subscription business and digital subscriptions in particular.
Step one: Create content people want
First and foremost, develop a product people want. The journalistic mission of news organisations requires coverage of national, regional, and local events, but news coverage is only a fraction of what your customers are reading on your site. Opinion, entertainment, sports, book reviews, obituaries — these are all are part of your product.
Packaging and bundling content is an important element of the business that can be personalised in the digital platform, and data can support the human curation process to improve customer experience and satisfaction.
Editorial groups are increasingly using data to allocate resources to content categories and formats driving subscriptions. Understanding how content supports advertising revenue is also important for resource allocation decisions even though the mix of advertising and audience revenue is changing. In the growing age of privacy protection, content categories are often used as proxies for advertising targeting data.
Step two: Maximise sales attempts
As with any business, maximising sales requires reaching the target customer base and giving it the opportunity to buy your product. The challenge for publishers is to maximise sales attempts to your online audience without severely compromising your advertising inventory, which is where intelligent paywalls are now playing an important role.
Paywalls are a minority of digital subscription sales for most publishers, including the publisher we met with this week. E-mail offers, newsletter click-through, and the voluntary “subscribe now” buttons provide most of the sales. Customers relationships should be owned by the publisher (ideally with the customer data in the publisher’s tech environment), and the publisher should be able to manage that customer relationship without limitations imposed by the technology provider.
Personalisation in the acquisition process improves conversion rates significantly. Finding ways to target the messaging, creative, and pricing for an audience segment is worth the investment in resources and analytics. Tech stack decisions should put a high priority on the personalisation capabilities of the tools under consideration.
Step three: Remove friction in the purchase transaction
Once you have a customer in the sales process, make it as easy as possible for him to subscribe. The publisher we met with shared the company’s experience in moving from a process requiring 21 pieces of information during the subscription process, including a physical address for a digital subscriber, to one requiring five pieces of information. Conversion rates increased 30% after the change.
This publisher also shared the lift in conversion by adding other payment options besides credit cards, including PayPal, Amazon Pay, and Apple Pay. Offering multiple payment options, some well suited to mobile payments, increased conversions 15%.
Step four: Retain customers once you have them
The sales process does not end once people have subscribed. Keeping new customers requires getting them engaged with the product, making them feel part of the community, and providing the value they were expecting as subscribers.
Motivations for subscribing often fall into categories such as community, convenience, cost, and cause. If you have insight into why a customer subscribed, using that knowledge in the on-boarding and messaging process improves retention.
Digital customer churn is a challenge facing many publishers that have had paid digital products for several years. Reducing churn is an effective way to raise the equilibrium level of subscriptions where average monthly starts equals stops.
If you have 2,000 starts per month and 50% annual churn (roughly 6% per month), the equilibrium level of digital subscriptions is about 33,000. With a 20% churn rate (2% loss per month and 80% annual retention) and 2,000 starts per month, the equilibrium level of subscriptions is 100,000, about three times the volume and revenue.
Using data in all phases
The areas summarised above — product development, sales optimisation, minimising friction, retaining customers — are the core of a subscription business. There is an opportunity to use data to improve the performance of each of these processes.
Data can be used for customer segmentation, propensity scoring, personalisation, content curation, and churn scoring. Collection and analysis of data is a growing capability of publishers, and much has been written about this topic within this blog and others. We will not add to that discussion here only to say that Rome was not built in a day, and neither is a data-driven organisation. It takes time and determination.
In some cases, the timeline for transformation can be shortened with investments in technology, but these investments must be paired with knowledgeable people and a strategic vision. The publisher we met with has demonstrated the returns on investment from sustained transformation with a focus on the fundamentals of the business and a clear strategic goal.