Converting your free publication to paid – or why you’re stuck with a struggling magazine

You are the director of a B2B publishing company. Advertising revenue has dropped and page yields are low. Profitability would be increased if you converted free readers to paid-for subscribers. However, you are unable to convert your readers because you don’t have the money for that kind of marketing.

This inextricable situation has happened because of the advertising downturn. You certainly can’t be blamed for the vagaries of advertising budgets. Or can you?

The fact is, if you are the person in charge, the whole situation is probably your fault. To find out why this is, let’s look at some typical attitudes:

The three stages of denial

1. Just before launch: "We need to convince advertisers we cover the whole market. We can’t do that if we sell just a few subscriptions. Anyway, there’s no time. We’re launching in two months."
2. When advertisement revenue is strong: "We don’t need to invest in building subscribers because there is no need. The magazine is making plenty of money. Why divert profits to marketing?"
3. When the magazine is losing money: "We don’t have the budget to bring in subscribers. We have to cut costs."

I have helped various publications successfully convert readers from free to paid-for and they all have one thing in common: a committed managing director. The average publisher is not usually responsive to the arguments set out in this article because he or she is focused on advertising revenue or just isn’t confident about the procedure.

Clearing that ‘mental block’

Most publishers are trapped and afraid to take even the first step. In this article I attempt to explain why this is. And if I sometimes use psychological terms, it’s because the main reason for a publisher holding back from increasing profits in this way is a ‘mental block.’

Converting readers to a free publication into paid-for subscribers has always been the Holy Grail for business publishers. And the idea has never been more attractive than now. Advertisement revenue has been low, causing many managing directors of B2B magazines to take drastic action.

Cut, close, cancel and sell up

When advertisers cut their budgets and decide to promote their services and goods through direct sales rather than through the pages of a business magazine, it’s time for the publisher to act. Here are ten common examples of what they do:

1. Replace creative publishers with cost-cutting administrators
2. Cancel all marketing
3. Cancel all investment
4. Make advertisement sales people redundant and reduce commissions for the rest
5. Abolish staff recruitment and training
6. Reduce editorial staff
7. Sack senior staff and replace with juniors
8. Don’t replace company cars until they’ve recorded 80,000 – 100,000 miles
9. Fold low-performing titles
10. Sell the B2B division in order to ‘focus on core products’

This is hardly a list of innovative solutions and many of us have experienced these painful and drastic steps. But then we should accept that life becomes harsh when there is an advertising downturn and revenue dives. Or should we?

Most of the above measures are unnecessary. You’ll notice that ‘Sell more subscriptions’ does not appear anywhere on the list. That’s because it’s rarely even considered as a solution because most companies cut all marketing immediately a downturn arrives.

Where’s the creative planning?

Creativity doesn’t exist in the mind of a ‘cost-cutting administrator’ and things become worse and worse for everyone the deeper the cuts go. But these measures are often a consequence of poor planning.

Things have been looking bad for many trade publishers for a while, but it’s not actually as bad as it could be. During the last major recession at the beginning of the 90’s, even the banks suffered. Profits were diving, no one was lending money and publishing businesses were struggling to pay salaries.

This time it’s different. Although advertising revenue has dropped, the readers of both consumer and business magazines are generally very well off. They are buying houses everywhere and happily paying high amounts for their subscriptions and not questioning regular rises in the rates they pay.

The wonderful opportunities this situation offers have, however, escaped the notice of the publishing fraternity. Although they may now see the attraction in bringing in lots of subscription revenue, publishers have omitted to set aside a realistic business model for subscription building and are not ready or able to fund any real marketing activity.

Overlooking or ignoring potential subscribers as a source of revenue during the good times is the reason so many business magazines have been struggling. It’s clear they have little or no financial stability.

Here comes the upturn

What about when things are going well? Surely no practical business person would ignore such a vital source of income as subscriptions? Wrong! Let’s look at what happens.

The publisher of a consumer magazine has three main revenue streams available: newstrade, advertisements and subscriptions. So there is an excuse (perhaps) for them to overlook one of these revenue streams when planning their marketing and investment expenditure.

But most business magazine publishers don’t have the option of selling through the newstrade. They must rely on advertisements and subscriptions only. So most of us will agree that building a valuable subscriber base is vital to the long-term stability of a business title.

However, when advertising is on the upturn a publisher doesn’t appreciate the need to invest in bringing in paid subscribers. This lack of forward planning is usually due to ignorance. Depending on whether the publisher came up through the sales or editorial route, the concept of ‘marketing’ is viewed as either another word for selling, or a bit of a mystery.

The first step - getting support from the directors

Direct marketing combines both science and art, so it’s bound to appear daunting to those who are new to the idea. Creating an effective and persuasive promotional program to attract long-term, profitable subscribers is a specialist task and the expertise just doesn’t exist in most companies.

Even the biggest publishing houses delegate (or should I say abdicate?) their direct marketing to junior managers and executives who have huge collective responsibility but little or no authority or budgets. They certainly have very little money for creating a profit-generating promotional program, because their directors can’t see the need.

Your first step, therefore, is to get the support of your managing director.

Advertising vs circulation

To convert a magazine from free to paid is to change the way a magazine is published. So it needs the full support of the company’s senior management.

Those responsible for advertisement revenue often fear that circulation will drop and advertisement bookings will suffer. However, this rarely happens in practice. What happens when paid subscribers replace free ones is:

1. Money is saved on production costs
2. Response to advertisements increases, improving the magazine’s position in the market
3. Page yields increase as advertisers pay more for paid-circulation titles
4. Subscription revenue lifts profits to new levels, year on year
5. Revenue from sales of ancillary products such as newsletters, reports and conferences increases, as paid subscribers respond in larger numbers

The way you keep advertisers informed and ‘on board’ is the key to success. Market support for the new strategy is achieved when the whole ad sales team understands the process and knows how to communicate the changes to the market. Ensuring the right message is delivered throughout your company and market is a job for the managing director, not the subscriptions marketing manager.

Planning the conversion

In a recent InCirculation article I asked: "Have you ever seen a controlled circulation publication run a subscription offer before launch to build some circulation revenue?"

As pre-launch marketing mostly pays for itself, you would think it obvious to bring in the money when it’s easiest to collect. Most publishers however haven’t even taken the first step towards finding out what kind of marketing investment is required. Below are some basic calculations to help assess the cost.

There are two ways to convert from free to paid-for. The first way is to announce to your market that free copies are no longer available and invite readers to pay for their subscription. This takes a fair bit of convincing and your tactics, and the persuasiveness of your promotions, are crucial.

Fortunately, there is no need to re-invent the wheel because most of the procedures are already established. You will, however, have to pay for this advice and build the cost into your budget. ‘Turning around’ a struggling magazine has never been quick or cheap.

Those of you who have seen a conversion promotion – invariably a direct mail pack – will know that they often appeal to the reader’s emotions. As I sit here and re-read one of the first promotions I was involved with, I actually find it difficult to resist. If I had been a reader at the time I would have subscribed rather than let the editor down.

The second popular method of conversion is to segment your market and treat each in a different way. Here are three common segments. Each is based on their value to advertisers:

1. Core readers who receive every copy either electronically or through the post
2. Secondary readers who are either converted to electronic delivery, placed on a rotated circulation list to receive occasional copies, or pay for their subscription
3. Non-essential readers who must pay to receive their subscription

While core readers are vital, secondary and non-essential readers can usually be tempted to pay for their subscription with the right approach.

Clearly it’s important to divide and keep the three lists distinct. They need to be de-duped prior to the dispatch of each issue and time must be allowed for this process.

Once you tell a reader he can no longer receive a free copy of your magazine, you cannot then send him a copy unless he pays for it. Once you have broken this rule, you’ll find it difficult to convince your readers to pay up, no matter how good the deal you are offering. Unfortunately, this is quite a common trap to fall into.

It’s important to have effective software to maintain the different segmented mailing lists you create. Any overlap in the segments will reduce response to your conversion effort. As free magazine mailing lists are often not the publisher’s first priority, expert help in this area is useful.

Time and budgets

The industry standard for marketing production is to spend a pound to get a pound back. Profits occur in year two and beyond. You also must factor in the cost of creating your subscription promotions and strategy plan for your particular market.

Promotions can be sent by email, post, inserted in other magazines and put on the home page of your website. Once your magazine is up and running, you can run your promotion as a loose insert within its pages. But be warned that after launch, response drops dramatically. So promotional activity prior to launch will bring in the best results. The timetable for the conversion should be in your strategy document.

For established magazines the procedure is as follows:

1. Time: increasing a magazine’s profitability is usually a long process. You should allocate around three months to allow for the testing of new business and conversion promotions to see what revenue can be achieved from available lists.
2. Revenue: an upgrading program should be introduced to increase revenue received from each new, current and renewing subscriber. Typical products to sell to subscribers are reports, books, newsletters, seminars, workshops and consultancy.
3. Budgets: you will need to allocate a budget to cover two areas: firstly the strategic marketing and creative advice for the conversion and secondly marketing production costs, such as printing and dispatching your promotions.

Strategic advice will include how to avoid advertisers jumping ship and how to convert your core readers to accepting ezine format rather than delivery by post.

The new subscription revenue you receive from the 3-month testing period should cover your marketing production costs over this period.

Reaping the benefits

The benefits of conversion are significant, which is why so many publishers are thinking of converting their titles. Most publishers find it’s worth taking the first step and commissioning a feasibility study showing where you are now, what a realistic paid circulation target is, and what is needed to reach the target.

The upside is that all publishers I know who have decided to convert readers have succeeded. As with most direct marketing processes, the downside is manageable.

If your early tests show your readers aren’t prepared to pay for your product there are two courses you can take: relaunch your publication with more interesting editorial or maintain your magazine as a free publication. Whatever course you take it will be an education I can thoroughly recommend.