1999: Mixed Newsstand Performance; Renewal Progress
highlighting results of the industry’s annual consumer marketing benchmark survey
LAST MONTH, WE PRESENTED KEY FINDINGS in the areas of overall circulation performance, source mix and new business direct mail trends from the recently released results of CircTrack 2000, the annual consumer marketing benchmark survey, commissioned by Capell & Associates in association with CM/Circulation Management.
Here, we highlight trends in single-copy sales, renewals, billing and collections, fulfillment, compensation and management issues, and other areas.
THE NEWSSTAND PICTURE: A MIXED BAG The newsstand picture that emerges from this survey is mixed, although the single-copy environment is certainly high on consumer marketers’ lists of the current challenges facing them. In fact, newsstand sales declines and industry consolidation slightly edged out other challenges when respondents were asked to cite their biggest areas of concern over the next two years. (The newsstand was cited by 17.4 percent, followed by declining direct mail efficiencies, which were cited by 16.7 percent.)
Asked to compare unit sales for the most recent issue for which final sales data was available against sales for the same issue in the prior year, 38 percent of consumer marketers reported declines, and the same percentage reported gains (leaving 24 percent who reported that performance was about the same).
Although one issue’s results can certainly be misleading, this data parallels the mixed unit sales performance of ABC titles as a whole. During most six-month periods over the past several years, about the same numbers of titles gain and lose single-copy circulation. (Over time, of course, overall industry units have steadily declined: A Capell’s 10-year analysis of ABC members’ total unit sales shows that they dropped from 78.8 million in 1989 to 63.7 million in 1999, despite growth in the number of members.)
Consumer marketers responding to CircTrack were also almost exactly split on the question of whether they think that industry unit sales will continue to decline for the foreseeable future.
These survey results confirm the ongoing challenges with efficiency levels: Reported sell-throughs averaged 39 percent. In addition, 42 percent of respondents reported that sell-through percentages had declined during the past 12 months, although 38 percent reported that sell-through was about the same, and 29 percent said it had improved. The largest titles reported the highest efficiency levels, but more mid-sized titles reported having experienced gains in efficiency than either small or large titles (see table, opposite).
Interestingly, the numbers of consumer marketers reporting reductions in draws during the past 12 months and reporting increases in draws was the same–28.9 percent each–while 42 percent reported no change. The average draw decrease was 7.9 percent, and the average draw increase was 9.2 percent.
Pricing was something of a bright spot in the newsstand area. The average cover price reported by this year’s sample was $3.57, compared to $3.33 for last year’s sample. And, while just 22 percent reported raising cover price last year, 45 percent of these respondents said that they experienced unit sales increases after the price hikes, and 35.5 percent said units were about the same (just 19.4 percent said units declined).
Still, fully 58 percent said that they will not raise their cover prices this year. Twenty-two percent said they will raise cover price, and 20 percent were not sure.
Not surprisingly, the largest titles reported the lowest average prices: $2.95 for those over 2 million circ. But nearly a third of this group said that they will raise cover price this year.
Respondents were also asked how much impact the Anderson News dual-distribution program has had on their titles thus far. (The News Group program, which charges “non-core” titles higher handling fees was just going into effect at the time of the survey.) Among respondents as a whole, 54 percent reported impacts ranging from minimal to substantial, while 46 percent reported little or no impact. As might be expected, the smallest titles (under 250,000) were most likely to report a “substantial” or “moderate” impact (34.5 percent and 24 percent, respectively). However, 38 percent of these titles reported “little or no impact.” Among the largest titles (2 million or greater), fully 79 percent said they’d seen little or no impact, and not a single respondent reported substantial impact, although 14 percent did report a “moderate” impact. Overall, 48 percent said they’re opposed to the plan, 35 percent said they have no strong feelings either way, and 17 percent said they’re in favor of it. (More than half of thos e in favor have titles with circulations of 750,000 or greater.)
RENEWALS: STILL IMPROVING
Renewal performance continued to improve last year, although the momentum is less dramatic than that reported for 1998 by last year’s respondents. Thirty-one percent of this year’s respondents reported that overall renewal performance improved in 1999, 45 percent said that it was stable, and 24 percent said that it had declined. (In comparison, nearly 66 percent of last year’s respondents, reporting results for 1998, said that renewal performance had improved, 21 percent said it was stable, and 13 percent said it had declined.)
Similarly, 22 percent of respondents said that conversion performance improved in 1999, 55 percent said it was about the same, and 23 percent said it declined. In the previous year’s survey, nearly 59 percent reported that conversion performance had improved in 1998, 20 percent said it was stable, and 21 percent said it had deteriorated.
The overall average conversion renewal rate was 43.2 percent in 1999 (last year’s sample reported 43.7 percent for 1998). The average for second and subsequent renewals was 63.5 percent (slightly higher than the 60.3 percent reported for 1998).
Looking at specific sources, the trend is also favorable: This year’s respondents reported average conversion rates that were higher than last year’s for all sources except one, and that one, catalogs, was flat, not down. (See bar chart, previous page). For most sources, the conversion rates reported were two to four percent higher than those reported for 1998.
Other renewal findings:
* Sixty-two percent asked first-time renewers to pay more than they paid for the initial subscription term. On average, the price was 20.5 percent higher.
* Thirty-six percent (compared to 30 percent in 1998) reduced their prices later in the series. On average, price was decreased by 12.5 percent.
* The typical industry renewal series begins 20.3 weeks before expire and has 8.1 efforts. Nearly a third (31 percent) added one or more efforts last year, and 9 percent dropped one or more efforts, but most (60 percent) didn’t change their number of efforts.
* Forty-seven percent now attach at least one of their renewal efforts to the magazine.
* Forty-five percent use premiums and 15 percent use sweepstakes in renewals (1998’s numbers were 50.4 and 12.8 percent, respectively).
* Forty-three percent said that they use both first class and Standard A class postage in their renewal programs, 50 percent said that they use only Standard A, and 7 percent said that they use only first class.
BILLING AND COLLECTIONS
Most (59 percent) of this year’s respondents reported that overall new business pay-up rates were about the same in 1999 as in 1998, 26 percent said they were worse, and just 15 percent said that they were better. In last year’s survey, 46 percent reported no change in pay-up, 35 percent reported an improvement, and 19 percent reported a decline.
However, average pay-up rates (cash plus paid credit) for all major new business sources were a bit higher in 1999 than in 1998 (see table above).
Average pay-up in the 1999 survey results was 70.9 percent for conversions and 78.2 percent for subsequent renewals (compared to 69 percent and 75.5 percent, respectively, reported for 1998 by last year’s respondents).
* Among this year’s respondents, 74.4 percent handle fulfillment through an outside bureau and 25.6 percent handle fulfillment in house. (In last year’s survey, 29 percent reported conducting fulfillment in house.) However, among titles with circulations under 250,000, 54.3 percent perform fulfillment in house.
* Average annual fulfillment cost per subscriber name over all respondents was $2.28 (compared to $2.24 in last year’s survey).
As would be expected, costs are skewed by size. The average for titles under 250,000 circ is $4.14 (this is a bit lower than the $4.38 average reported by last year’s sample). The average is $2.05 for those between 250,000 and 749,999; $1.49 for those between 750,00 and 2 million; and $1.20 for those over 2 million.
Looking at costs for in-house operations versus outside bureaus, the average is $4.78 for in-house and $1.50 for bureaus.
COMPENSATION AND MANAGEMENT ISSUES
* Average total compensation for this year’s respondents was $107,800. with 74 percent reporting participation in a bonus/incentive plan. (The average for last year’s survey respondents was significantly higher, $134,100, with 71 percent reporting participation in incentive plans.)
Size counts: For titles under 250,000 circulation, average compensation for this year’s respondents was $60,900; for titles between 250,000 and 749,999, the average was over $89,000; for titles between 750,000 and 2 million, the average was $142,900; and for titles over 2 million, the average was $188,300.
A total of 66 percent of consumer marketers overseeing titles with circulations below 750,000 reported participating in incentive plans, versus 82 percent of those overseeing titles with circulations above that level.
* Respondents report spending an average of 29 percent on management issues, 49 percent on new business development, and 22 percent on renewals. (In last year’s survey, the mix was 26 percent for management issues, 54 percent for new business and 19 percent for renewals.)
* Twenty-two percent of respondents said that they frequently participate in ad sales presentations, 40 percent said they do this infrequently, and 38 percent said that they never participate.
LIST RENTAL GROWTH SLOWING
More than 80 percent of respondent companies rent their active subscriber files. However, list rental revenue earnings appear to have slowed. In this survey, 34 percent reported that list rental revenues were ahead of last year’s (compared with 60 percent reporting increased revenue in last year’s survey). Thirty-six percent said rental revenue levels are about the same as last year, while 29 percent reported a decline.
Average annual list rental income per paid subscriber was $1.35 (compared with $1.15 in last year’s survey). Nearly 40 percent reported an average ranging between $1 and $1.49; 23.5 percent reported earning between $0.75 and $0.99; 7 percent between $0.50 and $0.74; 13 percent $2 or more; 7 percent less than $0.50; and 5 percent between $1.50 and $1.99.
* Nearly 41 percent of respondents said they carried arrears in 1999.
* For the overall sample, bulk copies represent an average of 7.5 percent of the circulation file (43.5 percent are in the 1- to 9-percent range; 28 percent in the 10- to 19-percent range; 6 percent in the 20- to 29-percent range; and 1.5 percent in the 30- to 39-percent range).
* Fully 80 percent of this year’s respondents use public place copy distribution in their source mix, compared with just 39 percent of last year’s respondents. Among those using public place, this source accounts for an average of 7.5 percent of the mix.
* Among the 73 percent of respondents who use telemarketing, 60 percent report using it for renewals, 47 percent for incoming toll-free calls, 21 percent for new business, 7.4 percent for collections, and 3 percent for other purposes.
* Sixty-three percent of this year’s respondents (compared with 75 percent of last year’s) said that they rely on in-house creative resources for most of their circulation needs. Thirty-one percent said they use freelance creatives most heavily, while 6 percent said they employ an agency on a regular basis
Karlene Lukovitz is editorial director of CM/Circulation Management.
CircTrack 2000 Sample and Methodology Erdos Research firm Erdos & Morgan mailed the eight-page survey to 728 circulation executives compiled from lists of paid ABC consumer magazine members and BPA International consumer magazine members with a minimum of 50 percent paid circulation. Net mailing quantity was 690. Useable responses were received from 138 companies, yielding a 20 percent response.
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