Web's Big Boost to Magazines? Selling Print Subscriptions

The magazine business is getting lots of attention for its push to build digital editions for the iPad and other shiny electronic devices. But magazines' biggest digital success right now may lie in a very different arena: selling print subscriptions through the web.

Just five years ago, big magazine publishers were still struggling to wring legitimate subscription sales out of the internet, while embarrassing, unauthorized one-cent subscription offers on eBay undermined their efforts. A variety of changes, however, have now improved both the cosmetics and the substance of online-subscription sales, giving magazines another reason to look more kindly on digital.

Selling print through the web, after all, is usually cheaper than traditional tactics and can even help publishers sell ads, where the industry finds most of its profits. "The subscriptions we sell to people online generally bring in people that are more educated, make more money, are younger in age and have more of the desirable traits that a healthy advertising offering is based on," said Chris Wilkes, VP-marketing and audience development at Hearst Magazines Digital Media. Hearst Magazines, for one, increased web-generated subscriptions from just 5% of its new subscriptions in 2005 to 45% last year. Earlier this month it sold its 10 millionth new print subscription through the internet.

"The other engagement is an engagement benefit," said John Phelan, associate VP of consumer marketing at Rodale. "When someone subscribes online, we typically get their e-mail address. Then we send them e-mail newsletters, promotions for other products, so it's a much more engaged relationship we have. The lifetime value of the customer tends to be much higher if we get someone through electronic means."

Rodale titles, which include Men's Health and Prevention, now get between 15% and 25% of their new subscriptions through digital means, up from single digits a few years ago, according to Mr. Phelan. Runner's World, the company leader in this area, is getting 40% of its new subscriptions online.

Holding steady
Print subscriptions, what's more, are holding steady. They slipped 1.1% in the second half of last year, compared with the second half of 2008, but increased in each of the three six-month periods before that. "There's been no diminishing of consumer demand," said Rodale's Mr. Phelan. "Consumers are no less interested in our magazines than they were five or even 10 years ago."

And while magazines lost one potential channel for online sales last year when eBay banned subscription sales, citing sellers' inability to start delivery within 30 days, at least the policy shift got rid of those unsightly penny subscriptions. More importantly, however, a combination of new organizational structures, technology and content partnerships with outsiders have started allowing the industry to generate many more subscriptions online.

Hearst, for example, empowered Mr. Wilkes to bring in outside expertise. "In prior years you'd take your existing traditional circulation department and have them try to apply what they were doing in direct mail to online," Mr. Wilkes said. "That was not a successful model. You had people learning on the fly."

Hearst also syndicates a lot of its content to MSN.com -- baking subscription offers into the content it sends MSN to share with web surfers. MSN's Life/Style channel, for example, recently displayed an article from Cosmopolitan, "Five Secrets to Keep From Him," below which appeared a come-on to get "more like this" by subscribing to the magazine.

Driving sales
New technology platforms are also proving beneficial by, among other things, centralizing companies' databases of consumer names and information. That helps them make the right offers, via e-mail or its own websites, to the right people.

At Condé Nast, whose titles include Vogue and GQ, a quarter of its new subscriptions come from online, up from 10% in 2005. The company is working on making impulse buys easier by enabling one-click purchasing and adding payment mechanisms such as PayPal. "These are the key things that drive sales on the web," said Robert Sauerberg, exec VP for consumer marketing at Condé Nast.

Not every online innovation, of course, is a success from the bat: Time Inc.'s Maghound service, meant to work like a Netflix for magazines, is not generating significant subscriptions after a year and a half in action. But there are more ideas on the way, too. The digital storefront that a coalition of five publishers is planning won't sell just tablet editions; it will also sell print subscriptions.

Our Biggest Brands Can No Longer Be Controlled by Nerds

There's something desperately wrong with consumer brand marketing. We all know it. The brand-building talent and expertise that created the CPG manufacturer are gone. Marketers with the ability to identify an unmet consumer need, develop a product to meet it, create a brand, and then lead it to market dominance are missing. Product managers with a fear of ambiguity have replaced the creative, forward-thinking brand builders. Our biggest consumer brands are now managed by nerds.

The crisis has been building for years and is now unavoidable. And because the wounds are self-inflicted, we cannot rely on the patient to heal itself. A quick review of industry news confirms this:

General Mills has identified their future growth. They're "anticipating a rise in multicultural consumers, particularly Hispanics." Apparently, they've also discovered that baby boomers are aging, and boomer children are more tech-savvy than their parents. Breathtaking, breakthrough stuff.

Kraft Foods is touting their "bold," "top-to-bottom" "marketing makeover." But the enduring images from the article are of Kraft executives wandering Cannes, contented dinosaurs and vanilla creative.

Industry researchers and academics have also recently weighed in with their diagnoses and prescriptions:

In "Adaptive Brand Marketing," Forrester Research first suggests brand "managers" be renamed brand "advocates." Then, the authors also recommend restructuring the brand manager role to better accommodate the "real-time digital world." To better fit less than 10% of a CPG brand's marketing budget, we should revamp the entire brand-management system?

In "Call to Action," authors Carl Johnson and Henry Rak contend that weak brand-building skills have forced the CPG industry to a critical juncture. They offer several very logical prescriptions. But like so much of the brand marketing they're despairing, their solutions are half measures, completely "by the numbers."

We don't need a "call to action," we need an intervention.

More data is not better data
Marketing departments used to be the creative engines powering successful corporations. Now they're overrun by number-crunching nerds. As a direct consequence, despite all the conspicuous focus on "change management," the way brands respond to change in the marketplace has deteriorated. A McKinsey Quarterly article several years ago argued that the key to "better branding" is to build brands "more scientifically." If managers would combine "forward-looking market segmentation" with structural-equation modeling, they could "build a better brand more efficiently." In short: more data, more regressions and more conjoint analysis mean the "brand crisis" is solved.

But fluency with buzz words and expertise with spreadsheets do not guarantee brand-marketing competence.

No one would argue with the objectives and need for consumer research. But brand marketing is not a science. It requires analysis, discipline and detail. Even more, it requires intuition, flair and vision. Great marketers are visionaries, not bean counters. They succeed by defying conventional wisdom. They see over the near horizon, envisioning products and ideas long before the average consumer even senses a need for them. Nothing captures this principle better than the adage, "If Edison had done market research, he would have invented bigger candles."

That statement restated for today: "If Howard Schultz of Starbucks had done market research, he would have invented ... Pepsi A.M." Consider what the "numbers" would have told you in 1987 when Starbucks began its national expansion: Per capita coffee consumption was in the midst of a continuing 25-year decline; conversely, soft drinks were experiencing uninterrupted growth. Consumers were "time-starved." Brand manager dogma was "convenience is the new currency." But Schultz had a vision and a big idea. By making Starbucks a special experience, he knew he could get time-starved consumers to make a separate stop on their way to work to buy high-priced fancy coffee drinks.

There are really only two successful business models. One is cost leadership: Deliver your product to an existing market with lower prices and/or higher quality (Dell, Walmart, Southwest). The second is creating and satisfying a completely new market (Starbucks, eBay, iPod). Effective brand-building is a critical component of both, but the two models require very different managerial thinking. The cost-leadership model requires a highly inward, focused skill-set; the new market model is more focused on the external consumer environment. Companies with large product portfolios should have brands in both situations, and a given brand's position must evolve as the external marketplace changes. It's hard to quantify, but clear to anyone who has spent any significant time with a major corporation, nerd skills and thinking are most valued in CPG corporate America. Setting the budget, revising the budget, gaming the system, improving existing margins, and controlling costs all exhaust a brand manager's time and require an internally focused skill-set. External-looking activities are confined to the third afternoon of the key executive golf retreat. Companies need both skill-sets, but currently value only one.

Pendulum has swung too far

The quantitative "MBA aspects" of brand management are vitally important. Ignoring the numbers and just "going with our gut" can be an even worse sin, and result in ... frankly, almost every one of this year's Super Bowl spots. But the pendulum has clearly swung too far. The result is today's brand manager who (paraphrasing David Ogilvy) uses data, "the way a drunk man uses a lamp post, for support rather than illumination."

Magnifying the problem, as the pace of external change increases and as margins are improved in smaller and smaller increments, the need for creative, imaginative thinkers and problem-solvers increases. Unable to conjure up anything new or compelling to say about their brands, the "numbers" managers chose to compete on price and promotion: defeatist short-term tactics. Instead of creative strategies yielding a new Marlboro Man, we have the UPS whiteboard guy. Instead of bold new brands, we have "flankers," "line extensions" and "brand expansions."

"The Research Paradox" explains some of the mediocrity. As market-research techniques have gotten better and more elaborate, the insistence that marketing decisions be thoroughly backed by the "numbers" has become even more pervasive. This requires ever more quantitative managers who spend even more of their time and energy poring over the data. The result is a crop of quant-jock brand managers just like the McKinsey authors who lean on the data to tell them how to build their brands. Theodore Levitt warned us about this possibility in 1960 in his seminal article "Marketing Myopia." Describing the risk of a technology-oriented management structure, he predicted "the bias in favor of dealing with controllable variables." Engineer-managers want to focus on "what they know and what they can control." Consumer behavior is not a controllable variable. Instead, he wrote, consumers can be, "unpredictable, varied, fickle, stupid, short-sighted, stubborn and generally bothersome."

Great brand marketers are comfortable with ambiguity. They realize marketing is a balancing act -- it's numbers and detail, but it's also flair and vision. It's qualitative and quantitative; analysis and intuition; perspiration and inspiration. Great marketing requires the balance of both sides of the brain. But the balance has been lost.

Be like Luke Skywalker

So how do we wrest control back from the nerds? I offer two terrifyingly intuitive solutions. First, we can break the current self-perpetuating nerd cycle by hiring and promoting different people -- it's a proven fact that managers tend to hire people just like themselves. Second, every once in a while, even when the numbers don't quite line up, we can promise to trust our gut and intuition. Be like Luke Skywalker. At the end of the original "Star Wars" movie, in order to make the "impossible shot" and destroy the Death Star, Luke shuts off his computer and chooses to trust his intuition. The nerds at headquarters are horrified. But the Death Star explodes, the audience cheers and we learn a life lesson we all promptly forget. Let's resolve to "use the force." Or something nerdy like that.

Ad Spending Dropped 12% in 2009, but Things Are Looking Up

Overall ad spending in the U.S. fell 12.3% in 2009, according to a new report from Kantar Media, triple the rate of decline from 2008. But last year's ad-sales drop was moderated somewhat by a fourth quarter in which nearly all media improved on their performances from earlier in the year. And things seem to be looking up further still -- depending on what happens with consumer spending.

"The advertising recession began to ease in the final two months of 2009 and preliminary figures from the first quarter of 2010, when compared against the abyss of a year ago, indicate many sectors are experiencing growth," said Jon Swallen, senior VP-research at Kantar, in the report. "Given the restraint in consumer spending, it appears marketers have more confidence right now than their customers. As we get deeper into 2010, the pace of consumer activity will be a key determinant of the strength and durability of the advertising recovery."

A forecast from Magna in January predicted recovery wouldn't arrive until the second quarter of this year, anticipating that the first quarter would deliver the last ad-spending decline of the downturn.

Last year, however, the troubles were still raging. Some of the worst suffering was by local magazines, which saw ad revenue plunge 27.7%; business-to-business magazines, where ad revenue fell 26.2%; spot sales of national radio commercials, where revenue sank 24.6%; spot TV commercials, down 23.7%; local radio, down 20.6%; and local newspapers, down 20%.

Internet display advertising managed to improve its ad revenue by 7.3% last year, on the other hand, while free-standing inserts distributed in newspapers improved ad revenue by 3% as package-goods companies targeted shoppers with coupon programs.

And cable TV only lost 1.4%, while network TV slid 7.6% -- not bad in the scheme of things.

Among the top 10 advertisers last year, No. 1 Procter & Gamble cut its ad outlay by 15.6%, according to Kantar, followed by No. 2 Verizon with a 6.9% reduction and No. 3 General Motors, which expanded spending by 1.3%.

Three of the top advertisers boosted spending dramatically: Pfizer was up 32.7%, Walmart up 35.4% and Sprint Nextel was up 29.9%. Overall, the top 10 marketers by spending reduced their outlay by just 0.9%.

Among the major advertising categories, three out of seven increased spending last year: telecom, food and candy, and pharmaceuticals. Others posted double-digit retreats, including automotive, financial services, local services, miscellaneous retail and direct response.

OMD Keeps Coty Media

OMD Keeps Coty Media

Maxus and MPG also contended for the business

March 16, 2010

International cosmetics giant Coty has opted to retain OMD in the U.S. for media planning and buying, per sources, after a protracted review that began 10 months ago.

In addition, the client awarded the Omnicom shop Canada, U.K. and Ireland duties in a competition that was expanded to include the four English language countries in one package.

Like many marketers, New York-based Coty slashed its ad spending during the recession.

Last year it spent $75 million in domestic measured media, down almost 40 percent from approximately $120 million in 2008, per Nielsen. Those figures exclude digital.

OMD successfully defended against two contenders: Havas' MPG and WPP's Maxus. MPG was a finalist, while Maxus was eliminated in an earlier round.

All of the agencies declined to comment, referring calls to the client. A Coty rep did not immediately return calls.

Along with the U.S. review, the client has been reviewing media assignments in other markets as well. It could not be determined whether Coty has made decisions in any of those markets yet.

In a separate creative review, Coty in February selected Laird + Partners to handle global creative duties on its Sally Hansen, La Cross and N.Y.C. New York Color brands, sources said.

In addition to those brands, the client markets fragrances, cosmetics and toiletries under many labels, including Marc Jacobs, Calvin Klein, Joop!, Davidoff, Rimmell and Kate Moss.

Coty reported net sales of $3.5 billion in fiscal 2009, down 12 percent from the previous year.

From a be-leaguered advertiser...thanks for all the good work, you're fired.

Activision Blizzard has yanked creative duties for its "Guitar Hero" franchise from MDC Partners' Crispin Porter & Bogusky, tapping Omnicom Group's TBWA/Chiat/Day to market the games going forward.

The decision was made late last week, said Activision Blizzard's top marketer and chief creative officer, Brad Jakeman. He noted the move to TBWA, made without a review, wasn't because of dissatisfaction with Crispin's work but was "principally based on the outstanding work that [TBWA] did with us last year in launching 'Call of Duty: Modern Warfare 2,' which was one of the biggest entertainment launches of all time." (Though, leading up to launch, shops other than TBWA did a substantial bit of the advertising for the game.)

The game publisher claimed "MW2" brought in $550 million in software sales worldwide, enough to best the previous five-day global sales record holders from both the movie and gaming industries; "Harry Potter and the Half-Blood Prince" grossed $394 million in global box-office sales, and "Grand Theft Auto IV" snared $500 million.

But people familiar with the situation say the agency change was spurred in part because the Crispin work didn't deliver the desired brand positioning for the franchise. A spot released last fall for "Guitar Hero 5" that featured Hugh Hefner and Playboy Playmates playing air guitar was directed by Brett Ratner. It was one of a series of ads that spoofed a scene from the Tom Cruise movie "Risky Business" that also featured various sports celebrities and heavy-metal band Metallica. Crispin could not be immediately reached for comment.

Under Mr. Jakeman, Activision Blizzard assembled an all-star roster of agencies, including BBDO, Crispin, TBWA, Droga 5 and Toy. The majority of the work this year is expected to be handled by TBWA and Droga 5; TBWA will handle "Guitar Hero" and "Call of Duty," while Droga 5 will handle the marketing of yet-to-be-released titles that are likely to be unveiled in the run-up to the gaming industry's E3 Expo event in early June.

BBDO doesn't have any assignments scheduled for this year, Mr. Jakeman said, and the work that was being handled by Toy was for licensed properties such as "Wolverine," which doesn't have a launch this year either. Activision Blizzard's global media agency, WPP's Mediaedge:cia, remains unaffected by the changes.

According to Kantar Media, Activision spent about $84 million on domestic measured media in 2009, up slightly from $79 million in 2008

Is it Time to Rewrite the Digital Playbook?

There's a struggle with defining "branding" in digital. Some people claim that brands should be about utility, others that we need to build brand platforms and yet others think that brands should entertain us and give us something to talk about.

Yet overall, surprisingly little has changed in the actual branding strategies in the industry.

Something is wrong here.

This is like exploring new territory with an old map.

While Landor's entire survival depends on telling brands that digital media are just business as usual, a lot of marketing professionals also tend to forget that brands have always been the products of their media. When there was only print, logos were important. With radio, slogans (in jingles) took center stage. With TV, it became all about brand image communicated through the 30-second spot. Simply put, branding strategies have always been connected to specific media technologies.

Change this technology, and the rules of branding crumble. That's why we need to stop asking the wrong questions.

First wrong question: How to use digital tools to build brands?

This reveals that we are still dealing with the strategy vs. implementation dilemma. The question should be: How can digital tools challenge what we call the brand? Instead of simply wondering whether we should spend more time and effort on developing strategy or focusing on implementation, our challenge is to address branding online simultaneously as behavior and technology. Judging by how they use Foursquare, some smart brands like HBO or Zagat or Bravo seem to already know this. Rather than simply advertising on the location service, HBO is encouraging users to visit real-world locations related to its program "How to Make It in America." They are not creating something new; instead, they are using technology to simply curate information and reward certain behaviors. And, because both behavior and technology are quite unpredictable in digital, this situation prevents definition of a particular brand strategy in advance. Regardless of whatever a brand promised offline, in digital there's no template. There's always an opportunity to choose anew how a brand is going to behave online.

Second wrong question: How does technology apply to the principles of branding?

The branding industry of the past worked by coming up with an idea that they handed off. In the branding industry of the present, it is not easy to hand things off. Rather than retrofitting today's technology with yesterday's formulas, we should ask: How can digital create new ties between people and products? Here, we deal with the campaigns-vs.-platforms challenge. More often than not, there is no way of knowing in advance what our digital solution will be or how it is going to unfold in reality. For example, instead of a simple branding campaign, which extends delivery of the brand promise to the digital space and ends after a short period of time, PepsiCo decided to build its Pepsi Refresh project with the main requirement of maintaining a longer-term change in people's behavior.

Third wrong question: How should we use the internet to build brand value?

By asking this, we reveal that we still think of digital media as yet another channel of communication to be added to the already existing roster of mass-media channels traditionally used for branding. Instead of treating digital as an additional venue to display brand messages, you need to ask, "What is valuable on the internet?" Twitter CEO Evan Williams likes to say that many of the great businesses of the next decade will be about making information about our behaviors more visible: How fast you run, how many followers you have, who you know, where you go, what you buy -- everything is visible these days. But digital does not stop there. It also reveals the non-obvious and unexpected relationships between people and products and technology. Because our thinking about branding has been based on our awareness of the obvious relationships, digital media are much more than a simple evolution of branding. Think of Lufthansa's MySkyStatus or Whole Foods on Twitter or branded tips on Foursquare or Blippy. By making more and more things connected via information, brands in digital can increase chances for serendipity.

Fourth wrong question: How should our brand promise be brought to life online?

Traditional branding deals with extending the brand promise to the digital space and integrating go-to-market tactics with digital tactics to support the brand promise. Of course, brands realized that they needed to appropriate their message to the new media, according to McLuhan's "medium is the message" idea, and now everyone is talking about brand experiences online. But they rarely think about them as designers do. Instead of talking about image, message, trust, expectations and perceptions, designers talk about experience, services, functionality, usefulness, interaction. They are focused on exploring all the ways that brand interfaces communicate the brand. They know well that people's behavior in digital is shaped by a simple trade-off between expected gains and expected costs of interacting with a brand. That leads to the pertinent question, "Does digital remove the need for brand promise in the first place?" In this situation, our job is to design digital brands so that we enhance expectations of gains and reduce expectations of costs. Smart shops, like Huge or R/GA, are already doing this. Others still claim that "digital is boring." It may be boring, but it delivers.

Every new media technology has its own rules of branding to go with it. Instead of simply appropriating everything that we know about branding to digital media, it may be time to focus on how digital media change branding. In particular, we may want to get rid of some of the old branding concepts (brand promise), redefine some (brand equity, brand value) and replace others (brand image). We can now change how we answer tomorrow's brand challenges. And in order to do so, we need to ask the right questions first.

Finally Banks have learned!!!

Finally banks are getting why consumers hate them....check out ING's new strategy. I hope this catches on industry-wide!

ING Direct has positioned itself as the Southwest Airlines of the banking industry. It's got low fees, dynamic employees who tweet often, thousands of devoted fans on Facebook and cool places to hang out. And it's zigging in another area where other banks are now zagging: overdraft coverage

And it's zigging in another area where other banks are now zagging: overdraft coverage.

With the Credit Card Accountability Responsibility and Disclosure Act going into effect this year, financial institutions are scrambling to figure out how to hold on to income from overdrafts that totaled $38.5 billion last year. Among the act's consumer-friendly provisions is one that requires customers to opt-in for overdraft coverage (and the resulting fees.) It also disallows interest-rate increases on fixed-rate accounts until an account is 60 days past due.

ING, however, sees the transition and customer confusion as an opportunity to market its terms. "We think that with the new regulations and things like banks pressuring customers to opt-in for overdraft coverage, that the market is really coming to us," said Todd Sandler, ING Direct head of product strategy. "We've seen a real shift, even in just in the past 45 to 60 days ... our business is up 70% to 80%."

Instead of a fee, ING's overdraft charge for its Electric Orange accounts is an "overdraft line of credit" system that allows customers to write checks or use a debit card for more than their balance (up to a preset amount usually no greater than $500) and pay back the overage with interest, which is the ING Direct prime rate plus 4% (currently 7.25%). While ING customers do pay for overdrafts, it's not a flat fee, but interest paid on the amount "borrowed." For example, on $100 at the current 7.25% rate, a customer would pay about 60 cents for one month.

Some of ING's new business is likely coming from people like this one online: @caitlin_thomps wrote on Twitter last week, "I just quit you @Citi/@INGDIRECT doesn't charge me arbitrary checking-account fees. Thanks for rewarding my 10 years of business with suck."