While many publications are seeing a decline in subscriber numbers, The Economist has turned its circulation revenue into the most profitable part of the Group. Michael Brunt, MD of circulation at The Economist Group, explains how they’ve done it – and how there remain plenty more opportunities to grow…
Michael will be at the 41st FIPP World Congress in London, 9-11 October 2017, where he will explain more. See the agenda here. Register here to join Michael, some 100 speakers and 700-800 delegates from around the world. Here Michael speaks to Jon Watkins, to give insight into what he will discuss at the Congress…
My background was originally in above-the-line advertising, and I moved into direct marketing when that exploded in the mid 90's. I actually started working with The Economist all the way back then, whilst on the agency side. After running my own small agency in the early 2000's, I then jumped ship and joined the management team in 2006. Since then I’ve run the circulation marketing in different regions, been based in New York, based in Hong Kong, and had responsibility for each of our geographic regions. That business was globalised in 2013 and that’s when I started to run the circulation business globally as MD of circulation.
Yes, absolutely. Ten years ago the first priority for our circulation marketers was to build an audience that our advertisers wanted to reach. At that point the circulation business was loss leading and, in order to support the volumes of advertising revenue – mainly the print revenues that we were enjoying at that point – we started to optimise the circulation business towards at least being cost neutral, which we achieved in 2011. So we learnt a lot about how to make the marketing cost neutral while supporting our commitment to advertisers. And of course those skills really came into their own when we saw the rapid decline in print advertising revenues. We turned around the profitability of circulation and it’s now the biggest contributor to our group profit. We’ve just published our latest results and year on year we’ve grown our circulation revenues by 21 per cent and our profits by 52 per cent. The revenue mix has been completely upended and now revenue from the circulation business is the single-largest contributor to The Economist Group’s profits.
Yes, we’re lucky for several reasons. Firstly, we’re lucky because our target audience is growing and our target audience speaks English. We’ve calculated that there are about 76 million people in the world who have a tight and close match to our current subscribers – and our circulation at the moment is about 1.5 million. So we have a low penetration in a market that is growing. It’s growing because of the globalisation of business, it’s growing because of education levels and it’s growing because of English language growth, so we benefit from a huge trend. The other big benefit for us is that our readers have more in common with each other than they do with the people from their specific countries. So for us marketing can be very consistent and we can plan things globally and then execute them locally – in a way that’s very efficient. What we really do is a kind of global sampling campaign. It’s really about trying to get our content in front of prospects to show them the relevancy and high quality of our journalism and to encourage them to start interacting with us – and then we can drive them along the customer journey. And that approach is pretty much standard across the globe, which means it’s efficient. The other big driver is that there remains strong demand for high-quality journalism, and the news agenda is particularly supportive for us. We’ve had pretty seismic things happening with the rise of populism, the election of Trump and Brexit – and all the time there are reasons to read The Economist.
Yes, of course. We’ve been able to produce content in audio and in video, and I think the consumption of news digitally and in social media has been of huge benefit to us. Over the last few years we’ve halved the cost of acquiring a subscriber while asking them to pay. We tend to be two or three times more expensive than the next most-expensive alternative in each region or each country, so we’re asking a lot of people to commit. But new digital-marketing opportunities, new technologies and big data have allowed us to track how people are engaging with our content – and then serve them new examples of our content in a way that’s kind of personalised and relevant. So we’ve got a lot of new subscribers who are accessing their Economist content through Apple News, for instance. We’ve got about 50-plus thousand that have done that. Equally we’ve got more than 400,000 people who are just reading us purely on their digital devices. And even the consumption of long-form content on smart devices has been really useful for us because we can market to them on those same devices.
We’ve been surprisingly successful on Snapchat, for instance. We’re getting a lot of the Snapchat audience engaging with our content. So we’re reaching millennials that we wouldn’t have reached otherwise and it shows that the topics that we write about are very relevant. Because the name of our publication is The Economist, people may draw conclusions that it’s only about economics and politics. That means a lot of our job is to showcase that we’re talking about things that are happening in daily life, and a lot more than those subjects.
This year we’re spending pretty much 50 per cent more on circulation marketing than we ever have. We are accelerating our investment in circulation marketing so that we can capture this large audience. Let me give you an example. If we were able to match our audience penetration in the US with what we’ve achieved in the UK – which is obviously a lot smaller in terms of absolute numbers and we’ve been at it for 175 years now in the UK – there is a huge opportunity for us. But there isn’t the awareness there. So we’re spending money to grow awareness and to build our image – but we’re doing it all through very clever, carefully tracked digital technology which allows us to do things like individually placed TV commercials and that sort of stuff. So we intend to up the investment over each year and get to the point where there’s huge scope for us to grow our audience. And we’re confident because our penetration is small and the audience itself is growing all the time. We obviously have access to people at the Economist Intelligence Unit that can help us find how that audience is growing and there might be 76 million globally curious people today that ought to be reading The Economist but, within a few years, that grows to 85 million just because of the demographic changes in the world. So we’re confident we should continue investing in our circulation because we’re small and, secondly, because there’s no diminished demand for what we sell. Lots of people have said this but in an era of fake news and alternative facts, people are turning to trusted brands. We maintain our investment in our journalism. Each year we spend more on our journalism while a lot of publications get into a bit of a downward spiral through an erosion of revenues that leads them to compromise their editorial quality. That’s something we don’t do at all.
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