Circulation Directors Change Discount Tactics

By: Lucia Moses

Imagine a company penalizing its most loyal customers. Well, look in the mirror. Many newspapers have been guilty of this, offering subscribers few choices and charging long-term subscribers the most.

Today, however, newspapers are changing their tactics in their quest to build circulation and subscriber loyalty. San Francisco Chronicle subscribers can now choose from seven-day, six-day, three-day, and Sunday-only packages. Those living in the right ZIP code can get The Philadelphia Inquirer at as much as 68% off.

Using flexible frequency and pricing to grow penetration has become one of the hottest strategies in circulation marketing. On the skids: the standard practice of starting new customers out low, then raising the price upon renewal, a method that’s led mainly to high churn rates. And with the average paper having to replace more than half its subscribers each year just to maintain its circulation level, incentive is high to cut that turnover.

No dominant new model has emerged, but all strive to get people subscribing longer — without sacrificing precious revenue. The focus is on people for whom price is an object — generally 20% of the market — according to consultant Jerry Kackley, who specializes in circulation-pricing models at his Flagstaff, Ariz.-based KGroup Inc.

One tactic gaining favor is so-called permanent discounting. In The Philadelphia Inquirer‘s version, new subscribers were offered a lower-than-usual discount, but with the promise that the renewal rate wouldn’t go up. The move seems to have paid off — circulation (at long last) grew in the Inquirer‘s most recent publisher’s statement as the churn rate fell to 46% from 65% a year ago.

Others are taking a different tack, starting people out at rates higher than the ones usually offered to new subscribers with the hope of keeping them at the higher rate. Going to the extreme, a few even have toyed with the idea of offering a lifetime subscription at a low rate.

Better data that cost less to retrieve is partly driving interest in pricing models. For example, newspapers can look at internal records to see where churn levels are highest and which households responded best to phone solicitation.

In trying to determine the value consumers put on the newspaper, some are taking a page from the consumer-products industry. The Seattle Times, for one, hired Waterbury, Conn.-based Intellisponse, whose clients include McDonald’s and Sony, to help figure out how to price the paper and understand the link between single-copy and home-delivery prices.

But unlike consumer products, newspapers run risks when they segment subscription offers. What happens, for instance, if a customer finds out others are paying far less than him?

With this concern in mind, the San Francisco Chronicle worried that subscribers to its seven-day package might trade down to its three-day package, so it marketed the new offer discreetly, and cannibalization was minimal.

It’s hard to keep information quiet for long, though. Said Kackley, “Permanent discounting based on something other than geography is when you start to run into potential problems.”

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