11 Essential Metrics for Paid-Circulation Marketers

February 14, 2011  |   Marketing   |     |   2 Comments

When you sell content, metrics can overwhelm you. But there are some essential pieces of information that all circulation marketers should follow over time. You may have a good handle on some, and others could require a mental leap, but tracking them will make a difference in how you look at your publications’ success and how management views your results. Most importantly, these metrics will help you to better allocate your resources in order to grow your paid circulation.

1) Web metrics

The web is where most customers start to engage with your content. Web analytics has a long list of metrics to analyze, but you’ll want to focus on click-through rates, cost per click, unique visitors and conversion rates to show your website’s ability to bring in new prospects.

To determine your content’s “stickiness”, track bounce rates, return visits and average time on site. Be careful not to put too much weight on bounce rates as sometimes your customers will want to read one article and leave your site. This is fine as long as your high bounce rates are coupled with a long average time on site.

2) Gross new orders, net new orders and pay-up rate

Keep track of new orders, but make sure to break these out by who has paid and who has not. A historical ratio between these is very useful for estimating future net new orders. Breaking down these ratios by marketing source allows you make estimates like this: “If I mail 100,000 pieces and get a 2% response rate for 2,000 gross new orders, then based on the historical pay-up rate for mail of 30%, I can expect 600 net new orders from this promotion.”

3) Gross and net circulation

You always need to know your gross and net circulation. If you have 2,000 subscribers, but 600 haven’t paid, your managers may count on revenue for 2,000 subscribers rather than 1,400 (believe me, I’ve been in this situation and it’s not pleasant when the truth comes to light). With the historical pay-up rate in hand from 2), you can estimate your net circulation by the time all 600 open credit orders go through your billing cycle.

4) Price per subscriber

If you start to notice a large drop in price per subscriber, it may mean big changes in how you report on net circulation. For example, let’s say you sell newsletters for $1,000 per year. That means your 5,000 subscribers will earn you around $5 million this year. But if group sales closes at $200,000 per year for 500 new subscribers, your price per subscription drops to $945. Management may expect $5.5 million in revenue with the increase in circulation, but you’ll only get $5.2 million.

Keep track of average price per subscription. If it drops significantly, it may be time to track individual subscribers separately from groups so that your company will know how much revenue to expect in the coming year.

5) Free trial conversion rates

When you offer a free trial to your content, you need to know how many leads who take a trial will eventually pay for a subscription. This ratio will show how many free trials you need to generate in order to meet your circulation goals. If you need far more trials, you have data to support a budget increase to attract new prospects.

6) Renewal and conversion rates

Conversions can mean two things, and for that reason I refer to “free trial conversions” separately. A proper conversion is a first-year renewal. Customers who have only subscribed to your publication for one year will renew at a much lower rate than after they make it to their second year. This can be important in projecting circulation beyond one year and for developing different strategies to keep first-year subscribers interested.

A great way to track renewal rates (which I’ve heard called a horse-race report) is to look at expire pools over time. To do this, you set your pool 6 to 10 months before expiration. Assuming we’re in February, we would set the pool for September with its 110 subscribers. Now, from March until September, we track the renewal rate of that pool over time. In doing this for every month, we see where some pools are having trouble. If you spot the issues early enough, you can download those subscribers and give them an extra email, telephone call or mailing to keep your renewal rates high.

7) Customer satisfaction

Subscriber satisfaction is one of the few metrics not affected by economic turmoil or other outside factors. It benchmarks how well your publication meets subscriber needs, and starts discussions between marketers and editors about overall product improvement and business strategy. Breaking down satisfaction by feature will show where your publication underperforms, and where it overachieves.

8) Customer referral rates

How often do your subscribers refer colleagues to your content? Word of mouth is a powerful form of marketing, but oftentimes we fail to explore how it works. Knowing referral rates is a great indicator as to the health of your content and can help you target more valuable subscribers in the future.

9) Lifetime value

When a customer subscribes for $1,000 per year, we sometimes forget that there’s more return than this. A subscriber could renew 10 years in a row, generating at least $10,000 over time for your business. Also, referrals can push lifetime value even higher.

Because lifetime value presents such a challenge to all marketers, I’ve included some formulas. But you’ll need to know conversion rates (first-year renewal rates), ongoing renewal rates, the propensity of subscribers to refer colleagues (perhaps from a survey) and, if possible, the internal rate of return demanded by your business.

Step 1) Figure out the average lifetime of your subscribers

(1 – conversion rate) + [conversion rate x (1 + 1/(1 – renewal rate))]

Let’s say you have a 50% conversion rate and an 80% renewal rate. That means 50% of subscribers drop after one year. The other 50% renew at a rate of 80% for their remaining life cycle, meaning they stay for five more years (six years in total since they already converted after the first year). So, of 100 subscribers, 50 stick around for a combined 50 years (1 year per sub) and 50 stay for a combined 300 years (6 years per sub). 350 years / 100 subscribers = average lifetime of 3.5 years.

Using the formula above…

(1 – 50%) + [50% x (1 + 1/(1 – 80%))]

(0.50) + (0.50 x (1 + 5))

(0.50 + 3) = 3.50 years per subscriber

Step 2) Average value of a subscriber without referrals

At a price of $1,000, you could take 3.5 years x $1,000 and conclude that the average value of a subscriber is $3,500. But you should discount future values by your company’s internal rate of return, which is typically the average return on equity for your company (values usually range from 5% to 20%).

∑ (1 thru n): Price / [(1+R)^n] where R is the internal rate of return.

Assuming R = 10%, the first year would be valued at $1,000, the 2nd at $909, the 3rd at $751, the 4th at $683. The total lifetime value would be $1,000 + $909 + $751 + $683 x 0.5 (only 3.5 years per subscriber, not 4.0) = $3,001.

Step 3) Add referral revenue

If you find that your 100 subscribers each refer an average of 0.2 new subscribers in a year, then take $3,001 and multiply it by (1 + 0.2) = $3,600.

In sum, any brand new subscriber to your publication is worth an average of $3,600 over her lifetime, not just the $1,000, first-year-subscription price.

10) ROI – Return on Investment

A simple return-on-investment calculation takes the revenue generated from a specific campaign divided by the costs of that campaign. Revenue generated is NOT lifetime value because the promotion you sent is only responsible for whatever price the subscriber pays at that time. Therefore, if a direct mail piece costs $10,000 and yields 20 subscribers at $1,000 per year, you have a $2.00 ROI. Anything over $1.00 is considered profitable as all product development and salary costs are sunk by the time you send a promotion.

11) ROMI – Return on Marketing Investment

Because ROI is specific to a single promotion, management needs ways to gauge the effectiveness of your overall circulation strategy. Return On Marketing Investment (ROMI) takes into account all possible marketing returns vs. all costs.

For example, in September if you spent $50,000 on salary, $50,000 on promotions, $20,000 on customer service and fulfillment and $10,000 on renewal efforts, and you incrementally brought in 50 new subscribers with a lifetime value of $3,600, your monthly ROMI would have been (incremental revenue – total marketing investment) / total marketing investment, or ($180,000 – $130,000) / $130,000 = 38%. Not bad.

Summary

To conclude, a few of these metrics may prove challenging to report on. But with greater focus on results, business owners and managers will want to know how much their subscribers are worth over a lifetime and need an overall return on marketing investment. And in all marketing analysis, it is better to have approximate answers to pertinent questions than exact answers to irrelevant questions.

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2 Comments for this entry

  • Peter Hobday

    January 10th, 2012 on 4:24 am

    Great stuff, Joe. Thanks for posting!

    Peter

    • Joe Leider

      January 10th, 2012 on 8:20 am

      No problem – if you have any questions or critiques, do feel free to share them here.









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