Driving toward retention

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"It takes all the running you can do, to keep in the same place," said the Queen. "If you want to get somewhere else, you must run at least twice as fast as that!"

-- Lewis Carroll, "Alice in Wonderland"

Sounds like there was a customer retention problem in Wonderland. How about where you are?

Want to know why some retention programs are doomed to failure from the outset? It’s because not all prospects will be retained at the same rates. Targeting the prospects who match the profile of your current loyalists is more strategic.

But newspapers on the whole have not been strategic at all. Want proof?

• For years, and still today, telemarketing has been the source of more new starts than any other source.

• And for years, circulation executives have cited telemarketing as the order source with the lowest retention.

Maybe this isn't true at your newspaper. But unless one believes that our industry can't grasp the obvious, this contradiction illustrates the challenge of getting off the treadmill. It is doubtful that many circulation executives or publishers need to be convinced of the need to focus on retention; and yet the fact remains that as an industry we continue to deliberately put the most resources behind the order source that offers the least retention value.

So the problem probably lies in a need for tactics and executional guidance. That's what this chapter delivers -- not so much the "why" of retention, but the "how-to."

But before we take a renewed look at the topic of retention, here are some resources that you’ll find very useful:

-- “Subscriber Retention: The New Basics.” This NAA publication is a comprehensive, 94-page guide that includes everything from start verification practices to EZ Pay to billing enhancements.There’s also a discussion of the lifetime value of a customer. In the new era of restricted telemarketing, this book should be on every circulation executive's desk.

-- “Study of Subscriber Loyalty” is a 48-page guide to keeping your customers and moving them up a ladder of increasing loyalty. It includes some groundbreaking predictive models you can use to enhance retention before you ever begin selling, by seeking out the right prospects in the first place.

Retention: The frontline of defense

Even if you are not a sports fan, you may have heard the old adage that "championships are won with defense." It does little good to score lots of points with a flashy offense, only to see that success slip away due to a poor defense. Similarly, it is of little value to generate a high volume of costly orders, only to see them fall off the books at or before the end of the first billing cycle.

That's why, while the rest of this Guide focuses on customer acquisition, this section focuses on an inseparable topic: retention. The topics are inseparable because before a sale is ever made, or even offered, retention should be factored into the plan so that:

• you target prospects that most closely match the profile of your long-term subscribers.

• your incentives reward reps for longer-term options.

• your subscription terms reward customers for lengthier durations or for EZ Pay payment.

Smart newspapers view a new start as a qualified lead. Only after the customer has established a willingness to pay and renew is this "prospect" considered a customer.

If your average retention on, say, a telemarketing order is 13 weeks, then each customer you retain for a year means 4 fewer telemarketing orders you have to sell. Multiply your CPO of a telemarketing order by 4, and you have a rough-but-useful valuation of a customer's annual worth in sales costs alone!

The solution begins with analysis

This chapter goes hand-in-hand with the previous chapter on using analysis to drive results. Once you make the commitment to doing things differently in order to get off the treadmill, you'll need to apply some data to the problem.

First, examine your current sales quotes and incentives. Are you placing your dollars on the channels that offer hope of decent retention? That's Step 1. The analytical tools for this were laid out in the previous chapter: focus not on the CPO, but on the CPU; not on the price of the order, but on its performance in terms of retention, and the potential for incremental sales within a given channel.

The role of payment is paramount

Newspapers have discovered -- and by now it's been proven -- that the customer's method of payment has a profound impact on retention. Many of the retention programs in recent years have focused on various means of promoting EZ Pay, before and after the initial sale.

EZ Pay has proven to be the closest thing we have to a sure-fire, no-brainer, slam-dunk way to increase retention. When your subscribers pay for their subscriptions by credit card or by automatic bank-account debits, only good things happen. It’s a simple process, and those who have tried it swear by it, as you'll see in the Close-ups on the topic. Newspapers that have tried it find their retention rates increase by an average of 50 percent or more. Canadian newspapers have led the way on EZ Pay, with more than 60 percent of their subscribers paying by credit cards or direct-payment withdrawals from their bank accounts.

Why sell the same customer over and over?

EZ Pay works because it removes the renewal decision from the customer. Each time you send a bill for renewal, the subscriber must decide whether to renew the newspaper.  By automating the process, the subscriber decides only once whether he or she wants to buy the newspaper; after that, no further decisions are required.

Credit card and direct payments also reduce sticker shock for some customers.  Rather than facing a bill for a 13-week or longer service, readers see a more modest monthly charge.

For others, paying by credit card is a way of life. In many households, for example, one spouse pays the monthly bills. The other rarely carries the checkbook around, often using credit or debit cards for virtually all day-to-day purchases. This person will EXPECT you to take a credit card, and may in fact be unwilling to buy under any other terms. We live in a plastic-money world.

As the Close-ups will show, promoting credit card and direct-payment options takes some planning, but plenty of help is available. Credit card companies and banks are eager to help because electronic transactions reduce their business cost and make money for them.

Selling EZ Pay with urgency

As in any sales effort, convincing existing and new subscribers to pay by credit card or direct payment requires a sales pitch. The successful newspapers go beyond simply offering credit and debit payments. The most successful actively, even aggressively, promote the process to their readers and prospects.

Some papers have redesigned their bill to feature credit and debit options. Telemarketers get cash incentives for promoting credit-card use, and retention workers get bonuses for making long-term credit-card sales. Subscribers who switch to credit or debit card payments can get a week of service free.

To make the program work, a newspaper must heavily promote it to new and current subscribers while offering incentives to the sales staff for credit card and direct payment sales.

Credit-card companies are happy to help with promotions of this type. 

EZ Pay Promotional Checklist

Here’s a checklist of things you can do to promote credit card and direct payment among your subscribers:

·     Train the sales staff and customer service representatives to use a presumptive close with a payment card:  “Would you like to put that on your VISA, MasterCard or American Express?"

·     Shift premium offers to the payment stage of the sales process. Rather than giving a premium just for subscribing, use it as a carrot to nudge the customer to pay by credit card.

·     Put credit card logos on billing statements, countertop displays, entry doors and on all direct response pieces.

·     Give customer-service representatives some incentives.  Encourage them to promote credit card and direct payment options when customers call in. Also, and this is crucial, provide good incentives to new-start verifiers. Some papers report dramatic increases in securing credit card payments at this stage of the sales process because they encounter less resistance from customers on verification calls than telemarketers do on their initial cold calls.

·     Structure commissions for telephone marketers and other sales staffers so that advance payments and credit-card orders are rewarded.

·     Use credit cards to convert stops into restarts — especially the nonpay stops. The convenience of credit cards might be enough to retain them as paying customers.

·     Tend to the details. Be sure to send customers a letter close to their expiration dates, to get a new credit card number and expiration date.

·     Insert a credit card sign-up option in paid-in-advance and other office-generated billings to remind subscribers of the “EZ Pay” option.

·     Offer choices — of credit cards, subscription durations and premiums for longer durations. Give the customer a big range of options.

·     Provide incentives for credit-card sales to renewal or retention callers during grace periods, as well as to district managers charged with collections or calling stops.

You'll find useful tips in the Close-ups both in this section, and in the section on Making Telemarketing a Stronger Sales Source.

Using telemarketing as a retention tool

We've noted throughout this Guide that telemarketing sales produce some of the worst retention rates. That's the bad news.

But there's good news with respect to telemarketing and retention. Telemarketing can be used strategically as a tool to actually enhance retention.

Here's how:

The first approach begins by recognizing that a new start from a standard telemarketing effort is not a start at all; it’s really just a qualified lead. Retention of these starts is so predictably poor that some papers have developed follow-up processes to "close the sale" and convert a qualified lead into a real customer. 

Some will offer the prospect a short-term, eight-week subscription, usually at a low price, to get the newspaper into the home and start cultivating a longer-term relationship.

An extreme example is the free-trial subscription. The goal is to convert this lead into a sale. In this strategy, the cost of getting the subscriber to say “yes” is relatively low, but the process includes costs for follow-up calls, premiums to secure the first payment, and other mailings and perks to convert the start into a subscriber. The key is to consider that short-term subscription not as a sale at all, but as just the first step in building a relationship. This sales approach has its place in the overall strategy. No doubt we would never reach some consumers without these sales methods.

The internal accounting process can be set up so that these starts are not posted as “sales” until receiving the subscriber’s first payment. Telemarketers’ compensation for the initial start should be minimal, with the balance awarded upon receipt of a credit card number or the first payment. Some newspapers split the commission — part of it after the initial start and the rest only if the subscriber is still active after 13 weeks.  In other words, each week the telemarketer receives two commissions, one for the subscriptions sold in the past week and another for those sold 13 weeks earlier. Some papers pay the telemarketer for a sale for each week that the subscription remains active through the first year. Under this system, telemarketers’ compensations grows with tenure, much like an insurance agent's commissions.

Another telemarketing-retention strategy

Some newspapers use telemarketing to close sales based on a targeted, more-developed prospect list more likely to yield subscribers. In that approach, the follow-up procedure cements the relationship, secures the first payment and converts the start to a subscriber.

The second approach is “targeting through technology”: applying data and technology to identify and sell a qualified prospect. This could take the form of contacting consumers who have demographic characteristics that match the loyal-subscriber profile. Or it might involve following up on a sample program or supporting a direct-mail program.

In short, the role of telemarketing in newspaper sales will continue to evolve.  The most likely fit would include contacting current customers or converting qualified prospects achieved through methods like sampling, into subscribers. The sales call has to be leveraged, however, by a more thorough retention program — following the “yes” with a direct-mail package, reiterating the offer and offering premiums or discounts for credit- card payments among other measures. Telemarketing has a role in the process of building a relationship.

The future might not hold the immediate demise of telemarketing.  A long-term strategy could re-deploy its ability to contact so many, so fast; to follow up on qualified leads or, at the very least, to acquire prospects for other programs that can only begin when the customer says “Yes.”

The story of the hotshot pen salesman

There's a story of a hotshot salesman who sold ink pens wholesale to retail merchants. Year after year, he sold more pens than any other rep. He won every national sales award and was the envy of his peers.

His fellow salesmen wondered about his secret. He said there was no secret. But they were suspicious. "I used to cover some of the same territory as you," said one old timer. "Something's fishy. For example, the stationery store on Main Street would never buy more than 100 pens from me at a time. You claim that you sell them as many as 288. How can that be? Same customer. Same pens."

The hotshot looked puzzled. "How can you sell them just 100 pens? They come in cases of 144."

Both the old timer and the hotshot were momentarily puzzled, until they figured out what was happening. The hotshot had never been told that salesmen were authorized to break open cases and sell pens at the level of individual units. He offered only cases -- and that's all he sold.

The moral of this story, is that it takes just about as much effort to sell a large-volume order as it does to sell a small order.

Some newspapers have learned this lesson well. For example, The Morning News in Springdale, Arkansas (37,000 daily; 43,000 Sunday) wanted to change subscriptions sales from two- or three-month terms, to terms lasting six to12 months. “Our carriers sample, then seven days later our crew works the area. We offer a reader-reward card as an incentive to purchase a one-year subscription,” said Circulation Director Lewis Floyd.

Kiosks promote the same offer. The Morning News also changed to agent delivery to better control the billing.

The results? Churn decreased to 39 percent (from 179 percent).

In the future the paper might offer renewals for multiple years.

The moral of the story

Ask for what you really want, and think big. Just as selling pens by the case leads to greater success than selling individual pens, selling longer subscriptions avoids the need for selling and re-selling to the same customers several times a year to achieve the same results as selling one year-long subscription.