The famous Chinese curse “May you live in interesting times” is currently proving to be more like a blessing for media companies.
As people look to understand the significance of the U.K.’s EU membership referendum and the U.S. presidential election, high-end publishers have seen business boom. One such publisher is The Economist, but its recent growth has also been built on a longer-term strategic change of focus from advertising to subscription income. This move has seen it almost double profits from circulation every two years since 2011—startling growth in an era supposedly dominated by free content.
Michael Brunt is CMO of The Economist and MD of its circulation business. He spoke to CMO.com recently to explain the publication’s changing approach.
Brunt: Only a few years ago advertising income was the biggest driver of our profits. Since then it has fallen quite dramatically, and our focus has turned to maximising the profits of our circulation business. I’m now the biggest contributor of profits to The Economist Group, by some margin. That’s interesting because, when I joined 10 years ago, the circulation business made quite a big loss, but we made all the money back from advertising. In fact, the circulation business only broke even in 2011.
The big difference is in my priorities. I took over as global CMO for The Economist in 2013, and, before that, the first bullet point in the job description was “build the audience that our advertisers want to reach.” That didn’t necessarily mean encouraging people who would value The Economist to pay to read it. There’s a difference.
In the last few years, we’ve shifted towards capitalising on the high—and growing—demand for high-quality journalism; finding those audiences and optimising the customer journey to encourage them to subscribe. And we’ve put prices up. I raised prices globally in March 2016 by about 20%, but we’ve still got more subscribers than we had before the price increase.
CMO.com: What’s driving that?
Brunt: The news agenda has been entirely up our street recently. We saw quite an unprecedented boost after the E.U. referendum, because people turned to trusted sources for analysis. And then we had a much larger surge of subscriptions as a result of the U.S. presidential election result.
Meanwhile, we’ve become quite nimble at pinpointing our target audience. We look at where they’re reading the news, and, through contextually relevant ads, we position The Economist as: “You’ve read the news, now hear the story behind it.” And it’s been really effective.
CMO.com: How has the department changed?
Brunt: When I got the job, we completely recalibrated the team. Previously, we had five separate regional circulation teams, which I globalised, so we have a matrix of marketing specialists who look after chunks of the customer journey and have deep vertical expertise in that type of marketing, and then we have regional directors who help the global functional lead to articulate their strategy to best effect in each region.
I also have other roles that help me look across the whole customer journey. Last year I appointed a chief customer journey officer, who joins up all our technologies and the flow of data and helps each functional lead to optimise their activities to benefit the other teams. For example, we make sure the people acquiring subscribers are acquiring the type that are more likely to renew, which supports the retention team.
Since we’ve joined up our marketing with a global-first look, and a functional look, and put a big emphasis on improving our digital marketing capabilities, we’ve massively reduced the cost of an acquired subscriber, whilst charging subscribers quite a lot more.
CMO.com: How does the process work?
Brunt: We capture that you’ve engaged with us—for example, you’ve read one of our articles—and the machine is in place to give you more content in that subject area.
Then you see ads appearing in your social media stream, and on the sites that you visit, with mentions of the subject matter you read to show we cover that area. If you don’t subscribe then, the machine switches to other subjects we think you might like. And then there’s a point—and it’s a nine-week process—at which we start to introduce an offer to subscribe to The Economist.
CMO.com: How big is your potential audience?
Brunt: There are about 130 million people in the world who ought to be reading The Economist. We call them the globally curious. But not all of them have a command of English that would make it comfortable for them to read it. If you filter those out, it comes to 76 million people. We’re selling 1.5 million copies a week, so our penetration is quite low. Breaking that down by geography, in the U.K, penetration is 15%. But in our biggest market—the United States—it’s 1.5%, so we’ve still got a big opportunity there and in other core English-speaking markets: Australia, Hong Kong, Singapore, Japan.
We’re really lucky—with low penetration, high demand for good-quality journalism, and the marketing machine getting a lot more efficient. That gives me confidence I can continue to grow the circulation business. This fiscal year coming up will see the most we’ve ever spent on marketing, and that’s setting us up for profit growth and making sure that we are as future-proof as possible.
CMO.com: There’s a lot of talk about brands being built by customer experience. Is that how you think?
Brunt: For us, customer experience is actually a reading experience, so we’re thinking a lot about where there should be a customer experience. It used to be just on our platforms, but the vast majority of our readers are no longer there. We’ve got 44 million social media followers, and that’s grown 25% in the last year, so most of our content is being consumed outside our environment. But there still has to be an experience that represents our brand, and that’s a challenge.
Our model is, if you come to our website from social media, you can read an article, but if you want to read another, we ask you to register. Then you can get three articles a week, and, once you’ve reached that quota, we ask you to subscribe, and we stick to that. But then every week our editorial team puts together a raft of content that we put in front of the paywall to show the relevance and topicality of our brand. That content also goes on social media and in our newsletters, and we use it in our marketing.
The multimillion-dollar question is how much should be free. What level of generosity does a good job of piquing interest and expanding awareness, but isn’t so generous that you don’t need to subscribe? All publishers are wrestling with this, and we haven’t cracked it. It will evolve continuously as new platforms arrive, but we have incredibly good relationships with all the big aggregators and digital platforms, and when they ask if they can have The Economist content, invariably, the answer is yes. And then we work out what it does to drive engagement and awareness.
The reason we are more likely to be generous than not is because our penetration is so low—apart from in the U.K.—so the likelihood of cannibalisation is slim. The content that appears on other platforms is content that we’ve managed, so it provides untold opportunities for growing brand awareness effectively, without, at this stage, any sense that it negates the need to subscribe.
A few years ago, we made a hard but productive decision. My team had done a great job building up our social media following, but we handed them over to editorial because only editorial have the confidence to make sure the irreverence, and wit, and style of The Economist are represented accurately on social media platforms.
Now my marketing team focuses purely on converting our social media audience into subscribers. We have software that monitors which editorial posts are gaining the most traction, but, of course, they have low organic reach—about 1.5% of our fans, on average.
So this software boosts those editorial posts that are already organically gaining traction. And the paid reach is vastly more, for only a few hundred pounds per post. Then, because it’s getting more reach, it gets more organic reach as well. But the only reason it works so effectively is because editorial is managing the posts.
CMO.com: What are the next steps for the business?
Brunt: We fully expect our advertising revenues to continue to decline—that’s the challenge. The solution is hard, but it’s to invest a lot more money into growing the circulation business.
And we’re confident it will work, because there’s this low penetration, because of the big demand for high-quality journalism, and because our marketing machine is getting smarter all the time.