Magazines test "till forbid" programs.
This March, the first large-scale testing of a "till forbid" program will begin, when long-time publishing industry consultant Robert Bader starts soliciting subscribers of publications ranging from Golf magazine to Working Woman for his AutoRenew till forbid system. A till forbid program enables subscribers to automatically renew their magazine subscriptions via their credit cards. The subscriptions remain in effect until the subscribers notify the magazine or their credit card company that they wish to discontinue.
If the program works, says Wendy Weber, circulation manager for Bon Appetit, "it could be revolutionary."
In fact, adds one circulation director, a till forbid program could be "the most profitable way" for publishers to maintain circulation. And that, of course, would be particularly welcome in this challenging period of rising postal rates, increasingly softening newsstand sales and a weak advertising environment.
And till forbid could have an ancillary benefit, as well. It would help magazines identify their most loyal readers. While that information is easily obtainable now, many publishers have not leveraged it in any way.
On the other hand, if it doesn't work--if subscribers are confused by the program, if they don't remember they authorized automatic renewal, or if they are otherwise turned off--it is a magazine's most dedicated group of readers that is most likely to be affected. "You don't want to risk them," says Diane Potter, vice president, circulation, at Times Mirror Magazines.
The till forbid idea has circulated through the industry for years. Several magazines have run short trials, and the approach is used by American Express for its magazines. Of course, as several circulation directors noted, it is easier to institute a till forbid system if you own a credit card company, and, unfortunately, few publishing companies do. "A lot of people have played around with till forbid, but nobody has stuck with it," observes Dan Capell, publisher of Capell's Circulation Report. Capell helped Bader negotiate the maze of Audit Bureau of Circulation (ABC) regulations for AutoRenew.
Indeed, Bader's program is the first large-scale attempt to implement a till forbid system in the U.S.--the approach is more common in Europe--and his program runs in a straightforward way. Instead of renewing for a fixed term, subscribers are asked to supply their Mastercard or Visa numbers so that their subscriptions can be automatically renewed every year. To cancel at any time, the subscriber simply contacts either the publisher or the credit card company.
Bader's role in developing AutoRenew has been to create software to allow information on subscriptions and payment to flow through the necessary channels and to coordinate the efforts of other third party suppliers involved in the process. "Somebody had to bring everything together and to recruit enough publishers to make it worthwhile," says Bader. "And it had to be cost effective."
To handle the potentially millions of credit card transactions, he has enlisted Nabanco, a Fort Lauderdale, FL, company that is the largest processor of credit card transactions in the country. For fulfillment, service bureaus will receive tapes in the same way they receive them from the stampsheet companies.
The cost of AutoRenew to a publisher depends on the number of subscriptions involved. Nabanco charges a credit card discount of 2 percent to 2.7 percent of the subscription price. And since Nabanco already handles literally billions of credit card transactions a year, the charge is the same whether a magazine has one AutoRenew subscriber or one million.
AutoRenew charges a $3.25 service charge in the first year for each converted subscriber to cover the business-return envelope, processing, computer input and other administrative functions. In the second year, that figure drops to a maximum of $2.50. There is a 45 cent transaction fee when an AutoRenew subscription is cancelled.
As Bader sees it, till forbid is a classic win-win situation for the publisher and the consumer. First, not only do publishers eliminate the need to send out a renewal series to a core subset of the subscriber file (perhaps cutting their mailings by hundreds of thousands), but subscribers do not have to proactively agree to something they have already agreed to before. "When most people get their credit card bills," Bader notes, "they will not ask if they are going to renew a magazine, but whether they are going to pay all or part of the total bill." Monthly credit card bills average about $400, Bader observes, and magazines cost about $24--not a significant item.
Secondly, publishers will actually receive their money faster and cut down on bad debt with AutoRenew. The first step in the process is to verify the credit card, Bader points out. Once the transaction has been approved, funds are transferred to the publisher and the debt is officially between the subscriber and the cardissuing bank.
For consumers, the primary benefit is convenience. No longer will they be bombarded by renewal notices starting six to eight months before their subscriptions expire. And no longer will they have to write a check to renew.
Not surprisingly for an experimental venture, till forbid is haunted by several important questions. Perhaps the most serious is how willing are subscribers to turn over their credit card numbers to publishers.
While that is an open question, the change in the patterns of credit card usage in the past ten years indicates they may be willing. Credits cards are increasingly being used for convenience as opposed to simply a ready source of credit, till forbid proponents argue.
Even supermarkets are beginning to accept credit cards, notes Richard Holpp, a partner of Bader's in AutoRenew and a former vice president, marketing, at Mastercard. "The catalog industry would not exist without credit card numbers" being provided through the mail, he adds.
There are approximately 215 million credit cards in circulation, Holpp observes; so it is safe to assume that an overwhelming majority of subscribers could opt for till forbid.
But even if they are willing to shop by credit card through the mail, will consumers understand what it is they are agreeing to with till forbid? That question worries several circulation directors. "People are so used to other ways of subscribing that you have to be very careful and up front. You have to be exceedingly clear in what you are offering," says Potter. "It takes a reeducation process," agrees Capell.
Finally, nobody is quite sure how to promote the program, at least in the beginning. Tests will go out with and without premium offers and at different stages of the renewal cycle. Some magazines will solicit for AutoRenew before their standard renewal cycle to allow themselves enough time to "re-get" those subscribers should they shun the new program.
Acknowledging the uncertainty involved in promoting AutoRenew, Bader has devised a premium program called TargetChek for publishers to use to attract AutoRenew subscribers. Those who enroll receive quarterly checks that they can redeem against the price of major consumer items.
Capell believes the premium, which serves to remind the subscriber about AutoRenew, could be key to the program."People may need a little extra incentive," he suggests. "When they see that annual charge, they may ask 'Why did I do that?' and then remember, 'Here are the checks for the quarter.'"
If that proves to be the case, not everybody will be happy. "I would like to see the response after the program is clearly explained," says Potter. "I see other promotional linkages as step two." And there is some question how the TargetCheks will affect ABC's classification of AutoRenew circulation. If AutoRenew is classified as premium circulation, in effect, a magazine's best readers are being downgraded.
Despite these uncertainties, the momentum for AutoRenew is clearly growing. "I approach it with caution, but it is clearly worth testing," says Terry Perkins, circulation director for Home Office Computing. For publishers who test the program along with their regular renewal cycle, he points out, there is little risk.
Perkins won't be alone. Bader has commitments to drop between 2 million and 3 million pieces of mail for AutoRenew in the three months starting in March. Among the publishing companies committed to a test are Hachette, Conde Nast, Lang Communications, New York Times Magazine Group, Times Mirror Magazines, Murdoch Corp., Knapp and Scholastic. Several companies plan to test a variety of titles, both large and small, in a variety of ways.
What will be considered a success? That depends, to a degree, on the size of the current subscriber file. But the number most commonly bandied about as an achievable goal is 10 percent of the subscribers.
Bader, of course, is convinced the time is ripe for a successful till forbid program. "With soft ad sales, advertising agencies are urging magazines not to have unrealistic rate bases," he says. "And there is concern about newsstand sales. This is a way to consolidate the rate base and make circulation as profitable as possible."
He may be right. But in the final analysis, says Potter, "The consumers will tell us if this is a good idea."
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|Title Annotation:||Circulation Insider; automatic renewals|
|Date:||Feb 1, 1991|
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