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Plus Report - By Thomas Baekdal - February 2016

Do You Need Real Loyalty as a Publisher?

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Avinash Kaushik
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Over the past month, three different publishers have asked me questions pertaining to loyalty. How do we get loyal readers, how do we encourage loyal behavior, and how do we measure loyalty? It's a fascinating and important set of questions.

So, in this article, we are going to talk about loyalty. You will discover that the need for loyalty varies greatly from one brand or publication to another, and you will learn that loyalty is only part of the equation. For some it's absolutely critical, while for others it is not.

Most importantly, in the second half of this article, I will give you a number of examples of how different types of publication need to focus on either scale (no loyalty) or momentum (high-loyalty).

Sound good?

The test you shouldn't do!

Before we start, I want to illustrate that there is a very simple way to determine how loyal your audience is. It requires no fancy measurements and it's pretty much spot on every time.

However, before I tell you what this is, I want to stress that you SHOULD NOT do this. I do not recommend this action in any way or form, because it will likely cause a tremendous amount of damage to your business.

Don't do this! Okay?

But, if you want to know exactly how loyal your audience is, what you do is tell them to convert again, from scratch.

For instance, imagine that you have a Facebook page with 100,000 likes. You would then create a new Facebook page and then tell your old fans to like that page instead. You also tell them that you are going to close your old page in two weeks' time.

Then, two weeks later, you look at the total number of likes on your new Facebook page and compare it to what you had before.

You can do same with email newsletters. Create a new list and tell all your existing email subscribers that they will have to sign up for that instead, because you are closing your old list.

Or, if you are a magazine, tell your existing subscribers that because you have switched to a new payment system, you need everyone to subscribe again, from scratch, otherwise their current subscription will end.

As you can probably imagine, the result of doing any of these three things will lead to financial disaster. Your truly loyal audience would obviously make the shift. They would like your new Facebook page, sign up for your new email list and subscribe again using your new payment system. They are loyal and therefore consider the value that you create to exceed the slight burden of having to act again.

But the far majority of your audience wouldn't do this. They wouldn't like your new Facebook page, they wouldn't sign up for your new newsletter, or subscribe. They would just disappear.

So, as I said, don't do this!

Think about it like this:

Only a tiny part of your audience is the super-loyal audience who would do what you ask them to.

A slightly larger share of people are those who aren't quite loyal, but they are interested in what you do. These groups combined is what makes up your valuable market.

Then we have the bulk of your audience. These are people who are neither really that interested nor that loyal, but they might convert anyway. Or for publishers, this group provides the bulk of your traffic from which you can sell advertising.

Finally, we have the odd group of people who aren't anything. In fact, when you look at how they behave you have to wonder why they even came to your site to begin with. This is the group that is unconvertible no matter what you do.

So, if you ask your audience to act in a way that only loyal people would do, the only ones who would do that are that tiny green group at the end of the above graph. But your market is much, much bigger than that.

This is the challenge that we are all faced with when we talk about loyalty. Loyalty is great, but it's not that great.

We see this even more clearly when we look at retail brands. Kevin Hillstrom, a retail analyst, recently published a graph from one of his clients illustrating profit by recency and frequency (our main loyalty metrics).

Here you see that the bulk of purchases are made by people who haven't been around that long, nor have they made that many purchases. For instance, there is almost nobody who has purchased 10 times over a 10 month period.

We see the same when we look at total profits.

Again, we see that the audience with a short customer life is where the bulk of the profit is. There is much less profit to be made from customers with a longer lifespan. If someone hasn't bought anything new for five months, it's pretty much game over.

Mind you, this is just one example. There are huge differences depending on the type of products you make, how often people need them, the price level, your uniqueness in that market, and so many other factors.

I don't know what type of retail brand Kevin is looking at here. We see some level of seasonal effects (at the 15 month mark), and with people making 10-20 purchases within the first months, I think we are looking at a somewhat high-frequency retail store. Not quite like a supermarket, but close.

Obviously, if you are Ford, the graph won't look like this at all, nor if you are Apple. People only buy one new iPhone per year (or more like every two years), so they won't get 10 purchases in a few months from the same person.

But you get the idea, right?

The point is that when you think about whether you should focus on customer retention or customer acquisition, you will often find that it's far more relevant, in terms of resources and marketing/sales budgets, to focus on getting new customers than trying to reactivate old ones whom you have lost.

You are not loyal to your grocery store

Another important point about loyalty is that many brands don't need loyalty at all to succeed. What they need instead is better options and better conveniences. Grocery stores are a great example of this.

Let me give you a personal example.

I buy all my groceries online. It's brilliant and exceptionally convenient in every way possible. And if order my groceries before 9 AM, one of them will deliver the same day.

How awesome is that? I will never visit a physical grocery store ever again. I will never stand in line behind 10 other people waiting for that one guy at the front who just placed a product with no barcode at the conveyer line.

I'm now totally and completely loyal to the concept of online grocery shopping.

But I'm not actually loyal to any specific grocery store. Because they all sell the same products, and they are all offering the same prices. So my choice of which one to use depends almost entirely on the minor difference in options and conveniences.

For instance, I generally turn to four different places.

I have two general purpose grocery stores that I turn to. One has three delivery windows per day, one of which is the same day delivery that I mentioned before. But their speed comes at the cost of lower availability and less inventory of products. So, they can deliver faster, but I have less to choose from.

The speed also comes at a cost of packaging. They will drop the products in plastic bags outside my door. So, you pretty much have to be home when they arrive (but they will tell you when that is within a 15 minute window).

Note: This is actually a good thing for elderly people, because they also offer to deliver the groceries directly into people's kitchens, bring the products inside and unpack them for you. That's a great service for older people, but I prefer the 'just leave it outside and don't bother me' option.

The second general grocery store has a much wider selection of products, but they also deliver much slower. Sometimes it can take up to four days from the time I order to when it actually arrives. The products are still 100% fresh (as they are packaged just before delivery), but four days is a long time.

So, depending on what I need and when I need it, I will switch between these two stores.

Then I use a number of specialized stores. I use one store for fish and another for meat. The reason I do that is because I get much better quality and options by turning to a speciality store for those. I have also considered doing this for vegetables and fruit, but since I live alone, I can't order them in low enough quantities.

For the meat, I have a subscription option, where I will get 12 KG of meat every two months, and I can pick and choose exactly what type I want. It's brilliant.

But you will notice that I'm not loyal to any of these stores. My loyalty is based on the result, rather than the provider.

One example is that I recently decided to buy fish from another store, and the reason for this shift was due to pollution. You see, the store that I used to get fish from is located in the inner waters of my country, while the new store is located next to the North Sea (aka the Northern Atlantic Ocean). I have no idea if I'm actually getting any better products, but I feel better getting my fish from a fishmonger who is located near a less polluted area.

You see how this work? I'm loyal to the outcome, not the company.

The reason I tell you this story is because this is a pattern that we see in so many places. In a world of abundance and where the distinction between products are minimal, our real loyalty is shifting away from the products and the brands and is instead focused on the result we get as individuals.

This is not just true for supermarkets and grocery stores. This is also true for so many different brands. And, it's very much the reality for publishers.

Think about a newspaper.

In the past, people would be loyal to a specific paper, but this isn't really true anymore, is it? Today, the way especially young people consume news is focused on what people get, rather than who they get it from. They will turn to whatever news source that they think can give them the best result at any given moment. Or, worse, if they don't know which one is best, they will turn to whatever news source attracts their attention using whatever optimization tactic is needed for that moment.

This is a big change.

In the past, people chose the publication first, and the content second. Today, people choose the content first and ... well, who cares where it's from.

Another challenge with loyalty is that loyalty often isn't loyalty at all. A good example is the many supermarket loyalty plans. Here you can become a 'member' of the supermarket in exchange for getting a loyalty card from which you earn a discount.

In business terms, those cards kind of work because they entice people to keep buying all their groceries from just that store. But in reality, they don't create any real loyalty. Instead, what they create is incentivizing lock-in.

It's the same concept as before. We choose the store not based on real loyalty, but rather on whether that store is slightly more convenient.

This is the reality of 95% of the market. You don't necessarily need real loyalty to win. A well designed focus on convenience, solving people's needs, and a focus on the options available often produces better results.

But does this mean that real loyalty isn't important? Well, that depends.

If you are focusing on making products that people don't really care about that much, that are common, that exist in a market with very little distinction, and where you are focusing on the mass market of everyone rather than a targeted niche, then focusing on all the non-loyalty elements is a much better strategy.

This is true whether you are a brand (supermarket products), or a publisher (random news, viral sites, content farms). Buzzfeed, for instance, would not benefit from focusing on loyalty.

But if you are a niche product, for a targeted audience, with a specific purpose and intent, then loyalty is paramount. Which is even more true if the product you are selling is something people have to 'renew'.

One of the easiest ways to see this is by looking at churn rates.

Loyalty versus churn rates

A churn rate is the rate at which you lose customers or subscribers, similar to how a subscription rate is how many new subscribers you get. And churn rates are a vital metric regardless if you are a brand or a publisher (but especially for subscription-based sites).

It's not whether people churn or not that is important. It's why. And there are generally three major reasons why this is happening.

Wrong audience

The first reason is due to a mismatch of targeting. Like when you are are reaching the wrong audience.

Imagine that you are running a magazine about gardening, but then someone subscribes who doesn't have a garden. Obviously, you are happy with the new subscription, but you know from the start that it's not going to last. After a few months, this person is likely to churn.

We all have this problem, and it's a problem that gets worse the more you lack focus. A publisher who is all over the place will have an above average churn rate simply because it attracted the wrong audience to begin with.

There are also often technical reasons why this happens. For instance, Motor Trend recently announced a new on-demand premium video channel with the message "Watch anytime, anywhere".

But then when people subscribed from outside of the US, they were greeted with content restrictions. As one person commented:

So, they are now getting a lot of churn because what they offer is not actually available to the audience they promoted it to.

We see the same with sites like Netflix. Netflix may claim that it is global, but because the actual availability of the content varies greatly from one country to another, they see a lot of churn because people feel disappointed by what they actually get.

They are reaching the wrong audience compared to what they offer.

Failed payments

Another huge reason for churn is due to problems with renewing people's subscriptions. This is actually the cause of about 70% of all the churn I see here on this site. PayPal will try to renew people's subscription a number of times (and alert the person each time), but if they still can't complete the payment, the account is suspended.

The result is that I get bunch of emails like this every month, and it's usually the result of people's credit cards expiring.

Every publisher and brand that relies on renewals suffer from this problem.

Obviously, you would try to correct this. You would email the customer to explain the situation, and try to get them to manually reactivate their accounts, but only a fraction actually do.

There are many reasons for this. One reason I have come across quite often is that the email people use for their payment (especially with Paypal) isn't their primary one. So, the most common feedback I get is that people didn't see the notification emails.

Another reason is that you need to make it really simple to reactivate an account. Paypal, for instance, isn't simple at all. You have to log into your Paypal account, navigate to your personal account settings, choose your card options, manually add a new credit card, and then set that as the primary. And you have to do this before the account is suspended.

So I have lost many people who actually wanted to continue subscribing but were put off by how complicated it was to do.

It's deeply frustrating. And I hear similar stories from so many other publishers and brands. We really need to completely rethink how payment works online.

Out of season

A third reason for churn is what I call 'out of season' renewals. This is especially true for publications or brands where what you offer is linked to an activity that only happens during certain times per year.

For instance, imagine that you have a subscription magazine for NFL. Arguably, there is plenty of news to bring for the whole year, but the matches themselves exists in 'seasons', like this:

Based on this, we can draw a line to indicate how excited people are throughout the year, like so (estimated):

As you will notices, the excitement drops substantially in the off season, but then picks up tremendously at the start of the pre-season and at the beginning of the full season. Then it slows down throughout the season period, only to gradually pick up excitement leading up to the big finale at the Super Bowl. The Super Bowl is so big that even people who don't like football get excited about it. It's crazy.

But, back to churn rates.

Imagine you are a subscription based magazine focusing on this, and you are asking people to renew once per month. What do you think will happen?

Yep, you are going to see a whole lot of people churning in the off season because there is nothing for them to see. Why renew the subscription now, they ask? You are asking people to act during a period of time where they don't really care.

It's the same with an annual subscription. Imagine that a fan of the Chicago Bears subscribed in April in anticipation for the next season (with an annual subscription). The 2015 season ends and the Bear don't make it to the Super Bowl. Then two months later, you ask this person to renew his annual subscription.

What do you think would happen?

Yep, he will likely churn because you are asking him after his team lost and during the off season. It's the wrong time to ask. You are out of season.

A much better solution would be to design your subscription plans around when people are excited. Instead of selling monthly or annual subscriptions, you sell them 'season passes'.

And regardless of when people have subscribed, you don't ask them to renew until the beginning of August. Even if someone subscribed in April last year, you continue their season pass until August this year (essentially giving them 3 months for free).

Similarly, just before the Super Bowl, you offer people a subscription package: "Get full access to this year's Super Bowl + a season pass for next year with one simple price." because that's the perfect time to ask.

Similarly, you offer a season pass for the next year immediately after the Super Bowl as well ... although you might want to tailor this to only the fans of teams who performed well.

The result is a subscription strategy that looks like this:

This is just one of many examples. But the same thing applies to most magazines in different ways, although some won't have as sharply defined a season as with NFL.

But what does all of this have to do with loyalty, you ask?

Well, as you can see, there are a ton of very important things you can do to minimize churn by itself.

All of that in itself will help a lot. But you can also focus on loyalty. Loyal subscribers don't churn by default. They will stick around even if something isn't quite perfect.

Loyalty is like magic. Or rather, it's like glue. It makes people stick around even when things aren't perfect.

So, how do you determine whether loyalty is important for your business or not? Well, it's simple. It's based on just a single concept: Momentum.

Any brand or publisher whose business model is based on obtaining and building up momentum will need to focus on loyalty as its key metric for success. Any brand or publisher who doesn't need momentum can ignore it (Well, to a point. You never want people to be actively disloyal either).

And remember, we are not talking scale here. Momentum and scale are two words that both signify that something is growing over time. But scale is usually used when we are looking at the business as a whole across everyone, while momentum is strongly focused on when you are growing for each individual person.

Buzzfeed, for instance, is a company with a ton of scale but not momentum, while all the famous YouTubers that you know have a ton of momentum, but often not scale.

That's a big difference.

So, basically if what you do or what you sell is dependent on what you have offered previously, loyalty is critical.

We see more than anything with the YouTube Let's Players. For instance, we have a guy like Paul Soares Jr., where he has done several Let's Plays of the game 'The Escapists':

He has now created 153 videos in this series, each being about 20 minutes long. That's more than 50 hours of videos. But each one of these videos will look weird to outsiders, because unless you have been following this series for a long time, you don't really see the value.

We see same thing with normal broadcasting. If you have never seen or heard of Game of Thrones, and you just happen to watch episode 4 from season 3, it's not going to make much sense to you. You have don't know the history of the characters, you haven't seen what happened before, and you haven't build up any momentum.

It's only when you have watched something from the very start, when you have become loyal with your momentum, that the shows turn into the best thing you have ever seen.

Compare this, for instance, to Buzzfeed.

None of the things Buzzfeed does depends on you watching any of their other content. If you look at what Buzzfeed has to offer right now (as I'm writing this), you will find this:

You can watch any of these videos without ever have watching anything Buzzfeed has ever made before. There is no momentum and no loyalty here. Everything is just a random micro moment.

The difference between the Let's Players/Games of Thrones and Buzzfeed is staggering. They are not even in the same universe. It's two completely different forms of media.

And mind you, it's not because one is based on creating a series, while the other is not. Another example is to look at a YouTuber like Cupcake Jemma. She has a YouTube cooking channel where she is mostly baking amazing cupcakes.

Technically speaking, you could watch any of her videos and get value from just that, but she probably wouldn't get that much traffic that way. Instead, her momentum is centered on a passion and a purpose, which is what people follow.

So this momentum can be created in many different ways, and it's all driven by real loyalty from the audience. It's driven by people who love her focus and energy and want her to do so much more of the same.

I'm using YouTube here as the example because, as I have said many times before, it's a great way to see this split in media. On one hand we have the content that people truly care about, driven by momentum, loyalty, passion, energy, focus and value ... while on the other hand we have all the content that is not.

Both work. Buzzfeed is getting a ton of views on YouTube, but so is Jemma (Jemma actually get more views per person than Buzzfeed). But the reason why both work is entirely different.

One is based on macro moments, the other is based on micro moments. One is based on real intent, the other is not. One is about being inspired, the other is about being bored. One is based on momentum, the other is based on scale.

And this is the challenge that we are now faced with in the media industry. Depending on what you focus on, loyalty is either really, really important ... or not important at all. But it's not the same form of media.

I come across this dilemma every single time I discuss the future with my clients. Most people think the future is about print versus digital. That is, that the shift is merely a change in the methods of format and distribution.

But in reality, the future of media is about neither. Instead, the real future is format and distribution agnostic, but is instead defined around loyalty.

One part, the niche verticals, needs to have an editorial where loyalty drives every single decision, and where the type of content that you produce is dependent on building up momentum over time. The other very different part is the opposite of this. It's defined by scale, and doesn't really care about what people did before as long you can keep optimizing for new views.

Matching this to your own publication/brand

The problem that everyone is now facing is that most traditional publications are stuck in the middle of this. You are neither building up momentum, nor really taking the steps needed to build scale.

New York Times

Take a newspaper like the New York Times. Where would you put that?

Well, if we look at the editorial profile, we see that it's completely random. There are stories on prison, cars, nibbles, food, the weather, the military, politics, and science.

Note: Again, I'm using YouTube to illustrate this because it highlights the real strategy so very clearly.

In other words, it has no momentum and this also has no loyalty. It's exactly the same as Buzzfeed ... but not as funny (or as snackable).

But, at the same time, the New York Times is trying to monetize itself via subscriptions, which you need loyalty to do. The result is a constant struggle. Their business is trying to do one thing, while their editorial focus is trying to do something else. Or rather, it's just being old media in that they still think people will subscribe to 'the package'.

The New York Times is actually getting away with this. It's surprisingly successful and now has 1.1 million paying subscribers. That's amazing. But they can only do this because their brand is so powerful and they are so big.

Most other newspapers can't do this. And they are failing because they have the same strategy. Their editorial focus is trying to be random, but their business focus is to drive specific value. It doesn't work.

This is the dilemma.

What are you going to focus on? Scale (no loyalty) or momentum (high loyalty)? Both work for different reasons and with very different editorial strategies (and business units), but you can't do both.

An NFL magazine

Another challenge is when we look at magazines like the NFL magazine I mentioned before.

As a niche vertical (even one as big as NFL coverage), it's fundamentally based on momentum. The reason is that people need to have followed NFL for a while to be able to truly understand and engage with the articles.

If you have never heard about NFL before, going to an NFL site would just be like reading a bunch of gibberish. So, an NFL magazine is, essentially, the same as Game of Thrones or the YouTuber creators. It's based on momentum and insight over time defined around a shared passion.

So, obviously, the best strategy is to design an NFL magazine as a niche vertical with an editorial focus based on real loyalty, right?

Eh ... yes and no.

You see the problem here is that everyone is talking about NFL, and thousands of articles are published about it every day. We have such an abundance of NFL content. So it's practically impossible to build real momentum around NFL as a niche vertical.

The result is that most NFL sites are forced to focus on scale rather than momentum. They simply can't be distinctive enough to build real loyalty.

Once this happens, we are back to what I talked about when I mentioned the supermarkets. Instead of focusing on real loyalty, now you have to focus on convenience, options, and practical matters.

Because the only way to win now is to focus on making people loyal to what they are getting (the result) rather than where it's coming from. And, of course, to make your publication come out on top, being the one with the best options.

You have to be a supermarket ... but the most convenient supermarket.

VOX

On the other hand we have sites like VOX. On the surface it looks random because it's covering so many different topics, but it's not random at all.

You see sites like VOX have an extremely specific editorial focus of being a magazine that explains and analyzes the news. It's the place you go to when you want to understand what is happening, rather than to just hear that it is happening.

This makes VOX very different from sites like Buzzfeed. They are not even in the same category of media. It also makes VOX very different from traditional newspapers.

So, sites like VOX are a niche vertical. And it is successful because of its momentum more than its scale. It doesn't look this way, but this is actually the recipe for their success.

SKIFT

Finally, we have sites like Skift.com. Skift is a highly niche vertical for the travelling industry. Or rather, it's niche vertical for executives in the travelling industry. But within this niche they are doing it all.

They provide news about the industry, with a executive focus (aka trends, patterns, movements). They provide analysis and insight, and they even provide highly comprehensive industry trend reports, like the 'The Future of Hotel Loyalty 2016'.

As such, Skift is 100% about building momentum and value. Scale is irrelevant to them, because it is not about reaching as many randoms as possible. It's only about reaching the right people and turning them into highly loyal readers willing to pay their $1,595 year subscription fee.

And it's brilliant. Skift is quickly becoming the voice to follow for travelling execs. Few other sites even come close to their value. I absolutely love what they have achieved.

But Skift is also the absolute opposite of Buzzfeed in every single way. Buzzfeed gets most of its views from Facebook, while Skift wins because of its email newsletters. Buzzfeed is about reaching people with micro moments when they are bored, while Skift is about providing real insight when people are looking for it. Buzzfeed doesn't care if you are loyal, while Skift defines loyalty as their number one metric.

This is the new reality of media in the future. It's not about print versus digital. It's not a question of 'how can we make people more loyal'. The real shift is this split between momentum and scale.

One is about loyalty, the other one is not. Both can be highly successful, but for very different reasons, editorial focuses and business models. Both can generate millions of views (just look at the YouTubers), but with very different types of audience behavior.

What you cannot do is to try to be both. You cannot be Buzzfeed with a Skift-like focus, nor can you be Skift with a Buzzfeed-style focus.

You have to choose your new path.

 
 
 

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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé

 

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