A Case for Ratebase Reduction
Typically when a magazine reduces ratebase, many observers speculate a problem is brewing. However the motivation behind lowering the numbers does not necessarily reflect a lack of reader or advertiser interest. Kiplinger's Personal Finance successfully reduced its ratebase by 200,000 in 2005, leading to decreases in production costs.
When publisher Bob Kelly sat down to assess the ratebase of his competitors in early 2004, he found that his 1 million ratebase was significantly higher than the 500,000-700,000 range held by publications like Business Week, Fortune, and Forbes. He decided he wanted to reach out to a select affluent audience, rather than a mass group.
"We didn't need to be bigger than the competition," says Kelly. "And like all publishers, we were spending a lot of money to reach that extra couple of hundred thousand readers. We found out these were not subscribers who typically renewed, which didn't help us or our advertisers."
Because 95 percent of his readers are subscribers, Kelly hired a marketing group to conduct an independent study analyzing the financial habits of its affluent audience. The study concluded that Kiplinger's Personal Finance readers tend to actively manage their money, and Kelly wanted to directly target those readers, who were more likely to resubscribe.
The strategy: Gradually reduce the agent subscription channel and increase the direct publisher channel. "The direct-to-publisher percentage was 30 percent before the reduction, and now it's in the mid 40s," says Kelly. "When we sell direct, we are able to explain to people, in a comprehensive manner, the exact advantages of our magazine and why they will be getting a good value for their money."
A personal letter was sent to advertisers, prior to distributing the press release, explaining the ratebase reduction, and the benefits of a more engaged, higher-income audience. Ad costs decreased slowly over the 18-month reduction period, creating bonus circulation over ratebase which pleased advertisers. "We were applauded by our core advertisers," says Kelly. "They liked the fact that we were mailing directly because the agent business has gotten bad press. They understood what we were doing and supported it."