Clamor Over Custom
Custom publishing is a fertile $48 billion market that has more than doubled since 1999. It is also more competitive than ever. Marketers have become more enthusiastic about this unique combination of the best of print editorial and best of marketing communications. Little wonder then, that this is the golden age of custom communications.
Consider that there are more copies of custom magazines distributed than ever;an estimated 34 billion, according to the Custom Publishing Council (CPC);and that growth in custom is far outpacing growth in advertising overall. And consider that innovative new partnerships are being formed, such as the alliance between National Geographic and The Magazine Group, awards programs are booming, and membership in the CPC has soared, from 25 companies in 2002 to 87 today.
Increasingly, marketers are looking to custom to demonstrate ROI, and custom publishers are stepping up. See case studies below >>
All this commotion around the discipline has created a competitive tension between the independent custom shops on the one hand and the custom units within magazine companies on the other. Indy shops swear that the industry is a marketing discipline better suited to their strengths as agencies, while traditional publishers talk about the value of a good read and point to their experience of putting together stories and photographs that people want to look at.
But the ranks of traditional publishers actively involved in custom publishing;Time Inc., Meredith Corp. and Rodale, Inc.;have thinned in the past year as both Hachette Filipacchi and Hearst have taken a step back.
Will a clear winner emerge in the race to grab a bigger chunk of an industry that for the rest of the decade is expected to grow twice as fast as other forms of advertising? "Is it marketers who can evolve to be publishers? Or publishers who can evolve to be marketers?" asks Eric Schneider, president of Redwood Custom Communications, a Toronto-based firm that produces 12 publications for such companies as Kraft North America, British Airways, LendingTree and Sears Canada.
Seek a Partner or Go It Alone?
Recently, some publishing projects made news for what they chose not to do. Rather than launch a custom arm of its own, the National Geographic Society teamed up with Washington D.C. giant The Magazine Group in January to form GeoGroup Media, which will develop projects that promote corporate social responsibility "National Geographic realized to be effective in custom publishing it had to outsource to a company like ours," says Jane Ottenberg, president of The Magazine Group. "The internal staff is focused on what they need to do day in and day out and it wasn't realistic to think that custom publishing would be a priority."
Hallmark Cards, however, decided in March to launch its own magazine independently. After three recent test issues with the custom unit of Time Inc. following another, in 2003, with The Publishing Agency, the retailer said it will launch Hallmark Magazine in September with a planned paid subscriber base of 400,000. A women's lifestyle publication, it will focus on home, food, decorating, entertaining, relationships and self.
"Because we understand our brand the way we do we thought it would be best if we publish it independently," says Julie O'Dell, chief spokeswoman. Cost was also a factor in the decision.
Stephen Giannetti, VP and group publisher for National Geographic Magazines, sees custom publishing as an important ingredient for future revenue growth. He just didn't want to do it alone. "We looked at scenarios where we use edit staff of one of our magazines. It could have been done for one magazine," Giannetti says. "With custom publishing, though, you want multiple magazines, you want people dedicated to it. We weren't in the position to hire and bring on a
large staff of people just to work on custom publishing."
The reason? The National Geographic Society is a nonprofit. "We don't have as many resources as Time Inc. or Meredith would have in starting this," he says. "It's not in our DNA."
GeoGroup Media hasn't announced any projects yet, but Giannetti says the target is "significant seven-figure investments" for multiyear titles published multiple times a year. "It would be very hard for us to go to National Geographic editors and say, ï¾By the way, you have to produce a magazine for the next two years, six times a year."
With a focus on corporate social responsibility;industries like energy, the environment, sustainable travel and even inside-the-Beltway subjects like government organizations;the new venture would be more likely to produce content about Toyota's work on conservation rather than simply publish a magazine for Camry owners, he says.
The idea of forming a partnership was nothing new for the organization. Other publishers produce the 29 local language editions of National Geographic, which also operates alliances with cruise line operator Lindblad Expeditions and Fox Cable Networks Group. In the case of The Magazine Group, it helped that the company's offices are right around the corner from the National Geographic Society on 17th Street in northwest Washington, D.C.
It's no secret that custom publishing, growing faster than other media, has become big business. Veronis Suhler Stevenson, the media investment firm that's invested more than $2 billion in 40 companies the past two decades, reported last summer in its annual Communications Industry Forecast that the industry had a compound annual growth rate of 14.4 percent from 1999-2004, compared with 1.5 percent for traditional advertising.
For the next four years, custom magazines and newsletters will grow at 12.1 percent, VSS predicts, nearly three times as fast as broadcast TV and twice was fast as broadcast and satellite radio.
As companies invest more, consumers are responding favorably. A survey conducted last summer by Roper Public Affairs for the Custom Publishing Council found that 85 percent of people prefer to get information from a company in the form of "an interesting collection of articles" rather than an ad. More than nine out of ten respondents were familiar with at least one type of custom publication, and three out of four said that they felt better informed after reading them.
An earlier survey last year by the council reported that custom publishing spending reached $35.5 billion in 2004, a 19 percent jump over the previous year and more than twice as much as 1999. In 2005, spending reached $48 billion, according to newly released CPC data. The increase in spending pushed custom publications to ever-larger folios;an average of about 22 pages in 2004, up from 20 the year before;with more copies being printed and a greater percentage produced as magazines, an amount nearly equal to newsletters. That was a stark change from 1999, when newsletters outnumbered magazines by nearly three to one.
With all that money flowing, the competition is heating up. Diana Pohly, president of The Pohly Company in Boston, says the days are over when a publisher could just dip a toe in the water or hire freelance editors to handle custom titles. Not only will the industry begin to consolidate, but it's time to sharpen business models.
"It's an established market now. You have to spend an enormous amount of resources to present yourself in a highly competitive way," she says. "It requires a much bigger investment now to succeed at it."
Pohly, whose media sales unit sells $12 million worth of ads annually for 28 custom pubs, maintains a stable of content editors and management editors. It recently picked up a new client from the retail food industry, but with an interesting twist: An ad agency, not the company itself, did the hiring. "That could be new trend."
More and more companies contemplating custom publishing think of it as just another media buy, Pohly says. "It's about marketing, not publishing. That's a big difference with traditional publishing."
Independent custom publishers, touting their experience as marketers plotting communications strategies, knock their bigger rivals like Time, Hearst and Hachette for simply being in the business to retain revenue from their existing advertisers.
Predictably, big publishers don't see it that way. "I have never seen an ad budget get cut to support custom publishing," says Valerie P. Valente, vice president of Rodale Custom Publishing. "Any smart publishing company is looking to increase revenue opportunities."
But Schneider, of Redwood Custom Communications, disagrees. When his firm won business from J.C. Penny in 1999 to launch Noise, a 3.5 million circulation quarterly publication aimed at teens, "the first thing they did was take it out of their magazine spend."
A second title, Real You, targeting women, followed soon after, but both were cancelled after a year and a half when the retailer decided to launch a TV campaign instead. "When something new is launched it's never new money, it always comes from somewhere else," Schneider says. "You're just prioritizing budgets."
A Client-First Mentality
Valente does concede that traditional publishers need to adjust their usual practices. At Rodale, which operates its custom group as a separate unit, that adjustment includes all the departments that support the business: Regular-magazine production, prepress, database management, circulation. "They all have a stake in custom publishing," she says. "There's amazing support and understanding that they need to be flexible to the needs of clients first. That makes you more effective than a standalone [firm]."
The quality of the writing, the bread and butter of traditional publishers, shouldn't be underestimated, either. "This is not copywriting," Valente says. "It has to be a good read. Custom publishers sometimes forget that."
Rodale, which has a dedicated staff of editors and designers, occasionally pulls writers from its other mastheads but usually employs freelancers. The editors often come out of journalism schools. Its newest title, the bimonthly RVLiving, published for the dealer Lazydays, which launched last May, was originally developed in a partnership with London-based John Brown Publishing Group, the U.K.'s largest custom publisher. But it withdrew from the U.S. market last year after working with Rodale for two years.
Other big traditional publishers have found their custom arms on shaky footing. Hearst Custom Publishing, which once worked with more than 30 clients and now has just three, has been integrated into The Hearst Group. Hearst began its custom operation in 1998.
"Custom publishing was the flea on the back of the water buffalo;a good thing to have when you needed it but not part of the overall business plan for magazine publishers of that size," Pohly says. Hearst's current custom publishing projects are with Thomasville, KitchenAid, and Georgia Pacific.
ROI Is Essential
On one point, both sides are unanimous: Tracking client return on investment is essential. In fact, it's so important for Chicago-based Imagination Publishing that last year the firm named an executive, Richard Baumer, to a new post responsible for understanding the different benchmarks clients can use and monitoring how their results stack up against other media and custom titles. "We're the only custom publisher that has a vice president of ROI," says president Jim Meyers.
At Redwood, Schneider says "everything we do has a measurement attached." But that wasn't the case in late 2004, when Home Depot decided to shut down its four-million circulation quarterly after four years of working with Redwood. The magazine was intended to be more inspirational and an advertising initiative, but that wasn't enough. "It just wasn't effectively measured and that's critical to the success of any program."
Now, in its place, Home Depot and Redwood are preparing to unveil interactive content for Expo, the retailerï¿½s high-end dï¿½cor division, that ties into direct-mail work the two companies have already collaborated on.
Still, measurements have to be broad;allowing for goals that can range from pushing certain products to retaining customers to increasing word-of-mouth marketing, the spin doctor's Holy Grail. "You can't go to a database and say, ï¾Did that featured kitchen sell?' It cannot be that simplistic," Schneider says.
The practice of personalizing content for individual subscribers is catching on. One Imagination client is considering putting a sticky note on each cover as a contact from the company to its customers. "The client's limitation with their database is more of a limitation than the printing," Meyers says. At least half his clients are doing something similar or thinking about it;either with customized pages or labels. The Royal Bank of Canada, which publishes a 350,000-circulation magazine twice a year with Redwood, inserts individual content to show subscribers updated information about loyalty programs.
As for launching a new publication, the world of marketing is sometimes capricious. There is a typical 18-24 month revolving door that most chief marketing officers pass through that requires that custom publishers be buttoned up: All the proper checks and balances need to be in place, and ROI easily demonstrated if the publisher wants to keep the business.
"You have to question why people want a magazine," says Craig Waller, chief marketing and sales officer of Pace Communications. "If a CMO embraces a custom publishing program, then his successor realizes a chunk of his budget goes to a magazine, you can show what that delivers to his bottom line."
Selling Tickets With a Soft Sell
Another in-flight magazine has encouraged its readers to buy tickets using a soft-sell approach. The Pohly Company, which has produced Continental for nearly ten years, surveyed readers earlier this year and found that 27 percent had purchased a Continental Airlines ticket after reading the magazine.
Overall, 82 percent of readers said they took at least one action in the past 12 months after reading Continental, according to the study;which had a 58 percent response rate, relatively high for a custom pub. More than half said they took issues home, nearly a third said they recommended the airline to others and nearly three out of four read at least half of an issue. The average reading time was 54 minutes.
The survey sample of 750 was taken from 1,568 people who sent in a reader response card from the magazine between October 2004 and October 2005. Data was collected via mail survey in January and February by Readex Research.
Combining E-media with Print to Produce Results
Air Canada works with Montreal-based Spafax Canada on two custom publications: its in-flight magazine enRoute and onAir, a monthly e-mail newsletter sent to 1.25 million opt-in subscribers. For both, Spafax generates revenue from ad sales and shares a percentage with the airline.
The newsletter, which Spafax has produced for more than a year, is not just about tickets. It mixes columns by travel writers and stories about destinations with information from AirCanada about new routes, promotions or contests.
Air Canada has published an in-flight magazine for four decades. Spafax has handled the work since 1998 and oversaw a redesign of enRoute last May, promoting it with ads in newspapers and inside major Canadian airports and even hosting events in three different cities.
Ad revenues;from the automotive, fashion, beauty, tourism and financial industries, pretty much the same as onAir;jumped 10 percent in the new enRoute, with another 10 percent increase this year.
Basu estimates readership of the 160,000 copies at more than 1 million and that ad sales total six figures every month. Since the relaunch, the magazine has won nearly 20 design and editorial awards.
Driving Buyers Into Stores
One big success story for Redwood Custom Communications has been the publication it produces five times a year for Kraft Foods, the largest of its kind in North America. English and Spanish versions of Food & Family reach 10 million U.S. subscribers, while another 2 million Canadians receive English or French versions of What's Cooking. Besides the different language editions, recipe and lifestyle content is also customized depending on whether the reader has children in the home.
The results have been strong enough;coupons are redeemed 4 percent to 5 percent of the time, nearly half of related e-mails are opened and sales volume, tracked by matching subscriber zip codes with store data, have risen around 5 percent to 13 percent;to convince Kraft to expand the magazine to France, Germany and Brazil, with printing handled locally, rather than by Redwood. As reasons for trying recipes, readers have cited the magazine's appealing photography and credible Kraft Kitchens experts, who added a personal touch.
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