Finance is playing a major role in navigating an era of great change in the publishing business. Part of the decision-making process and key to the development of strategy and tactics, finance business partners are working more closely with marketers, forging partnerships that represent some of the most fruitful collaborations in the industry today. Yet many people have a bizarre view of our contribution—thinking we still do what we did 20 years ago, putting reports together and telling marketers how much they spent.
The marriage between finance and marketing is necessary and still quite new. The decline in print advertising has radically changed the way publishers have to work in the marketplace, and the revolution in digital reading has presented a great opportunity. These changes have players across the industry refocusing their profit-making activities away from advertising and onto content and subscriptions.
We’ve had to be nimble in our response to key learnings, such as the fact that the profit margin on digital products can be significantly higher than on print products. Once we came to understand that digital and print have value in and of themselves, and that different people prefer to read content in different ways, we saw that we could drive more value by applying the right profit levers. We’ve had to learn the value of various products and how to spot the key drivers of profitability amongst a profusion of metrics.
The Economist has ambitious plans: We have set a goal to double circulation profits in the next five years. The role of our finance business partners is to work alongside The Economist’s marketing experts at all levels to make sure this happens. And in my case it is quite literally “alongside.” I sit next door to The Economist’s Chief Marketing Officer, Michael Brunt. By thinking together and speaking often, we have broken down the walls between creativity and data. We work together to ensure that data informs marketing decisions as we strive to keep our response rates high and our cost-per-acquisition low.
Traditionally, financial professionals have focused too much on the past. To be most effective, I’ve adapted to this new landscape and begun to look where marketers are looking, which is forward. As a result of the partnership with the heads of marketing functions, metrics like the lifetime value of subscriptions have become a major focus for us.
In the past, it has been important for The Economist to show advertisers large circulation volumes, regardless of whether or not they are fully paid for and profitable. Now, we also consider whether a subscriber will actually stay long enough to make him or her worth the money we’re spending on marketing.
Together, we’ve come to understand our subscribers at a much more granular level. Subscribers have to renew, renew and renew again before they start to pay off the amount of money we spent on getting them in the first place.
Just as our marketers have helped me to think differently, finance business partners can help marketers approach problems from a different angle and better appreciate the complexity of the circulation financial model. If a marketing team works alone, they can miss the fact that even though what they’re doing may be innovative or sexy, it may not generate the best returns on investment. With the help of a finance business partner, a marketer can now view subscribers from many different dimensions—determining how likely they are to renew, how much we spent on acquiring them and the lifetime value.
We have created integrated forecasting models that produce medium and long-term scenarios, integrating data from a variety of sources to help us achieve the best value from each pound we spend on a campaign. We can look at the effectiveness of spending at the channel or campaign level and by region, determining the channel and region combinations that provide the best impact. Together, we’re more able to focus on long-term returns.
This is where finance can add the most value to marketing—by offering deeper financial analysis of marketing plans. It has been a huge challenge for both the marketing and finance teams to understand how the new markets work, how marketing can bring in those higher lifetime value subscriptions, and ultimately how to become one team instead of two. We still haven’t gone as far as we can. But together we can, and will, make the best business decisions.