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HM manages subscribers 1-to-1
Hjemmet Mortensen sells 40 different magazines in the Norwegian market, 18 in the Swedish market and 4 in the Finnish market, through subscriptions and newsstand sales. It has nearly 800,000 active and 1.5 million passive subscribers in its databases. Though highly successful, the company identified multiple challenges, such as retaining subscribers, converting non-subscriber customers to subscribers and improving customer service efficiency. To meet these goals, HM invested in SAS Marketing Automation.
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Hjemmet Mortensen is Norway's leading producer and distributor of magazines and has substantial operations in Sweden and Finland. Its portfolio includes a range of general interest titles, special magazines for women and men, plus a range of speciality lifestyle, sports and activity magazines. These speciality magazines typically have low circulations, but being so well targeted, they generate increasingly large amounts of advertising revenue. Altogether, HM has 40 titles on sale in Norway alone, giving it a 54 percent share of the market in terms of both sales and advertising revenues. In 2003 the Norwegian magazine market sold close to 1.7 million magazines per week, the equivalent of one magazine for every Norwegian household. HM has shown steady revenue and profits growth over the past 12 years, and in the past three its net operating margin has grown from roughly 14 to 21 percent. In 2003 net turnover stood at NOK 1,554 million.
And yet, HM cannot take its success for granted. Magazines are a competitive business, and there are always a few storm clouds to watch out for on the horizon. Newsstand and bookstore sales have declined for speciality magazines where it is increasingly difficult for such titles to stand out in the crowd, and in any case newsstand sales are often one-offs. For HM's business strategy it is important to build up subscription sales, but the cost of recruiting new subscribers was rising faster than expected, with lower response rates to its marketing campaigns. People have grown more resistant to direct mail, and a new Act of Parliament in Norway has restricted the usage of personal databases. "It was increasingly difficult to find good prospects for new sales," says Kjetil Opaas, Vice President of HM Magazines.
HM decided to meet these challenges head-on in pursuit of its mission to become the Nordic region's leading magazine publisher, based on a profitable relationship with its customers. "We put the customer at the centre of all of our operations, from editorial through marketing communication, distribution, telemarketing, billing and services," says Opaas. "Our aim was to gain more from existing customer relationships and to reduce the cost of recruiting new customers." To make this reality, HM introduced a new program called Strategic Subscription Marketing (SAM), a total solution for customer relationship management. SAM would help HM to build a more complete picture of the individual customer, increase the customer lifespan and improve the efficiency of HM's marketing activities and other processes.
In the past, HM's marketing people were overwhelmingly focused on new customer acquisition. They devoted only 15 percent of their time and resources to customer retention, despite the fact that nearly 50 percent of customers were allowing their subscriptions to lapse at the first renewal. "With SAM, our priority was to reduce the losses at first renewal, as this offered the biggest potential to increase profitability," says Opaas.
In the past, HM did not communicate with subscribers until the subscription was about to expire, and then would send out a standard text to prompt renewal. "Customer service was mostly about registering terminations," says Opaas. With SAM, HM identifies what kind of customer they are dealing with, and communicates with the customer throughout the subscription period, tailoring a message in time for the first renewal based on not one but 380 alternative texts.
Moreover, by enriching its information on subscribers, HM enabled its customer services department to engage with subscribers more proactively, especially during the crucial renewal period. "As a result of these activities, we increased the customer retention rate at first renewal by more than 10 percent over a period of just a few months," says Opaas.
At the centre of any good Customer Intelligence system is a single view of the customer. This was achieved using SAS to extract operational customer data from a Siebel system, transform it and then load it into a warehouse. Then, SAS Marketing Automation was used by the contact center for targeting the right customers with the right messages as part of a process to drive communication with HM's 800,000 subscribers. As a rather obvious example, HM might offer subscribers to Hjemmet (a family household-oriented women's magazine) a cookery book as an incentive to renew their subscription. "But the more you know about the customer, the more likely you are to come up with the right personalised offer," says Opaas.
Functions that used to belong to the subscriptions department have been moved across to marketing. "Marketers like going out and winning new customers, but there are limits to what you can achieve in a small market like Norway. Very soon you have exhausted the possibilities to recruit new customers, so it is far more important to retain existing ones. Our marketers are getting better at analysing our data with tools such as SAS Enterprise Guide, figuring out which groups of customers are likely to respond to which offers."
HM opted for SAS in 2003, some two years into the SAM project. Opaas says that SAS is delivering more than HM had expected, a complete solution for analysis and marketing automation: customer data management, predictive analysis, customer segmentation and profiling, campaign planning, execution and management, campaign measurement and reporting, and channel integration are all now supported with SAS software. "SAS helps us convert the raw data we have into actual knowledge, based on a number of sources. Our customer service people can not only see what kind of communication we've had with the customer in the past, but also the other products that he or she has had earlier on in the relationship, the customer's economic profile, personal interests and so on. And importantly, they can see if the customer is a good one, who pays his or her subscription fees on time. So we have a total picture of the customer and therefore a much more solid foundation for communication. For HM, it's definitely a new way of doing business, and gives us a clear advantage over our main competitor in magazine subscriptions.
"Our cooperation with SAS goes way beyond technology. They demonstrated that they have a good understanding of our business, as a result of their work with companies such as Bertelsmann Direct in Germany, Mondadori in Italy and Time Warner in the United States. Though HM has had a very successful record over the past dozen or so years, we cannot simply carry on doing business the same way – so bringing in experts like SAS is helping us to shape up for future challenges. Before SAS we were good at delivering products and keeping track of revenues, but we were in the dark when it came to understanding what activities worked and what didn't at the level of the individual customer. Now we're getting that understanding," says Opaas. "And that means we can put our resources into activities that deliver a return on investment."
Having proved itself in a short space of time on "business case number one" – first-year renewals – SAS will be extended to many other marketing initiatives over the coming years, including new product development. "I'm convinced that our information gathering will help us to identify new and profitable market niches that we can target with new premium titles. A niche could be as small as 15,000 individuals with a common interest and similar socio-economic profiles, but this is the way to grow the business," concludes Opaas.
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Fifty percent of subscribers left at first annual renewal.
One-to-one communication with nearly 800,000 subscribers increased renewals from 52.5 to 58.5 percent.
“ Before SAS we were in the dark when it came to understanding what activities worked and what didn't at the level of the individual customer. Now we're getting that understanding. And that means we can put our resources into activities that deliver a return on investment. ”
Vice President of HM Magazines