APA Mintel Report 23/1/05 8:28 pm Page 1 THE CUSTOMER PUBLISHING INDUSTRY EXECUTIVE SUMMARY
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1 APA Mintel Report 23/1/05 8:28 pm Page 1 THE CUSTOMER PUBLISHING INDUSTRY EXECUTIVE SUMMARY PREPARED ON BEHALF OF THE APA BY MINTEL CONSULTANCY JANUARY 2005
2 APA Mintel Report 23/1/05 8:28 pm Page 2 Executive summary 01 EXECUTIVE SUMMARY Strong growth over the last decade Broadly defined as any regularly published title that is produced by a publishing agency on behalf of a third party and that is offered to customers, employees or members, customer magazines can offer commissioning companies a valuable means of communicating with their customers and stakeholders. The extent to which customer magazine publications have penetrated the consumer consciousness is illustrated by circulation data produced by ABC, showing that the top three consumer magazines are all customer publications. Sky, the most widely circulated customer magazine, has an ABC certified print run of 6.6 million, and even the tenth largest customer magazine reaches in excess of 400,000 customers. A growing recognition of the advantages customer magazines can offer is behind a 56% increase in value between 1999 and 2004, and a 244% uplift since As illustrated below, the sector was worth almost 350 million in Figure 1 Customer publishing market size, Source: Mintel Customer publishing turnover ( m) (est) When additional costs relating to contract publishing which are paid directly by clients are added in this figure rises to around 385 million. Just under 40% of total industry revenue is derived from advertising, approaching three-quarters of which is rebated to client companies. A further third of industry revenue is accounted for by throughput, such as print, production and fulfilment costs.
3 APA Mintel Report 23/1/05 8:28 pm Page 3 Executive summary 02 If the cost of mailing (estimated at approximately 300 million for 2004) were to be included, the customer publishing industry as a cost to marketeers would be closer to 650 million. However, for the purpose of this report, postage costs have been excluded to ensure direct comparability between publishing agencies, especially since these costs would otherwise be included within turnover data (even though often charged to the client at cost) of some agencies, thereby distorting trends. New clients main drivers of growth In the last two years, almost two thirds of the surveyed publishers had seen an increase in turnover as a result of an increase in spend by existing clients. The bullish feeling in the marketplace is at least partly explained by the fact that nine in ten customer magazine publishers had been able to grow revenues through attracting new customers in the last two years. Publishers are clearly making significant efforts to attract these new clients, with the total number of pitches increasing by 24% between 2003 and 2004, and the average number of pitches per company rose from 8 to 10 between 2003 and Future growth is expected to come from a mixture of new clients and increased spend on existing publications, but a sizeable minority felt that there was scope to convince existing clients to increase their online spend or to attract new online customers (31% and 22% respectively). Mintel forecasts a significant increase in the value of the market over the coming years, growing from 344 million in 2004 to 531 million by 2009 an increase of some 54%, or 36% when the effects of inflation are taken into account. Figure 2 Main areas of growth for customer magazine publishers in past two years Source: APA/Mintel survey of customer publishers, 2004 New clients on printed publications 92 Higher spend by existing clients on printed publications 64 New clients on web content Expansion abroard by new clients Higher spend by existing clients on web content Expansion abroard by existing clients 3 Other 25 No answer % 100
4 APA Mintel Report 23/1/05 8:28 pm Page 4 Executive summary 03 Retailing and distribution the biggest sector Retailing and distribution and financial services are the most popular types of contract publishing, according to the APA/Mintel publications survey, accounting for 30% of the total between them. Retailing and distribution titles have increased their share since 2002, whereas the number of financial services titles and their market share has declined. Other important sectors include travel, utilities and public sector, media and charities. As regards the target market for publications, the vast majority are aimed at the consumer, accounting for 68% of the magazines covered by the survey. A fifth were looking to reach businesses, with just one in twenty not aiming for either or both of these market segments. Figure 3 Main users of customer publishing, 2004 Source: APA/Mintel survey of customer publications, 2002 and 2004 Charity 5% Media 6% Other 45% Airline, train, ferry 7% Utilities and public sector 7% Financial services 13% Retailing and distribution 17% Relationship management is crucial in the customer publishing market. The most commonly cited aim was to encourage loyalty, with the second most common reason for publishing being to provide information to existing customers. That said, a desire to sell more to existing customers was the third most commonly cited intention. Costs offset by advertising and cover prices There appears to be a trend away from postal distribution to titles that are either sold or handed out in-store, thereby reducing distribution costs and also ensuring that only those who have an active interest in the publication will pick it up. Online distribution, too, is becoming more common, although the proportion available in electronic format still stands at just three in ten publications. There has also been a movement towards paid-for magazines. The practice is still relatively uncommon, with only a fifth of publications having a cover price, but it is gaining currency in the marketplace, with many magazines taking on news-stand publications head-on. Advertising, too, is a way of offsetting the costs of putting together and distributing customer magazines, and around half of the publications included in Mintel s survey accepted third-party advertising, generating an average of 505,000 per title per year.
5 APA Mintel Report 23/1/05 8:28 pm Page 5 Executive summary 04 Advertising revenue ratio down In 2003, approximately 39% of customer publishing industry revenue was accounted for by advertising (equating to 128 million). This represents a decline from the 2001 estimate of 46%. While this could be perceived as a bad thing (as these revenues are partially used to counter costs) it is in fact a very positive sign for the customer publishing industry. With the market value continuing to grow, it clearly demonstrates confidence in the customer publishing industry, as it implies clients are willing to make the extra investment. Furthermore, the lower reliance on adspend increases the stability of the industry, as it is less influenced by short-term fluctuations in the economy (which is directly linked to the amount spent on advertising). Customer magazine publishers thriving in diversity There are three main types of customer magazine publishers those that are part of a larger advertising/media/communications group, those that are part of a publishing company with news-stand titles, and those that are wholly independent. In terms of market share, there is no single category which is more successful than the other. Redwood Publishing and John Brown Citrus are neck and neck as the joint market leaders, each with a turnover of around 50 million. Between them, those two agencies hold a market share of 30% in value terms. There is then a significant gap to the next three biggest companies Redactive Media Group, Haymarket Customer Publishing and Publicis Blueprint. Figure 3 Customer magazine publishing key players by turnover, 2004 Source: APA/Mintel Others 46% Redwood Publishing 16% John Brown Citrus 15% Redactive Media Group 9% Publicis Blueprint 7% Haymarket Customer Publishing 7% The market for customer publishing is highly fragmented, with the top five companies accounting for around half of the total market in value terms and dozens of companies turning over less than 2 million.
6 APA Mintel Report 23/1/05 8:28 pm Page 6 Executive summary 05 Intense competition places pressure on publishers Margins have become tighter and competition is fiercer than ever in the UK customer publishing industry. However, publishers must resist the temptation to cut corners and compromise on the quality of their publications. As the core skill and USP of the industry, excellence in journalism, design and creativity must be striven for if the credibility that has been gained over the past decade is not to be lost: In general, the quality of customer magazines has broadly improved over the past few years but you still have a wide range of quality. When they are good, editorially they are excellent: as good as, if not better than, many paid-for magazines. (Media Strategist) Where does Customer Publishing fit into the marketing mix? The survey of media strategists and planners found that customer magazines are perceived as an ideal medium when the strategy has a longer term objective, such as building brand loyalty, but less effective for short term brand goals, when direct mail or door drops were felt to be more effective. but still work to be done However, customer magazine publishers need to work harder to create a better awareness and understanding of the benefits and qualities of customer titles. There are still too many potential and existing clients who are not fully convinced that this element of the marketing mix is not just a glamorous and expensive luxury. Nevertheless, there was a widespread willingness to listen to the case to be made for customer magazines, but the media planner survey suggests that the contract publishing industry needs to invest in more research and just as importantly, to fully capitalise on the results. In tandem with this, publishers should encourage their clients to spend more on measuring the tangible benefits and return on investment, something which will ultimately safeguard the future of individual publications and of the industry as a whole. Focus must remain on core discipline The core discipline and strength of contract publishers will remain printed publications. Despite rising internet penetration and a growth in the popularity of online shopping, consumers still want a magazine that they can physically touch and that is easily portable. The Internet is interesting but people want stuff to touch, stuff they can feel and read. (Top 5 Contract Publisher) There is room to grow online business New media still represents a relatively small proportion of turnover for the majority of contract publishers. However, there are signs that online work will increase in the next few years as internet penetration continues to rise among UK consumers. The challenge for publishers will be to find interesting ways of complementing the hardcopy edition with online support.
7 APA Mintel Report 23/1/05 8:28 pm Page 7 Executive summary 06 Addressing media strategists Whilst negative perceptions as to the value of customer publishing were less prevailing than in Mintel s previous surveys of the sector; there is still more work to be done in terms of overcoming scepticism on the part of media strategists, as to the value of customer magazines. The industry needs to work harder to promote itself within this sector and to display greater confidence in its product. The ability to deliver more segmented and targeted readerships, based on lifestyle choices more than demographics, will come only as fast as client companies collect and use information about their customers more efficiently. Although some client companies are already way ahead of the game in this respect, many, many others are barely off the starting blocks. Use of alternative distribution channels will grow Mass mailing to a mass audience will gradually fall out of favour because of the high cost and lack of selectiveness of this method. For retailers, distributing in-store will become more the norm while contract publishers will continue to find new and more innovative ways to distribute customer magazines. Publishing agencies are looking for innovative new ways to address customers on behalf of their clients. Piggy backing by inserting within an established mainstream consumer or business title is likely to grow, as are other more unusual methods of distribution which deliver a readership who have chosen to receive the magazine, rather than just having had it sent to them unsolicited. A novel example of third party distribution will be the NSPCC s launch of a parenting magazine in March 2005, which will be distributed through 800 Woolworths stores Public sector, retail, automotive are key growth sectors Future growth in terms of new clients and publications is most expected to come from the public sector, including government departments, local government and other non-commercial and not-for-profit organisations. There is also still room for growth, particularly in the retail and automotive sectors, which are a natural fit for a customer magazine both in terms of their desire to see product uplift and build brand equity and distribute relatively inexpensively via a network of stores or dealerships.
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