This model of selling subscriptions is referred to as continuous service. And in one corner of the subscription marketing universe, such a place already exists: New Sub Services.
NO PAPER, NO POSTAGE
"We want to get to the point where the entire relationship with the customer is electronic. We want to take paper and postage and bills out of the system," says Rodale's Magazine Group President John Griffin. "Thank goodness New Sub Services has such a model working."
New Sub Services began marketing subscriptions in credit-card statements in 1996. Three years later, it is selling an estimated 25 million subscriptions, and nearly all of those consumers were brought in with continuous service.
New Sub Services Founders Michael Loeb and Jay Walker viewed magazines as a service, not just a product. They recognized the 12-month subscription did not have to be the norm when other media such as newspapers and cable do not require subscribers to reaffirm every few months.
"We realized there didn't have to be a predefined death date," Mr. Loeb says. "The industry created a fixed term subscription. It's not a natural form of commerce."
Continuous service means subscribers sign up for a magazine, and agree to charge the subscription price to a credit card. Then, instead of a series of renewal notices, the customer is notified when another payment is due, and the charge is automatically billed to the credit card. New Sub Services has a toll-free phone number listed on the credit-card bill for consumers to call if they choose to cancel.
This is not a completely new idea. American Express Publishing has offered continuous service subscriptions to its readers for 25 years.
More publishers are looking at continuous service now that they have ceased to realize the customary volume from the industry's most inexpensive and efficient source: sweepstakes.
What New Sub Services has done is prove there are customers out there who were receptive to a continuous service model. Publishers will need to rethink how they approach readers with their renewal systems if they want to convert their current subscribers.
"It can be expensive to build and maintain these systems. It makes sense for us because so much of our business is put through on credit cards," cautions Mark Stanich, American Express senior VP-consumer marketing.
If only a small portion of a publishing house's circulation file is continuous service, the expense can outweigh the revenue.
Also, publishers need to get their fulfillment houses on board if continuous service is to work on a large scale. That won't be easy, as most fulfillment houses win their contracts by keeping costs low -- and are reluctant to invest in changing their systems.
For continuous service to be successful, say both Mr. Stanich and Mr. Loeb, the level of customer service must be very high.
"Subscribers who opt for continuous service have said that they want the magazine companies to make their life easier, to be even more convenient," says Mr. Loeb. That means customers want access to customer service centers to update an address, get a refund or change an order 24 hours a day.
"I'm somewhat disappointed from the lack of support we get from other publishers asking fulfillment houses to create the systems to allow us to do this," Mr. Griffin says, adding that he thinks Magazine Publishers of America ought to address this issue.
On the other hand, fulfillment houses may never need to handle the problem. Other service companies have emerged that would play a role similar to New Sub Services, as a third-party provider between the publishers and fulfillment house.
One such service is USApubs.com, a subscription marketing company established when Special Data Processing Corp. and Applied Interactive Media merged.
DUNNING HEADS NEW ENTITY
James Dunning, formerly of Emap Petersen, bought the two companies with the backing of Willis Stein & Partners and will serve as chairman-CEO of the new enterprise. Chip Block, AIM's founder and CEO, becomes vice chairman of USAPubs.com.
Continuous service is fine for those consumers who are very loyal to a magazine and would continue to resubscribe year after year. It won't lock in the reader who may choose to subscribe for a year and then switch to occasional newsstand purchases.
"A misconception about continuous service is that once you have them, they are on there forever and they are not going to cancel," says Mr. Block. "I see it as great innovation, but it's not the model a majority of consumers" want.
For that reason, continuous service is just one of the ways USApubs.com plans to market subscriptions.
Time Inc., which has spent the last two years developing its own in-house continuous service model, has 10% of its subscribers enrolled, says Jeremy Koch, president of Time Consumer Marketing. Rodale and Reader's Digest Association also are implementing in-house systems.
Hachette Filipacchi Magazines and Gruner & Jahr USA Publishing are exploring continuous service.
John Fennell, chief operating officer, says Hachette is just beginning to test continuous service. He believes it can be especially effective with niche publications such as HFM's Car & Driver.
"It should be something the MPA addresses, to discuss with publishers how to change the subscription model to one which is more efficient. We need to teach and help the consumer to see that this is a better way to buy magazines," he says.
Hachette has converted less than 2% of its subscriptions to continuous service. "But, if we even get it up to 10% we're on the winning side of the curve," says Mr. Fennell.
Gruner & Jahr will begin to test continuous service in the fourth quarter, according to Dennis Cohen, VP-consumer marketing.
"It's not that the original model isn't working. It's that we're trying to get a