Modeling Your Circ Target Plans

Paco Acosta, VP Consumer Marketing, American Media

Dennis O’Brien, Circulation Director, Taunton Press

Circulation Model

•Build in Layers

•Target - Rate Base– Natural or Assigned?

•Optimize Circulation– Maximize Profitability– Minimize Loss

Build in Layers

•Source Evaluation & Ranking– Historic Performance

•Take Recent Trends Into Account– Predicting Future Behavior

•Optimize The Use Of Each Source– Build Model in Layers

Source Evaluation

•Profitability – Over Time

•Volume – History, Tiers

•Risk

•Ranking

•Include both Subs and Single Copy

Source Evaluation

Fine Magazine ASSUMPTIONS:INSERTS - NS ISSUES: 7

CPM $169.37CASH % 41%

QTY MAILED 80,933 GOCOST 0.35GROSS ORDERS 1,222 COPY COST 0.78NET ORDERS 1,000 BILLING COST 1.04

CONVERSION % 44.6%GROSS RESP % 1.51% 1ST RENEWAL % 64.6%CREDIT PAYUP % 69.1% PURE RENEWAL % 75.8%NET RESP % 1.24% RENEWAL CPM $383.89

AVG # REN EFFORTS 4.872COST IN MAIL $13,707 FULF CPO NEW BILLME $0.22BACKEND COSTS $1,613 FULF CPO NEW CASH $0.22COST OF PRODUCT $5,460 FULF CPO RENEW $0.22TOTAL COSTS $20,781 NEW BUSINESS TERM1 % 83.0%Fully-Loaded CPO $20.78 NEW BUSINESS TERM2 % 10.5%Loaded CPO $15.32 NEW BUSINESS TERM3 % 6.5%

RENEWAL TERM1 % 72.0%REVENUE $28,996 RENEWAL TERM2 % 17.0%

RENEWAL TERM3 % 11.0%NET P/L AFTER 1 YEAR $8,216 REVENUE TERM 1 $29.95P&L / ORDER $8.22 REVENUE TERM 2 $49.95

Source RankingFine MagazineSource EvaluationEXAMPLE

Source Net OrdersPromo

CPMFully Ld

CPNO NPNS Yr1 NPNS Yr5Gross

ResponseNet

ResponseCredit Payup Bad Debt

INSERTS - NS 8,632 $169.37 $20.78 $8.22 $35.70 1.5% 1.2% 69.1% 1,913

INSERTS - SUB 4,104 $57.33 $22.09 $6.97 $35.55 0.5% 0.4% 73.4% 489

WEB 9,944 $88.89 $20.67 $8.01 $33.02 0.6% 0.6% 60.0% 0

AGENT 6,269 $0.00 $5.93 $6.46 $17.43 100.0% 92.5% 50.0% 470

PARTNERSHIP W/RN @ 35% - $0.00 $10.30 $4.13 $14.36 100.0% 100.0% 100.0% 0

INSERTS - SIP 1,520 $169.37 $51.58 ($22.51) $6.06 0.5% 0.4% 73.4% 0

DIRECT MAIL 5,061 $544.14 $75.78 ($45.83) ($23.53) 1.9% 0.8% 43.1% 6,600

PROMOTED NEW BUS COMBINED 35,530 $162.60 $27.43 ($1.31) $22.01 18.5% 17.0% 60.2% 9,472

RENEWALS 57,341 $383.89 $9.13 $19.24 $44.71 56.7% 55.5% 64.9% 6,003

SUBSCRIPTION 92,871 $185.10 $16.13 $11.38 $36.02 42.1% 40.8% 63.1% 15,475

NEWSSTAND 99,325 $423.83 $39.26 $9.39 N/A N/A N/A N/A N/A

Build in Trends

•Renewal Rates

•Insert Response Rates

•Web Orders

•Single Copy Sales

•Test Results

Optimize Circulation

•Use Ranking to “build” model to reach Target Circulation

•Other Sources:– Grace– Verified Circulation– Bonus Agents

•Maximize Profitability / Minimize Loss

Taunton Experience

•Natural Level

•Goal - Circulation Profitability

•Full P&L

•Shared Model - Finance/Circulation

•Circulation Forecast Determines Rate Base

Rate Base Management

•Back Starting

•Gracing

•Gap Analysis – How many orders do I need?– Ranked Sources Available?– Verified or Bonus?

Strategic Modeling

•Determine Leverage Points

•Price Changes

•Frequency Changes

•Rollout Test Results

Operating Profitability

•Why do I care?

•Advertising

•Editorial

•Postage/Distribution

•Manufacturing

•Over-head Items

Another Sample MagazineCirc Contribution

Another Sample MagazineAdvertising Contribution

Another Sample MagazineNet Operating Margin

Advertising

•Ad Pages

•Ad Rates

•CPM

•Promotion Expenses

Editorial

•Number of Edit Pages

•Edit Ratio

•Average cost/edit page

Postage/Distribution

•Subscription Postage– Periodicals vs. Standard Mail

•50% of my total circ must be paid at a nominal rate of 35% of basic.

– Pre-sort Discounts– Canadian Direct Entry is Cheaper!!– Is my mail getting to my subscribers in

time?•Red Tag

Manufacturing

•Total book size

•Total copies printed

•Average cost/m pages

•Average cost/copy

Key Metrics - Revenue

•Revenue/Copy– Sub Revenue/Copy– Newsstand Revenue/Copy– Ad Revenue/Copy

Key Metrics - Expenses

•Expenses/Copy– Sub Promo per copy– Fulfillment Expense per copy– Newsstand Promo per copy– Distribution Expense per Copy– Manufacturing Expense per copy– Ad Promo/Selling Expense per copy– Editorial Expense per copy

Key Metrics - Margin

•Sub margin per sub copy

•Newsstand margin per newsstand copy

•Circ margin per copy

•Operating margin per copy

Another Sample MagazineCirculation Key Metrics

Another Sample MagazineOperating Margin per Copy

Key Metrics - Other

•Minimum newsstand sales efficiency

•Minimum sub margin

•ROI

•Breakeven year

•Trend rate