Reader’s Digest files for Chapter 11
Direct Mail pioneer offers new lesson for marketers
Reader’s Digest, that stalwart of doctor’s surgeries is in its death throws. It has said it would file for for Chapter 11 bankruptcy in the US in order to deal with its mounting debt problems. The company, bought in 2007 and taken private by a group of investors including Ripplewood Holdings, has been hit by the weak advertising market, which has prevented it from cutting its massive debts. These currently stand at $2.2bn and the company plans to reduce this to $550m while in administration.
Reader’s Digest has a history dating back to the 1920s and is an interesting case study for those working in customer loyalty and retention. This is because it illustrates very clearly the danger of relying on a dated (albeit highly successful) business model that didn’t keep pace with consumers’ changing lifestyles.
It is important to stress that Reader’s Digest is the biggest magazine in circulation globally, selling 10m copies a month, and the Chapter 11 bankruptcy only affects the US operation. Nine of its 94 magazines have a circulation of more than 1m in the US alone, and its titles claim a combined global readership of 130m people in 78 countries.
However, its demise has been caused because it failed to respond to the popularity of the internet, and new ways of acquiring information, not simply because of the economic recession and the dive in advertising sales. These just hastened the crisis.
In theory, Reader’s Digest should have been a winner. People in today’s world browse increasingly for sound bytes of information. They want nugget sized input on a range of topics that interest them – across multiple sites and various different delivery mechanisms.
Watch people with their iPhones, and they are checking their emails, popping onto FaceBook to make sure they have not missed a new update from a friend, checking a route or a location through Google Earth, getting information to answer someone’s query or to win an argument. In the office, the same process takes place with a PC.
Travelling, people increasingly take their iBook along with them, loaded with a range of different titles to suit their mood at the time. A thriller perhaps for a long haul, maybe some journals that really have to be read for work reasons; that interesting article in the Economist they haven’t had time for yet, perhaps something from the Guardian or the Financial Times.
A holidaymaker or teenager may want the latest celebrity gossip, and will probably choose to browse all the main national media titles to check they have not missed anything – not to mention the dedicated gossop websites.
Theoretically, Reader’s Digest should have been well placed to provide all of this. Its initial remit was to summarise novels and magazine articles for those who either didn’t have the time or the mental energy to read an entire book. But take a look at their site – in any country – and it is more 1950s Woman and Home, than 2009 wired young person with little time but a thirst to stay informed.
In recent times, Reader’s Digest has relied more on book sales than those of its magazine for revenue. Looking at the most popular titles puts it in its niche. There are titles on how to improve your memory, extraordinary users for ordinary things, such as making a foot warmer out of an old bottle (no really), and 1001 home remedies. Wow that’s exciting!
So what should Reader’s Digest do to recover? Advice from Loyalty Magazine would be to ask its lost advertisers what segment they were trying to reach and then to widen its appeal to reach them. At the moment the target audience seems to be over fifties, home based female (the book at the top of the fiction section is a Barbara Taylor Bradford box set).
Remembering that this is still the biggest circulation magazine in the world, there is surely something that can be done to encourage advertisers back and breathe some life into the brand.
Direct Mail superstar
Reader’s Digest used to be one of the biggest users of direct mail, sending out regular and repeated campaigns, not to mention its hard to resist Prize Draw tempters. In fact the company was regularly given as an example of good practice in direct mail as a sales tool.
Send at least six mail shots to each recipient, we were told, regularly clean the list, using the Prize Draw tempters to check most receptive potential customers. Send practice mail shots to a few hundred people before investing in a large campaign to test response to the offer and the letter. Segment your list to enable you to send different offers to specific segments. These have all become best practice for marketers.
It will be sad if Reader’s Digest fades away, but not unexpected. Its business model has appeared dated for half a century. Perhaps it is too late to change. And it is not the only publisher to be struggling with its business case at the present time.
Rupert Murdoch announced recently that he would be introducing a pay to view model for all the titles in his empire, changing the widely held practice of free on-line content from most national titles. But this will be hard to enforce unless every publisher does it. Currently it is only specialist publishers that charge for content. People have come to expect news content to be available and although unsustainable, it will be a tough practice to change.
Loyalty Magazine wishes Reader’s Digest good luck but admits that it is a long time since anyone in the office has picked up a copy.