Automatic Renewal Not Automatic for Circulators

Automatic Renewal Not Automatic for Circulators
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Why do we buy gym memberships, movie subscriptions and even Web site subs on auto renewal, but not magazines?


By Barbara Love

Last year's settlement between Time Inc. and 23 state attorneys general had a chilling effect on circulators testing or committed to auto-renewals. The settlement language addressed what attorneys general called "deceptive practices" and sought "clear and conspicuous disclosure."

One year later, CM finds auto-renewal is being used more mindfully-not only because of legal red flags, but because there are new questions about its effectiveness.

In more than a decade of testing automatic renewal (also called continuous service), circulators have learned more about how and if they can benefit from this relatively-new tool.

Automatic renewal is not an automatic option for circulators.

What's the Incentive?

If the price of a subscription is high and the renewal rate is high using traditional renewal methods, circulators say there's no incentive in trying to automatically renew consumers. And if you want to promote multiple-term subscriptions, automatic renewal is not for you.

Dan Capell's CircTrack shows that in 2006, 50 percent of circulators were using auto-renewals, and those renewals represented about 20 percent of the file-the same percentages as in the 2005 report.

The whole point of auto-renewal is to boost overall renewal percentage over time. The big question is, how well is that working? Various sources tell CM that the norm in the industry is a 10 to 20 percent lift over traditional renewal methods.

But is this anecdotal information reliable? In the 2006 survey, Capell asked circulators for the first time what lift they were getting from auto-renewals. The results show a very different reality. 90 percent of the users got no lift from auto-renewal and of the 10 percent that did report a lift, that lift was 8 percent on average.

Producing a Lift in Renewals?

Capell wonders why people are using auto-renewal if it is not producing a lift in renewals. Is it worth the hassle to save on renewal notices? he asks. Could it be, as one circulator says, that most circulators reported no lift because they are too busy to do the analysis and just don't know?

Automatic renewal is established at some companies, but not high up on circulators' list of priorities. It is much more common on Web sites, where subscribers seek out information, and where the lengthy and cumbersome contract information can be handled more easily.

The Time Inc. settlement prompted a great deal of tweaking of auto-renewal promotions, link letters and renewal notices to address the attorneys general concerns.

At the same time, circulators are still trying to figure out how to best market auto-renewals-for example credit card vs. bill me, and promoting automatic renewal at time of acquisition vs. at renewal.

Consultant Bill Baird reports that three years ago publishers were approaching him and saying, "Show us how to do auto-renewals." Those requests have stopped and some of the original entrants into the offer are now asking, "Should we be continuing to use auto- renewals?"

"The Time Inc. settlement colored the industry's perception of auto-renewals," Baird adds. "The terms of the settlement were perceived as fuzzy, which has created fear, uncertainty and doubt.

"But I think the broader implications are the dangers we all face of crossing the line in our promotions. That's why sweepstakes begat automatic renewals begat vouchers," says Baird.

"Publishers just can't push boundaries the way they once did. The industry should be going back to review their own practices vs. those recommended by the Magazine Publishers Association back when the offers were receiving a lot of attention," he says.

CM did a little homework and here's what we found:

Impact of the Settlement



Ellen Dealy
VP-General Manager, Time Consumer Marketing Inc.

We've been using automatic renewal for so long that we don't have a point of comparison with traditional methods any longer. We really only have automatic renewal in our credit card offers at this point, and the ones we do with retailers are the best examples of these programs.

Best Buy, etc. offer the consumer a subscription to several magazines, the consumer receives some free trial issues, and the charge, after the free trial issues, goes on the consumer's credit card. The program with retailers is only for first time subscribers. Auto-renewal using credit cards is now a significant portion of our subscriber file.

The irony of the settlement with the attorneys general is that we had made most of the changes requested before the AG agreement was finalized. So there were not many changes as a result.

Automatic Renewal Wording

We began using the words 'automatic renewal' instead of 'continuous service' in promotion on the order form. Continuous service means your service is not interrupted. The AGs wanted more attention paid to the renewal.

We had been using a lot of benefit language in the continuous service promotion and we had to take some of that language out. We happen to think there is a benefit. The subscriber doesn't have to bother with renewal notices.

At the time of the settlement, we had a limited amount of bill-me automatic renewal, a one-notice combination of renewal and bill with an opportunity to pay by check. Time magazine had that program.

Bill-Me Offer Complicated

But when it was determined how much language would have to be put on the order card to make that happen, it was decided to drop the bill-me auto-renewal on that magazine. It wasn't worth it, partly because the renewal rates and pay up rates are so high on Time magazine anyway.

The impact of all the changes we made related to the settlement has been negligible, partially because most of them were made several years before the agreement.

While there are no laws specifically on magazine automatic renewal, the industry should look at the MPA guidelines and what Time Inc. does, because the AGs required it. Whatever you do, it needs to be clear to the consumer what they are getting in to.

Right now, automatic renewal is an integrated part of the way we do business. It's not going away. And we at Time Inc. do believe there is a response lift with credit card automatic renewal vs. traditional renewals. There is also a clear cost savings and, we believe, a consumer benefit.

A Lot of Subjectivity Involved




Alec Casey
Group Director, Consumer Marketing, Hearst Magazines

Hearst has approached automatic renewal in a step-by-step way and has now rolled it out on most of its titles. The original premise was to make the renewal process easier for consumers. We have always heard complaints from consumers that we need to streamline our renewal process.

We largely just use bill me later on auto-renewals. That works well for us. Credit card auto-renewals were tested in some places, but we have decided to go a little slower on credit card use because of all the attorneys general scrutiny.

Hearst did make changes after the Time Inc. settlement. We certainly have taken into consideration what was in that settlement. The attorneys general concerns were on nitty gritty stuff across a bunch of areas.

Spirit and Letter of Law

I don't think there is anyone today who can tell you exactly what to do to stay in compliance. There is a lot of subjectivity involved. We work closely with our attorneys, who review each and every promotion. We try to be in compliance, but one state attorney general may not agree with another, so we try to live up to the spirit as well as the letter of the law.

We've had auto-renewal in place for three or four years and back tested to see how it's doing. We are using it on a variety of new business sources. We tell the subscriber up front they will go into the auto-renewal stream.

We get higher renewal rates with automatic renewal and we're able to move people through the system smoothly. Our lifts are comparable to what you hear in the industry: about 10 to 20 percent.

Testing Period is Prohibitive




David Rosen
President, Rock Hill Direct

I've found that there's always been more 'interest' and buzz about auto-renewal than actual testing. The reasons aren't difficult to determine. First, it involves an extremely long testing cycle-foreshadowing, first auto-renewal, second auto-renewal.

You really need three years to get a grip on what's going on. A long testing time can mean that a test-blowing error can be really devastating-in extreme contrast to a single new business promotion, for example.

There's much less interest in automatic renewal today. For some publishers it may not be incrementally worth the trouble. Publishers have so many bigger issues. They are focusing more on the Internet, where promotion is constantly mutating and changing. There are plenty of auto-renewal offers on Web sites.

Incorporating Auto-Renewal Language

Regarding tactics, publishers get the best response when they incorporate auto-renewal language in the order form with no other option. The benefits need to be presented in a very low-key manner.

To stay safe and clear of the attorneys general you really need to do a lot of disclosure. Over the years we've finally developed the language. After considerable experience-and success-with continuous service, Reader's Digest has developed formats and approaches worth noting.

It used to be that when we sent out a link letter we really didn't want people to cancel, so we didn't include a reply envelope and we didn't ask for money. Now some publishers have found that it makes more sense to encourage cancellation in the link letter instead of going through the entire billing series for people who do not intend to renew. After the link letter, to be squeaky clean, you don't want to send the invoice until the new term starts.

Adds to Lifetime Value

Kimberly Draves
Sr. Consumer Marketing Manager, Rodale Inc.

We have found that we have been able to sell AR customers other things by including an invoice on the bottom of the AR invoice. For example, a coupon to receive a 21 day preview copy of a book. We find AR customers are quality customers with much higher lifetime value. They are multiple buyers in cross-promotions and they are gift-givers.

We use continuous service exclusively in our renewal business. As subscribers move through the renewal series, we attempt to enroll them in automatic renewal, but customers are not required to use automatic renewal.

A Bill-Me Only Option

For Rodale, automatic renewal has been successful. Of course our goal was to improve the retention rate, but we have also received positive feedback from our customers on the program. Our program is a bill-me only.

Customers who enroll in automatic renewal tend to be better gift-givers, and we have also sold them other products (magazines and books) using coupons at the bottom of the invoices, increasing lifetime value.

Customers are given an 800 number to call with any questions about the program or to cancel. This number is now shown on our enrollment materials, and is also shown on our link letter and our invoices. If customers want to cancel their subscriptions, or cancel out of the auto-renew program, we want to honor their request quickly.

A Positive Customer Relationship

We've learned through testing that customers who want to cancel do so anyway. They just cancel earlier when given a clear option (which means we send fewer bills). We also want to keep a positive relationship with customers. We'll likely be promoting them as an expire through direct mail or email and may be able to convert them to an active customer once again.

We make sure our marketing materials are not misleading customers in any way. For example, we do not use "invoice-like" terms such as "due date" on renewal promotions, and instead use "reply by."

I compare renewal notices to invoices by putting them on my bulletin board. If we feel customers would be confused, we change the creative.


DO'S & DON'T'S

· Do discuss the impact of auto-renewals on cash flow with management and accounting first. Automatic renewals will affect cash flow.

· Be up front and tell the subscriber how the auto-renewal will be done to avoid surprises.

· Talk to your lawyers about strategies.

· If auto-renewal is the only option in your promotion, provide an 800 number for opt outs.

· IPresent the benefits of auto-renewal in a very low-key manner. The consumer responds better.

· Assure the customer that he or she doesn't have to pay for any issue they don't want and can cancel at any time.

· When handling price changes, be careful of your wording in the link letter. You may want to say "savings off the newsstand price (in percentage or dollars)."

· Promoting cancellations sounds outrageous, but it may make sense in the auto-renewal link letter.

· Don't ask for payment on your link letter.