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Premiums and Freemiums: Who's Doing What
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By Shira Linden
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This article appeared in the 2005 July/August issue ofSubscription Marketing newsletter.
Premiums and Freemiums - Who's Doing What? by Shira Linden
Just like in the fashion industry, premiums have their hotsellers and their has-beens. The industry is sensitive tochanges in technology that render some premiums obsolete, and topolitical events that affect the business climate. Stan Konik,President of Konik and Company, a merchandise premium supplierto the publishing industry for over 30 years, reports thatcameras, which used to be very popular, are now defunct, thanksto digital photography. Calculators and many electronics havealso gone by the wayside, he added. Some premiums simply go outof vogue. Pens, for example, are now dead. Umbrellas are onlyused on a limited basis, because the quality is not there at theprice point marketers want to pay - between $2.00 and $2.50 peritem and decreasing. "People are looking for lower priced itemswith high perceived value," Konik declares. He reports that manywant imprinting, so his firm offers customized products as wellas drop-shipping. September 11 turned the premium industry onits head. "All business ceased," said Konik. He noted that nowbusiness is back to pre-9/11 levels, but the nature of thebusiness has changed. Scissors and knives were popular before9/11, but have practically disappeared, save for one magazinecatering to hunters. Conversely, security devices, such asradios with attached flashlights and sirens are good movers.Current top sellers include jumbo display clocks with time,temperature and date, travel alarm clocks with temperature, dateand alarm, binoculars, mini radios and scan radios, databanks(mini PDAs that incorporate calculators), pedometers, especiallyfor health newsletters, and tools like the motorized powerdriver screwdriver. Stainless steel travel mugs and tote bagsare also doing well. Konik likes to see clients feature thepremium on the envelope, on a 4-color buckslip and in theletter. He claims that when the premium is predominantlyfeatured, marketers will see a 28% lift in response versus anon-premium mailing.
Premiums Can Send Results South Overall, the majority ofmarketers who weighed in looked favorably upon freemiums andpremiums. The exception was VNU. Neil Eisenberg, CirculationDirector of VNU Business Publications, stated that AmericanArtist previously used pamphlet-sized books with repackagededitorial content, such as 101 Tips for Painters, as well ascanvas duffle bags. When they removed the premiums about threeyears ago, response went up. "I can't say why - I don't know ifit was just luck or the premiums didn't inspire our prospects toreply," Eisenberg stated.
Premiums, Freemiums = Business as Usual On the other hand,several publications use premiums routinely. For over a decade,Highlights for Children has been using premiums and freemiums intheir packages to consumers as well as teachers. "We're famousfor our freemiums, said Bill Hummel, Senior Vice President ofMarketing. "We use them as door openers. We get lots of brandidentity with those. They definitely lift response and have ahigh perceived value. We create our own - they're unique anddistinctive, and tie into the publication. We've used them forso long it's pretty much a given with us." Most, although notall Highlights packages also have premiums. Their gift sub offerincludes a free "Hidden Pictures Calendar" with eachsubscription ordered, a premium that refreshes itself, whichmakes it attractive. Highlights also mails a teacher package,which includes a choice of items teachers can use in theclassroom, such as reward stickers.
Premiums Out, Freemiums In For the past year, freemiums havesubstituted for premiums at Kiplinger's. The freemium enclosedin their statement of benefits package, "12 Grade-A Ways toBuild a Nest Egg for Retirement," is an attractive, 4-colorlaminated insert. Subsequently, Kiplinger's dropped thelamination, and went to a lesser paper weight with an aqueouscoating and results still held up. Carol LePere, CirculationDirector and Associate Publisher, indicated they tested thefreemium along with a new package. "The whole package workedlike gangbusters. The freemium doesn't cost much, yet provides avalue-added benefit subscribers have come to expect." Recently,they redesigned the freemium for their upcoming mailing to keepit fresh. LePere reports that retirement is the most popularpersonal finance topic, followed by taxes. The market changestoo quickly for stock tips. Previously, Kiplinger's relied oneditorial premiums with their renewal promotions. They also tiededitorial premiums into a soft offer.
Combination Offer "We're not a big premium user," said KenGodshall, Senior Vice President of Consumer Marketing at HearstCommunications, Inc. "We like to sell the magazine on its meritsat a reasonable price." But when Hearst tried a combination salein the Quality School Plan setting, "It boosted response so muchit got our attention. We wanted to appeal to a younger femaleconsumer, so the offer was buy Seventeen and get a six monthsubscription to Cosmo Girl. It turned out to be one of thebiggest successes in publishing last year." A postcard mailerenticed prospective Cosmo subscribers with a bonus 6-issue subto Marie Claire. Goodshall indicated the combination sale isquite new - just one to two years old. He called it, "smartmarketing," indicating they've had some success in renewals aswell, which makes the response even more attractive. But everymarketing coup has its down side. "We can't do it all the time.The limitation is that we can't make this offer continuously,just a few times per year," he said.
Winners Rely on Premiums According to Hallie Mummert, writing inTarget Marketing, "Blockbuster Direct Mail - Secrets of thedecade's most successful controls," April 2005, "The biggestpredictor of success between long-term controls and those thatburn out within two years can be boiled down to one word: gifts.Grand Control winners (257 Axel Andersson winners whose mailingswere tracked over the last decade) offered premiums or freemiumsin their efforts nearly 400 percent more than their general mailcounterparts. Specifically, 44.7 percent of the Grand Controlsused such incentives as name and address labels, specialreports, tote bags, plush animals, flower bulbs, stickers,calendars and calculators to drive response." Or do they? Yet,according to the CircTrack 2004 study of paid consumer magazinecirculation, premium usage in direct mail control offers hasdropped from 41% in 2000 to 26% in 2003, the last year thatfigures were available. When consumers were queried in theCircTrack 2004 consumer survey, 58% of consumer magazinesubscribers prefer price discounts, 21% favor an extended termsubscription and only 14% prefer gifts. Of those who haverenewed a magazine subscription in the past 12 months, 64.3%were motivated by a price discount, 20.6% by extended term, 7.4%by gifts and 6% by the editorial product itself.
The CircTrack findings are upheld by ParadyszMatera, a leadinglist brokerage and consulting firm serving the magazinepublishing industry. Glenn Lalich, Vice President, reportspremium use was down across the consumer magazine marketplace,dropping from 51% in 2003 to 47% in 2004, although not all typesof incentives saw declines. The most common incentive, premiumupon payment, held steady at 36% of consumer magazine promotionsin 2003 and 2004. Freemiums stayed at 7% for both years. Asexpected given the growth of hard bill-me offers tied to voucherpackages, incentives designed to increase upfront response(premium on order) declined from 9% in 2003 to only 6% in 2004.Lalich reports use of editorial versus merchandise premiums hasseen little movement in recent years, adding that on themerchandise front, one of the more popular items of the pastyear or so has been the personal organizer from mailers likeTime, U.S. News & World Report and even Details. Conde Nast alsooffers a variety of interesting fashion bags/handbags for titleslike Glamour, Lucky and Vogue.
Shira Linden is a direct mail copywriter and consultant. She canbe reached at 203 371-0654, via email at shira@promowriting.com.Or on the web at www.promowriting.com
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