If price discounting is your brand strategy think again. Any monkey can cut the price! Brand building is a tough business. It takes time and discipline and yet a good brand can quickly be destroyed by what may seem at the time to be good business decision making. Specifically we are referring to boosting sales by overusing short term discounting.
Anyone who’s ever had to sit in a waiting room will remember Time Magazine. By 1988, the iconic brand had a magazine circulation of over 4.6 million copies and was the ‘go to’ magazine to read in-depth stories from the news. Fast forward to 2014 when a plummeting circulation led the brand to be spun off by Time Warner. There are many plausible causes for the demise of Time – the proliferation of cable news channels, the internet, smartphones etc. will all have played a part in the downfall – but we also know that weaker brands have survived the same test. What happened to Time Magazine is a great study in how not to manage a brand – especially a stellar brand like this one.
Circulation of newspapers and magazines started to drag as news cycles started to gain speed in the late 1980’s. Led by Cable TV news shows and later the internet, print media looked to be out of touch and out of date the minute it hit the news stand. Time Magazine was no exception. When subscriptions sagged further Time launched a “Hail Mary” advertising campaign in an effort to replace lost magazine subscribers but by doing so inadvertently managed to destroy their own brand. Here’s what happened…
Time magazine ran a series of TV advertisements offering deep discounts off the cover price if viewers called within the next so many minutes. Of course operators were standing by and there were always other gifts loaded in to sweeten the deal. Trouble was the advertisements worked! Subscription rates rose fueling the sales department’s argument to continue discounting. All the other advertisements for Time that emphasized the quality of journalism were scrapped in favor of deep discounts and limited time offers. Unfortunately, the continuous discounting undermined Time Magazine’s image of quality, integrity and in-depth news reporting that had taken decades to build. As new, price conscious, gimmick happy subscribers signed up long term loyal customers became turned off.
Time was so focused on maintaining their subscriber levels they forgot who was actually paying the bills. It’s not the average subscriber – it’s the loyal customer who keeps the money coming in! Typically in any industry the top 15% -20% of customers will account for 50% – 70% of a company’s revenue and 90% of the profits. Not only do they buy more – in Time’s case book collections and records, they also encourage their friends to engage with the company.
Time was so focused on maintaining overall subscription volumes that they forgot about the loyal customer base upon which they may likely have built a strong complimentary on line news brand. By continuing to discount, Time Magazine broke their implicit promise to loyal customers because brands with high integrity don’t engage in long term discounting and gimmicky advertising! As Time drove their high value subscribers away and replaced them with “other subscribers”, advertisers also saw a sharp decline in response to their advertisements and also started to abandon the brand. What can we learn from Time:
- Data analysis can lead you astray: Data analysis told Time that discounting drove subscriptions – it did but with the wrong crowd.
- Use discounting judiciously: Discount too often and your brand has no value.
- Loyal customers pay the bills not average customers: Loyal customers drive up to 90% of a company’s profits. Recruit them and coddle them.
Time likely won’t recover and, in fact, the brand may disappear in the future. Other print news media like the Wall Street Journal and New York Times have managed to make the leap offering both on line news and in-depth story coverage in print and electronically on e-readers and tablets. Unfortunately for Time, their focus on sales promotions may have stopped the clock!