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InContext / An inside look at the business of digital content

Reducing subscription churn is critical for advertising revenue

September 22, 2020 | By Sarah Hartland, Marketing Manager – Lineup Systems @LineupSystems

The deluge of advertisement and subscription offerings can lead to rampant reader fatigue. In this digital age, subscription churn presents an ongoing problem for media companies. Benchmarks place the media and entertainment industry near the middle of churn averages, between 5-6%.

So, it’s no surprise churn is a big topic of conversation. However, what is less often discussed is the impact churn reduction strategies have on advertising revenue. Spoiler: Yes, they have a massive impact.

We’ve said before that subscription and advertising-based revenue models are the future of media. Unfortunately, though, some companies continue to underestimate the effect of subscription churn on advertising revenue and overall company value.

Understanding how these revenue models support one another empowers better decision making, presents opportunities for data sharing and cost reduction, and just generally improves performance. It all boils down to leveraging subscriptions data in your advertising sales and prioritizing churn reduction strategies that improve ad performance.

Modern ad sales boosted by solid subscriptions data

Ryan Holmes, Chairman and Co-Founder at HootSuite, points out that the average American consumer has seen a massive increase in daily advertisement exposure. In fact, since the 1970s, “that number has increased by a factor of 10 to upward of 5,000 ads per day.”

Highly engaged audiences are inherently valuable to brands. This is particularly true when compared with risky ad placements on social media, which can end up alongside fake news, or worse. These inundated audiences around the world require far more specialized, contextual advertising to build long-standing relationships with trusted brands.

At Lineup, we’ve long advocated for audience-based ad sales. But where does the best audience data come from? Subscriptions! Thus, when an advertising team can leverage subscriber data, particularly from loyal, long term subscribers, more effective strategies can be employed to target campaigns and better activate key audiences.

Customer data platform, Blue Conic suggests that most brands don’t actually leverage the power of this kind of first-party data to their full advantage: “Less than 5% of marketers say they’ve yet to realize 80% or more of the potential of their first-party data. They include information provided by their audience in some facets of their marketing but have yet to realize the desired ROI from the source.”

Effective churn reduction strategies impact advertising

Applying successful churn reduction strategies obviously benefits the subscription team with stronger retention rates to improve overall revenue growth for a company. However, successful reduction strategies also improve the impact of advertising revenue.

Prioritize personal experiences

Personalized subscriptions and ads are likely to mutually benefit each other. For example, subscriber data that builds stronger reader profiles and return-rates can, in turn, enable advertising teams to offer more insightful contextual targeting to a captive audience.

Successful advertising requires engaged audiences who trust the publisher’s content and return often. The act of subscribing indicates the difference between a casual web visitor and a true, returning, reader. And advertisers are eager to get in front of those eyeballs whenever possible.

In 2019, data management platform Cxense demonstrated this in the global market. Online marketing team members of major Danish advertiser Nordjyske Medier successfully leveraged personalized customer data to increase “click-through rates by 300 percent on average — while digital subscriptions grew by 50 percent in the same period.”

Personalized experiences are critical for turning casual web visitors into subscribers (whether paid or free). They are also essential for turning those subscribers into a fully monetized audience.

Build loyal audiences

If personalized experiences convert visitors to subscribers, the next step is ensuring those new subscribers stick around long enough to impact your bottom line. An individualized customer experience on both ends of subscription and advertising content creates deeper connections with audiences, making them likely to remain loyal to brands in the long term.

A loyal audience base attracts marketers because these kinds of audiences prove to be more responsive. Twenty years ago, many companies did not have the digital resources to so carefully segment, track, and individualize content for key audience groups in a relationship between subscriptions and advertisements.

But now, brands that can leverage cross-functional strategies and shared data insights to their advantage can build even greater loyalty to their high-quality content and ethical, reliable journalism. This approach builds strength across departments within media businesses so that everyone from audience teams to editorial teams has a basic understanding of marketing principles and can contribute meaningfully to the strength of your brand.

The result? Readers transform into brand advocates!

(Of course, systems like Amplio can strengthen brand loyalty by leveraging subscription data to the benefit of interested marketing teams.)

Understand why readers leave

When you understand the reasons readers cancel subscriptions, you’re also more likely to pick up on parallel reasons the same readers don’t interact with ads. It’s time to stop guessing why readers leave and start asking. Like many of the other benefits we’ve discussed so far, taking this integrated approach to discovery can benefit all teams and departments towards achieving collective company goals.

A solid approach to identifying at-risk subscribers is not only a marketing strategy, it’s equally critical for the success of your advertising sales team.

One goal, two revenue streams

Reducing subscription churn empowers you to focus on collecting better data from existing, long-term customers to the distinct benefit of advertising revenue. This approach can move a company from focusing merely on impressions, to actual impact.

Companies that retain more subscribers spend less time and resources strategizing against losses — as many businesses have had to do in the last year. Instead, they will be energized to use those resources for improved subscriptions and visibility to marketers.

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