Analytics Help San Jose Mercury News Pull in the Right Readers

Newspaper readers, if one believes what one reads in newspapers, are rare birds. And they're getting rarer all the time, much like print editions of papers themselves. Despite this, the San Jose Mercury News is not willing to spend $200 apiece to gain new subscribers.

Unfortunately, that was the cost of acquiring readers within a few extremely unprofitable segments, according to Steven Garza, the California paper's direct response/database manager.

Granted, these costs were the exception rather than the rule. And Garza quickly put a stop to any outreach efforts aimed at these targets. But it wasn't until he brought the paper's analytics operations in-house that he could do so.

In 2004, when Garza joined the San Jose Mercury News, it had retained one vendor to service its database, while another provided the marketing software. The system itself was housed within the paper.

As a result, when problems such as the inability to upload fresh data arose, there was often a round-robin of responsibility-ducking and less action than one would hope.

New edition

This changed in late 2005-early 2006, when the San Jose Mercury News rolled out a system designed by data firm Marketing G2 and powered by Marketing G2's partner, database company Alterian. The new structure brought the company's data operations under a single vendor. It also allows Garza to add marketing channels and eventually incorporate analytics into subscriber retention activities.

“We didn't want to build a database that would fit our needs now,” says Garza. “We wanted one that would grow.”

While future growth plans include incorporating retention efforts, the database's current mission is adding an additional layer of science to the paper's prospecting and subscriber reactivation activities.

Some of the concerns Garza has dealt with to date are basic, such as reconciling multiple recipients at a single address. A given member of a household may have previously received a subscription, but the paper may currently be delivered to a spouse. In that example, targeting the lapsed spouse would be a waste, assuming the wedded couple are still on newspaper-sharing terms.

Key concerns

But some of the concerns are critical. The new system makes business issues, such as providing information to the paper's telemarketing, collections and accounting operations on a timely basis, much easier than they were.

The platform developed by Marketing G2/Alterian is also applied to prospecting activities. Take the $200-per-lead mentioned earlier, which was largely the result of using telemarketing inefficiently. Using the database, Garza has refined both segmenting and messaging, and has been able to focus on target groups that make back operational costs such as newsprint and delivery.

By eliminating truly inappropriate groups from his mix — those that either won't respond at all, or will need an inordinate number of efforts to generate responses — he has brought acquisition costs in some segments to as little as $25 per order, although this result is hardly typical across the file.

That wasn't the only way the company realized savings. Before the database was brought in-house, the list selection activity was managed by an outside firm that also did telemarketing for the paper. The problem was that the firm wasn't the only vendor doing telemarketing.

“It was creating the lists for themselves and the other partners,” says Garza. “It could cherry pick and manage how we went to market. We got better market penetration just from taking over that management — just from bringing it in-house, incorporating the phone numbers and appending data. Once we managed the list, we found opportunities for greater market penetration in areas such as north of San Jose and south of San Francisco.”

Next Page: Influence factors

Previous Page: New edition

Influence factors

The database has also influenced the paper's direct mail efforts. Across all channels, the San Jose Mercury News has realized more than $233,000 in annual marketing cost savings, and anticipates spending $24,000 less on direct mail in 2009 than it did in 2008, without a corresponding loss in subscriber base.

This is where G2 Discovery, an analytics program from Marketing G2, has helped the most. The software/hardware combination allowed the paper to conduct a variety of tests within a single effort. A single direct mail drop can produce stable results on up to 20 cells that have variations in content, offer and creative design. This multivariate testing system, Garza says, is vastly superior to standard A/B testing splits.

To date, the biggest impact Garza's analysis has yielded is how his department should use former subscribers. He found that readers who previously received the paper seven days a week tended to come back after one offer — if at all. They either wanted the paper or they didn't. Subsequent mailings weren't as productive. Conversely, those with whom the paper didn't have a relationship, or who took the paper on Sundays only, responded better to two offers apiece.

Free but inefficient

The analysis has also demonstrated the inefficiency of free trial subscriptions. Former subscribers who refuse to re-enroll after being called three times during a six-month period are sent “bill-me” offers. A previous strategy of giving a trial subscription to this group didn't generate enough paid orders to be effective.

The system has even allowed Garza to evaluate approaches to readers who signed up to receive the paper but didn't pay for their subscriptions. He is testing a variety of offers and payment-in-advance tactics with this group, and preliminary results are encouraging.

Why go after them at all? Given the relatively limited reach of the paper, ignoring these readers would eliminate a substantial chunk of prospects, Garza says.

“We are also interested in appealing to customers living in areas important to advertisers,” he notes, adding that future analysis might lead to a borderline unprofitable prospect segment being brought over the line, provided advertisers respond to deeper penetration within select locales.