Month: September 2018

Mark Read is set to take full control of WPP. He does so at a time of tumult and uncertainty at WPP, which has seen its stock hammered. Here are the challenges Read must address.

WPP must restructure with purpose around its top brands
Sorrell knew that WPP needed to be leaner, and under his tenure, smaller agencies disappeared into larger ones. But those moves were made in the interests of the group, rather than its clients, as Read has previously acknowledged.

“If those businesses were really being brought under one P&L, then the demeanor of the group would’ve been very different,” said a former WPP executive on condition of anonymity. “There was no real thought about what those mergers were going to do beyond create efficiencies.”

Read will need to reassess the strategy before he calls time on more agencies. Larger network agencies are just too big to restructure in a way that will make them easier for marketers to navigate. All networks have this challenge that sees them needing to become more responsive, less layered and less bureaucratic — descriptions Sorrell has raised since his departure from WPP.

“From what I’ve heard from senior WPP CEOs, they’ll continue to merge smaller agency brands to improve administrative efficiency and offer clients’ broader capabilities under one roof,” said a source with knowledge of the WPP’s plans.

Read has been groomed for the top job for several years, having sat on the WPP board and then run WPP Digital when he was the boss of Wunderman. Furthermore, he will have a clearer idea of how to balance the efficiency needs of the agency with the service needs of clients when contemplating upcoming mergers due to his experience when Possible and Wunderman were brought together last year.

“A holding group CEO isn’t there to fill empty seats anymore like they might have been in previous years,” said the former WPP exec. “It’s about understanding what the business is going to be in three to five years and then asking who can manage that. The agency of the future may look very different to the 400 acquisitions under one umbrella that it is today, and that means changing the way the bosses think about finance.”

Build an agency model that’s less reliant on media budgets
More marketers are querying how media buyers spend their money, and that’s making it harder for agencies to make as much margin as they once did. As the biggest agency network, WPP felt that impact harder than most. It lost $2.6 billion in its market value after it reported flat growth in 2017. The next phase of WPP’s growth can’t be sustained on media trading alone. It’s why some of WPP’s media agencies are already trying to pull back from actually buying the media for clients and are increasingly trying to teach their clients how to do it instead. Consulting is where the margin is for media buyers now media buying is becoming automated.

“The smartest clients are asking us to help them bring media trading in-house over a long-term period,” said a senior exec at a WPP agency. “They realize automation of media buying is going to become rife and believe that their in-house function will eventually entail someone checking machines. Clients are saying they don’t want to lose the independent, strategic advice they get from agencies because they can’t take media in-house on their own. There are huge opportunities for us to increase our margin with clients if we get this right.”

It’s a plan that could see Mediacom hand over parts of the media trading process that have become cumbersome to the clients, and take control of the parts they aren’t setup to do. Under Read’s stewardship, Mediacom could pitch itself to larger clients as an extension of their marketing team.

Clients will make that decision based on the agency’s creative thinking rather than buying power. Read’s challenge is to be able to surround its planners, creatives and strategists with the tools needed to make the best choices for WPP’s clients in the most creative way. That model takes time to build, time that Read doesn’t have. WPP’s share price nosedived after it cut its profit forecast in March, and shareholders will be impatient for the business to return to growth.

“I think that the holding companies are rapidly moving toward a delivery of services to clients that is more consultative and creative, and that is much more valuable to clients than executing on marketing plans, said David Wiener, who advises agencies on acquisition and growth strategies.

Pay more attention to the threat of the management consultants and the duopoly
Sorrell made it known that he didn’t see the likes of Accenture and Deloitte as a threat to the agency business. And while there’s been a dearth of big client wins in that space to prove him wrong, advertisers are starting to consider the consulting firms. Read can’t afford to be as dismissive as his predecessor.

Under Sorrell, WPP’s relationship with Google and Facebook were “frenemies,” according to the exec, on account of the vast sums the group spent with a rival for talent and budget. Under Read, that relationship is set to change. Mediacom, for instance, is building more tools on top of the marketing and media buying technologies of Google, Facebook and Amazon now that those same platforms have automated away many service-layer roles.

The post The key challenges Mark Read must address as WPP CEO appeared first on Digiday.

Managing retention, an ever-present problem for subscription publishers, is taking on new importance as more publishers explore subscription models and the tactics and metrics evolve.

Axel Springer newspaper Die Welt found that half of its new subscribers were leaving in the first three months, according to a report on subscriber churn by the World Association of Newspapers and News Publishers, released Aug. 22. After this period, the churn rate dropped to between 1 and 2 percent a month.

According to the author of the report, Cecilia Campbell, executive program editor at WAN-IFRA, that’s a typical time frame, once people have subscribed for a year they’re likely to stay. But it takes a lot of research into segmenting audiences, inferring interests and surfacing content to readers that they may not be aware of in order to hold on to them for that long.

“Retention has increased in significance,” said Campbell, speaking to Digiday. “Twelve months ago, the KPIs were all around conversion. Many publishers have said to me, ‘2018 is the loyalty or retention year.’ But we’re not at churn 2.0.”

Typically, publishers are wary of sharing churn or retention rate. Despite competitive reasons, there’s no universal way to measure churn. It’s also hard to make relevant, once publishers have the number they’re unsure what to do next.

For Schibsted title Svenska Dagbladet, which studied the content people read after subscribing, that meant hiring editors to work on specific content that was more effective for retention rather than conversion. After studying reading habits, articles that converted readers were around topics like world events, while articles that retained subscribers were on topics like arts reviews.

“Work with digital churn is more important than ever,” said Tor Jacobsen, chief commercial officer at parent publisher Schibsted. “We are going from a very sales- and volume-driven phase where we have had a tremendous growth in new subscribers to a phase a little bit more about keeping the subscribers and making them happy. You need to do a lot of different activities; we are approaching the different customer steps in a much more targeted way: onboarding, anti-churn work with existing customers, loyalty programs, win back. These steps all need different actions.”

According to Robin Govik, chief digital officer at Swedish media group MittMedia, bringing more flexibility to unsubscribing has stabilized churn rates. “At first, we tried to make it as hard as possible for subscribers to quit, as other publishers did, we were hiding the buttons. People had to call in to cancel their subscription.”

For the last year, digital audiences have been able to subscribe and unsubscribe by clicking one button. A popular vertical for MittMedia’s newspaper is ice hockey, but outside of the season between October and April, people aren’t interested in reading about it. “We know they will come back,” said Govik. This flexibility has had the added benefit of attracting younger audiences, Govik is seeing more people between 30 and 40 years old subscribe online compared to those who pay for the digital version of the newspaper, who are 20 years older. Although readers of the digital version of the paper are five times more loyal, he added.

According to Govik, in January 2017 MittMedia had 70,000 logged in daily users; this has now doubled to 140,000 with 2,500 new customers subscribing each week. “We have people dropping off so the net gain is not good enough,” he said.

Rather than measuring the number of people who have unsubscribed, media analyst Thomas Baekdal suggests measuring how long people were subscribed before they lapsed, to focus on growing to subscriber longevity.

“The key metric for churn isn’t the percentage of people who churn, because everyone churns at some point, but instead to their tenure as a subscriber,” he writes. “When people churn, did they stick with you for longer than, say, a year ago?”

In order to balance churn with new prospects, high volumes of low-engaged subscribers will lead to high churn rates, publishers should focus on subscriber revenue rather than numbers, Baekdal added.

“It’s about setting the right KPIs, looking at how long people read for rather than how many times they click,” said Campbell. “The one universal truth is that engaged readers don’t churn.”

The post ‘2018 is the retention year’: How publishers are managing subscriber churn appeared first on Digiday.