How Effective Reader's Digest's Strategic Marketing Program?
1.0. The History of Reader's Digest
Reader's Digest was founded by William Roy De Witt Wallace (1889 - 1981), a salesman; and his wife, Laila Acheson (1887 - 1984), who established the &ldquoReader's Digest Association, Inc.&rdquo in 1921 in the New York City suburb of Pleasantville, where its headquarters is still located.
The first issue of Reader's Digest magazine was published in 1922 and sold it for 25 cents. In 1923, a one year subscription by mail was available for a special rate of $2.75 and subscription members grew quickly where sometime in 1925, the Wallaces hired their full time employee. By 1929, the magazine was also available on newsstands. By 1934, the circulation was nearly 1.5 million. The Wallaces would continue to actively manage the business until 1970's, when they were in their 80s.
In 1939, soon after the initial international edition of Reader's Digest was published in the United Kingdom, the magazine and organization had expanded enough that a bigger headquarters facility was needed. The Reader's Digest Association moved to a large Georgian building in Chappaqua, New York. Then building has continued to expand ever since to accommodate the growing company.
The magazines popularity in the United States soon led to its publication in many countries worldwide. In 1940, the first foreign language edition was published for Latin American distribution. A Swedish edition was first published in 1943; a Finnish edition was started in 1945. Numerous other editions in many other languages have followed. The global edition is listed as below:-
- 1938 : United Kingdom
- 1940 : Latin America (in Spanish)
- 1942 : Brazil
- 1943 : Sweden
- 1945 : Finland
- 1946 : Australia, Denmark
- 1947 : Belgium (French), France, Norway
- 1948 : Canada (English and French), Germany, Italy, South Africa, Switzerland (French and German)
- 1950 : Argentina, New Zealand
- 1952 : Austria, Spain
- 1954 : India (English)
- 1957 : Netherlands
- 1965 : Hong Kong (English), Southeast Asia (Chinese)
- 1968 : Belgium (Dutch)
- 1971 : Hispanics in the United States (Spanish), Portugal
- 1978 : South Korea
- 1991 : Hungary, Russia
- 1993 : Czech Republic
- 1995 : Poland
- 1996 : Thailand
- 1997 : Slovakia
- 2005 : Romania, Slovenia, Croatia
- 2007 : Bosnia and Herzegovina, Serbia, Ukraine
No advertising appeared in the magazine until 1995, when surveys indicated that readers would prefer ads to an increase in subscription fees. The magazine has never accepted tobacco advertising and ran its first liquor advertisement only in 1979.
Reader's Digest has retained an essential look and tone yet evolved over the years. Although it began as a collection of condensed articles, it soon began including original content and is now approximately 80% original content. For decades, all articles were listed on the magazine cover, but that changed in 1998. The advent of the internet has brought changes too - now much of the magazine content is available at the website.
The Reader's Digest Association, Inc. is a worldwide publisher and distributor of magazines, books, recorded music and home video packages, which are also through a variety of distribution channels including direct mail, display marketing, direct response television, catalogs, retail and internet. The company also publishers numerous special-interest magazines and books that include do-it-yourself, cooking, health, gardening and children's title too. Its major publication is the monthly general interest magazine Reader's Digest, which is the world's most widely read magazine with a global readership of more than 100 million. To market its many products, the Reader's Digest Association uses an extensive consumer database that is considered to be one of the largest in the world.
To maintain its subscribers' loyalties, Reader's Digest kept coverage diverse and of high quality. The publication was earning nearly 70% of its revenue from circulation, which was a very high figure given the most magazines relying more heavily on advertising for revenue.
Other operations of the association contributed to the company's total revenue. These operations included a subsidiary, QSP, Inc., which provided fundraising services for schools and youth groups through the sale of subscriptions to magazines, music products and candy. Despite the magazine's popularity, however, it was the books and home entertainment division that generated the bulk of the association's profits by the late 1990s. Furthermore, with the increasing popularity of the internet, an entirely new avenue of the product development and distribution was opening up for Reader's Digest.
In 1999, the company acquired Books are Fun, Ltd. for $380 million, a profitable and fast-growing company and operated travelling book fairs in office buildings and schools. In 2002, the company completed the largest acquisition in its history; paying $760 million for Greendale, Wisconsin based Reiman Publications. The company also maintained a 32 million customer database where 19 million of whom were not in Reader's Digest's database. As Reader's Digest entered the mid 2000s, restructuring efforts continued, endeavoring to create a company that could look forward to a profitable future where $10 million increases in operating profits by the company's North American operations. Reader's Digest derived 8% of its revenue from its non-core businesses. Reader's Digest' also has their principal subsidiaries around the globe. The Reader's Digest Association, Inc. is a global publisher and direct marketer of products that inform, enrich, entertain and inspire people of all ages and all cultures around the world. In 2000, Reader's Digest had over 12.5 million subscribers and the third largest circulation of an American magazine globally. Below shows the company's evolution:- 1922 : De Witt Wallace and Lila Bell Acheson Wallace publish volume 1, number 1 of Reader's Digest 1923 : A one year subscription by mail was available for a special rate 1925 : The Wallaces hired their full time employee 1938 : The first international edition is published in the United Kingdom 1950 : Reader's Digest Condensed Books is established 1973 : The Wallaces retire 1984 : George Grune is appointed Chief Executive Officer 1996 : Reader's Digest World, later renamed www.rd.com, is launched, giving the company its first presence on the internet 1998 : Thomas O. Ryder is appointed Chairman and Chief Executive Officer 1999 : Books Are Fund, Ltd. is acquired amid sweeping restructuring efforts 2001 : Restrictions are imposed against sweepstakes promotions, prompting Reader's Digest to abandon the use of sweepstakes for marketing purposes 2002 : Reiman Publications is acquired, the largest acquisition in the association's history Recently, on 17 August 2009, Reader's Digest announced they intend to file for bankruptcy for their United States operations to restructure their debt and continue operations. 2.0. Global Editions Although Reader's Digest was founded in the United States, its global editions have made it the best selling monthly magazine in the world. Efforts are made to give the international editions a local look to make sure the Digest is never seen to be a threat to the local cultural identity, as imported American cultural products often are. Advertisement placements in the local editions are entirely managed by the local staff and reflect local products. Local editions also avoid reprinting articles which may touch on sensitive spots in the receiving culture. In general, the local editions will also avoid selecting texts which are too closely linked to very specific American (or too foreign) situations. The few articles written by local authors always deal with local topics. 3.0. Direct Marketing Programme as Reader's Digest's Strategic Marketing Reader's Digest offers many order products included with &ldquosweepstakes&rdquo or contests implying that one would have greater chance of winning if they bought from the company. In 2001, 32 states reached an agreement with the company to settle allegations that the company tricked the elderly into buying products because they were a &ldquoguaranteed winner&rdquo of a lottery. The settlement required the company to:- 1. Establish a &ldquoDo Not Contact List&rdquo and refrain from soliciting any future &ldquohigh-activity&rdquo customers unless and until Reader's Digest actually makes contact with that customer and determines that the customer is not buying because he or she thinks that the purchase will improve his or her chances of winning. 2. Send letters to individuals who spend more than $1,000 in a six-month period telling them that they are not required to make purchases to win the sweepstakes, that making a purchase will not improve their chances of winning and that, in fact, all entries have the same chances to win whether or not to the entry is accompanied by a purchase. 4.0. The Advantages and Disadvantages of Reader's Digest's Direct Marketing Programme Current and specific part of loyalty programs as discussed in item 3.0. presented the following advantages and disadvantages:- • Many would fall and be tempted to the idea that while subscribing the Reader's Digest, one would be able to win a hefty sum of money if one participated continuously in the purchasing program and the chances are higher if the purchases are more • This would suggest an enticing mechanism or seducing consumers program and in other word soliciting. This enticing idea to my view is a normal and has become part and parcel of marketing not just recently but enticing customers to products and services has a long history • The question is whether customers understood the program in its entirety and Reader's Digest did not withhold any information that would suggest actually to win the so called lottery is a difficult thing to achieve and consumers are not truly well informed and as discussed in item 3.0. many felt cheated that they were enticed continuously and always felt they have already won but in reality they are not • Hence, loyalty program should be in the first place being clear and transparent in its offer. The consumers should understand the program in its entirety and program should show clarity of what is on offer if customers participate and the chances of winning is the same for everybody. 5.0. Analytical Views on Reader's Digest's Direct Marketing Programme Readers Digest as a brand has a long history and tradition. Hence, it is an established brand and has a powerful platform and on the issue of marketing and customers retention one would assumed the following:- • The products has substance, quality and well packaged • Its customers has been shown good service and at cost that are reasonable and cost effective • Has established global networking and high profile with customers ranging from all ages, a key that drives a global product. Hence, with these comes other factors:- o Maintaining the relationship and customers loyalty According to Gro¨nroos (1994), the aim of relationship marketing is to establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. Rapp and Collins (1990) suggest, similarly, that its goals are to create and maintain lasting relationships between the firm and its customers that are rewarding for both sides. This is achieved by a mutual symbiosis and fulfillment of promises (Ndubisi 2003a, b). In other words, a key objective is to foster customer loyalty, which Oliver (1999) defined as a deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite there are situational influence and marketing efforts having the potential to cause switching behavior. The onslaught of globalization Reader's Digest has to adapt to counter competitiveness and with regional cultures come flexibility and adaptability. The issue of culture is a significant factor in determining customer loyalty. Every culture has its own idiosyncrasy. Hence, the global editions and articles published monthly have to adapt to regional sensitivities and not to reflect articles that might serve to drive away the established customers or the new ones especially the young readers. Articles must be subservient to the regional concerns even though the articles and stories are universal in nature. The authors chosen can be locally sourced and in some instances Reader's Digest could be up to date in current political and social events within the region in question. It is no longer a straight forward selling of product to universally acceptable based customers. Customers are not the same country to country and region to region. There are groups of people with different ideology and perceptions to life in general and lifestyle in particular. To deny this it is a means to failure and loss of sales and customers. Technology advancement too plays a great part in determining customers' relationship. Many young readers are IT savvy and to this fact the product and services must also follow suit. Reader's Digest has initiated on line or internet web site that indicated this effort to keep up with the times even though Reader's Digest was based on paper reading material previously. Loyalty programs must include R&D on the transition of technological dissipation of information through today's methods and mechanism. The speed of acquiring knowledge to the masses all over the world has changed drastically. Readers Digest has to change its views and not rely upon paper publications as the only means to further boost its sales and expand customers' base. Readers Digest global strategic initiative in terms of customers loyalty has also to look into how regional offices staff and personnel are sourced. Previous HR mode of operations from headquarters normally would send expatriates and personnel from founder countries in this case US. Globalization has made education and information readily available and qualified staff and personnel are readily available from regional countries can now be sourced adequately. The advantages of having local personnel are boundless. Firstly, they help in the adaptation process and marketing would be a simpler task. The local personnel would be able to foresee and anticipate customers' wants and preferences. This would help tremendously in compiling customers' data base and future sales projections. Secondly, they are better equipped and up to date to serve offer and resolved customers complaints and inquiries. Language barrier would not be a problem and social etiquette could be easily understood. But on the hand, a global and well recognized product must also have a well structured and standardized system that serves a single vision which drives the product brand internationally. According to the President, Emergence Loyalty Rules, Asheville, North Carolina, USA, Dennis L. Duffy (2003), the development of customer loyalty is a strategic objective for most companies. Marketers around the world agree that new customer acquisition alone will not ensure long-term success. Acquisition must be balanced with customer retention and customer development to optimize performance and shareholder value in the long run. To conclude on this matter, there should be a balance between global recognition of the brand as well as the flexibility of individual perception of regional countries and cultural differences. Conversely, curiosity is still playing in the mind of consumers as the Reader's Digest's subscribers in terms of eligibility and chances to win the contest. Will there be an opportunity and chances to win? Does it going to be a reality? The answer is - wait till this September 2009, for Customer Appreciation Prize Contest to be announced. END.