Read all about it

Read all about it

Using secure digital vouchers to retain existing readers and get new ones. A discussion paper for the newspaper & magazine publishing industry

Comments from across the digital divide

“Whenever I have the time, I pick up the printed version of the newspaper. I wish I could do this all the time, but our lives are not like that anymore.” Steve Jobs, 09 October 2011

“At places where editors and publishers gather, the mood these days is funereal. Editors ask one another, ‘How are you?,’ in that sober tone one employs with friends who have just emerged from rehab or a messy divorce; that lovable, old-fashioned bundle of ink and cellulose”. Bill Keller, Executive Editor, The Times, 31 March 2008

“A tradition is only an innovation that worked.” The Economist, March 2003

“News Corporation is on the cusp of a digital dynasty. Content is not just king, it is the emperor.” Rupert Murdoch, 25 November 2010

“In the next 10 years, the whole world of media, communications, and advertising are going to be turned upside down — my opinion. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form.” Steve Ballmer, Microsoft CEO, 10 November 2009

“Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents.” Warren Buffet, 01 March 2013

So are printed newspapers & magazines really dying?

The last ten years have seen publishers of newspapers and magazines wrestle with seismic changes similar to those faced by the music industry thirty years ago.

Publishers’ initial response to the challenge of widely available and free journalism online was to compete on a like-for-like basis, on the assumption that vast online audiences would compensate for lost cover-price revenue. However this view has given way to a more nuanced view where print and digital co-exist and complement each other.

The short answer is therefore no: printed newspapers and magazines are not dying, but they are certainly facing a challenging future that is difficult to predict. Far from assuming the Canute-like posture that decimated CD sales, publishers are exploiting the strengths and opportunities represented by digital technology to produce a widely differentiated product set that appeals to multiple segments of their audience.

While idealistic proponents might believe that ‘everything on the internet should be free’ such naive idealism goes hand-in-hand with an oversupply of content and comment of widely variable quality. Goethe’s observations that “We know accurately only when we know little” and “With knowledge doubt increases” are 250 year old sentiments that resonate with a contemporary audience, an audience that demands news as and when it happens together with a means of making sense of the mass of information generated by media in all its forms.

The need for quality, paid-for journalism has therefore never been more pressing. But how can publishers address the two simple business axioms of retaining existing customers while attracting new ones?

Although the print market might be in steady decline, it does still offer a significant advantage to publishers over their digital stablemates in that print is still profitable and so justifies investment in marketing activity to attract and retain readers.

Driving sales across a complex and challenging landscape

Newspapers and magazines are physical products, handled and sold by wholesalers and retailers independent of the publisher. To avoid any disruption to the complex supply chain implied by this, one of the simplest methods to stimulate sales of a product is to put a means of payment – a voucher – into the hands of a reader and allow them to use this to buy the product at a retailer of their choice.

The implication of this is that any retailer accepting the voucher as a form of payment must have the voucher ‘settled’ (i.e. converted to real funds). Regardless of whether the voucher is a promotional tool funded by a publisher or a subscription voucher bought at a discount by the reader, the same financial, security and logistical challenges remain in settlement.

While paper vouchers are almost ubiquitous in terms of retailer acceptance, they are produced without adequate security features often at print facilities with lax procedures. As a result publishers have been hit by significant levels of fraud and theft in the past (Retail Newsagent; 5 March 2010 ‘Mail voucher cheats must pay’). Distribution of printed vouchers using the internet poses similar risks as without robust checks in place at the point-of-sale, it is easy to make multiple copies of such vouchers. Any voucher represents a potential loss to the publisher who issued the original, meaning an uncapped liability if vouchers are easy to copy.

Paper vouchers are also very unpopular with the very retailers who accept them. They must be counted, sorted and submitted for settlement, after which they may wait several weeks or even months for the funds. The trade press also regularly report on instances where vouchers get lost in transit and settlement is refused or reduced over concerns that the retailers’ claim is not genuine in some way. The sums involved are substantial as the vouchers themselves often represent the full cover price of the publication.

Lastly, the paper voucher clearing process works at 19th century speeds in terms of delivering critical information back to the publisher regarding who is using the vouchers, where and when.

Faced with the 21st century threats posed by the online world where every aspect of consumer behaviour can be monitored and measured, publishers need a common digital processing platform to issue vouchers in any form (paper, mobile, payment card, or email) for any type of campaign (trial, reward or subscription). This is required to both protect their financial interests and get the real-time management perspective of retail behaviour required to optimise the various sampling and subscription schemes they run.

The table below is a guide to which format of voucher distribution should be considered for which campaign type, bearing in

mind factors such as the target audience together with frequency and purpose of use.

Some examples are as follows:

  • A subscription voucher used regularly for the purpose of buying a daily newspaper needs to be durable and looked after with care by the reader. A voucher displayed on mobile phone or a plastic card kept in the readers’ wallet fit these criteria. Example: Financial Times subscription card.
  • A sampling campaign might use a plastic/magstripe card distributed to potential readers. Recipients using the card frequently could be contacted by the publisher and be ‘upsold’ to a full subscription but using the same physical card. Example: Daily Mail sampling/subscription cards.
  • A sampling campaign using social media or any online exposure could contain a call-to-action that triggers an email to a reader allowing them to generate their unique voucher code. This code is then displayed on a mobile phone or tablet for scanning by the retailer using their payment terminal. Readers without such devices can print the voucher for use in the same way at retail. Example: Guardian/Observer ‘We own the Weekend’ recruitment campaign.
  • A campaign for a free product or other valuable offer sent to loyal subscribers – users of a subscription card, for example – should use a dynamic, transient medium for distribution such as mobile or email. These formats can both describe the nature of the offer and the purpose of it together with the voucher number. This flexibility is not possible with a plastic card that is inherently inert and so impossible to communicate ‘one-off’ offers to. Example: Daily Telegraph offer of Weekend Telegraph for £1 to digital subscribers.

Any colour you like as Any shade you want, as long as it’s black (or white)

In terms of voucher offers, traditional newspaper and magazines sales take an ‘all or nothing approach’ in that the reader proposition tends to be either casual sales (i.e. paid for in store) or subscriptions which are pre-paid by the reader, directly to the publisher.

Neither is optimal given the challenges faced by the industry. For a reader to benefit fully from a subscription, they must take every copy of the title within the defined period to enjoy the discount at which subscriptions are typically sold. Many readers prefer to remain ‘casual’ and avoid this lock-in as a result. For a publisher, a reliance on casual sales exposes them to the vagaries of the market and with it, greater volatility of sales and the knock-on effect on advertising revenue.

Digital vouchers can address these points through offering great flexibility and responsiveness for recruiting new readers, tailoring individual product propositions and offering more price-points along the spectrum between ‘casual’ and ‘subscription’ sales. To highlight some examples of how digital vouchers can address these challenges:

  • Over 8 million unsold newspapers and magazines are returned by retailers each week. A digital voucher could be offered to readers that would entitle them to a significant discount on cover price for buying the publication – subject to availability – after say 16:00 in the afternoon for a daily newspaper or in week three and four in the case of a magazine with a four week publication cycle. Such a move would at a stroke reduce wastage while increasing sales. This method could also be popular with major retailers as it would allow them to manage ‘mark-downs’ (re-pricing of stock to be sold at discount, usually when it is shortly to go out-of-date) in the news and magazines category without manual effort on their part and without fundamental changes to EPoS systems.
  • Loyal readers to a title but ones who do not want or cannot justify a full subscription might be offered a ‘partial’ subscription through outbound telephone contact. This could allow them a number of copies over a period of time in line with their reading habits or could represent a cash balance that is decremented as and when they choose to buy. In both cases, the level of discount to cover price could be tailored for each prospective reader at any given price point between cover price and that offered to full subscribers. This ‘one-to-one’ pricing could be achieved without any public statements regarding pricing and so would ensure that margins are protected while maximising the sales opportunity of each reader sales call.
  • Casual purchasers of newspapers or magazines had until recently, to pay retailers for each purchase using cash or credit/debit cards. The emergence of Trinity Mirror’s PaperPay smartphone application offers the reader the opportunity of paying for a title after they have taken it. By using the model popularised by Apple’s iTunes service, Trinity Mirror allow readers to lodge payment card details in the PaperPay app and then select vouchers representing individual titles they ‘might’ like to buy at some point. The user then shows the voucher (represented as a unique barcode) to the retailer as and when they wish to purchase any given title.Trinity Mirror aggregate all purchases made through the ‘app’ periodically and make a single charge against the lodged card. Aside from enabling cashless purchase for readers and so encourage impulse ‘casual’ sales, the platform also benefits retailers by allowing such transactions to take place at full margin without the retailer incurring any merchant service charges for card usage as these are born by the publisher. In addition, Trinity Mirror have taken a commendably free-market approach by allowing rival publishers to use the PaperPay platform and also making the technology available for white-label use in adjacent market sectors. In addition to this ‘post-paid’ model, PaperPay also offers other charging models such as traditional, seven-day subscriptions and the flexible ‘cash-balance’ model alluded to previously.
  • Retailers may provide a means of converting the casual reader into a subscriber as these retailers understand, better than anyone, the habits of their regular customers. Retailers could stock subscription cards on behalf of newspapers and magazines that are ‘valueless’ until registered by the reader. The incentive for the retailer to promote these cards to his customers is that each one distributed could be identified as such by swiping it through the terminal to identify the store responsible. If the card is subsequently activated by the customer and payment made, the retailer would earn a ‘Finders Fee’. Publishers can justify the investment in this activity compared to the relatively high cost of outbound telephone cold-calling to achieve similar ends.
  • A further refinement of this process is for industry trade groups to issue generic cards that could represent any title from a range selected by the reader, similar to the PaperPay proposition. This would avoid the need for retailers to stock potentially thousands of card designs, each representing a specific publication and would allow publishers to avoid the logistic and cost implications of producing and distributing small batches of cards across a broad base of retailers.

About i-movo

i-movo provides a Secure Digital Voucher service to consumer goods companies, publishers and retailers, enabling them to issue paperless vouchers to consumers and have them redeemed electronically. Paper vouchers have been around for over 100 years and the evolution to digital vouchers has been slowed by fears of the viral effect and multiple use of vouchers; vouchers are, after all, a currency so they represent a risk to issuers and are subject to fraud.

The solution is to check the validity of vouchers in real-time at the point of sale, using existing systems that retailers already have installed such as credit card terminals, electronic point-of-sale systems and mobile top-up payment terminals. The i-movo service does exactly this and is available on all UK epay, PayPoint and Payzone terminals by default.

i-movo vouchers are impossible to use more times than intended by the issuer, may not be used beyond the expiry date or at the wrong location. This process allows our real-time reporting to show exactly which vouchers have been used, where and when, the instant the transaction takes place.

The unique codes issued by i-movo can be distributed by any electronic medium, often as a numeric code within a text message after a consumer sends a keyword by SMS in response to some form of advertising. They can also be rendered as barcodes that can be read by the scanner attached to most payment terminals.

The case for a common standard for secure digital vouchers

These and previous examples all share a common denominator in that they require a secure and robust means of vouchers being trusted as a payment or part-payment method across a widest possible range of retailers.

The three fundamental principles of this assertion are:

  • Consumers want mobile vouchers that are accepted by the widest range of retailers.
  • FMCG Brand Owners & Publishers – Issuers – want their vouchers accepted across all retailers and not be restricted e.g. to individual loyalty schemes or groups.
  • Retailers want to adopt the system that the bulk of consumers and Issuers will use.

With nearly 7 million transactions worth in excess of £40 million, i-movo has become the de-facto standard for ‘secure digital vouchers’ in the UK. Patented use of card payment standards and protocols make it technically feasible for any retailer wishing to accept its vouchers to do so. This scale has been achieved principally through integration with epay, PayPoint and Payzone, the UK’s three leading bill payment networks. As a result, i-movo has a retail footprint covering over 50,000 locations across the independent, forecourt and convenience sectors accounting for over 80% of UK newspaper and magazine sales.

Significant investments by PayPoint and Payzone in rolling out Broadband terminals increase the speed and convenience of all transactions including i-movo voucher redemptions. In addition, PayPoint’s introduction of the ‘PPoS’ service allows all PayPoint transactions to be processed at all EPoS till-points in a growing number of sites improving processing speed and efficiency yet further.

epay’s transaction services are integrated to all the EPoS systems used by major supermarkets and other prominent national retailers specialising in news and magazine sales. The bulk of the technical work required to process i-movo vouchers at all till-points in retailers served by epay is therefore complete, leaving minimal levels of EPoS reconfiguration for the retailer to perform, similar to setting up a new mobile airtime top-up product or gift card. Previous similar projects demonstrate that this can take as little as three days of technical development.

While individual retailer groups may choose to work with alternative providers to i-movo, such schemes will be viable for retailer-specific activities only and not attractive to publishers wishing to give their readers the freedom of choice of where to redeem. What economists refer to as the ‘Network Effect’ will therefore lead to retailers considering implementing a secure digital voucher service being more likely to adopt the platform that is already used by retailers accounting for the majority of magazine and newspaper sales.

As i-movo’s technical approach is based on widely accepted card processing standards that are shared by new, emerging methods of payment such as contactless credit cards and mobile devices equipped with Near Field Communication (NFC), the i-movo solution is effectively ‘future-proofed’. Payment message standards are not likely to change fundamentally in anything other than the very long term as to do so would require the wholesale replacement of all credit and debit cards together with supporting terminals and other infrastructure, not just in the UK but the world over.

Intellectual property issues notwithstanding, it is conceivable that alternative providers to i-movo may appear over time in much the same way that the VISA and Mastercard networks support competitive card products from rival financial institutions. The issue is one of time: Barclaycard enjoyed a monopoly of the UK credit card market from its introduction in 1966 until 1973 when the Joint Credit Card Company, a consortium of the other UK banks, formed Access. Only after the formation of Mastercard, 23 years later in 1996, did a completely heterogeneous card payment market supported by common standards emerge. The publishing industry does not have the luxury of these timescales.

Learning from the lessons of the past…

With the launch of the Compact Disc in the early 1980’s, it was widely assumed that this new convenient digital format would signal the end of vinyl LP’s, which are expensive to produce and distribute while being resolutely unportable and inconvenient for consumers. Within thirty years, the digital technology had virtually eaten itself as file-sharing and compression techniques made piracy easy to practice and rife. The industry had allowed market forces to increase volumes, downgrade product quality and virtually bankrupt itself simultaneously. But amidst this scene of commercial desolation, there were some beacons of hope.

The mid-market represented by iTunes improved product quality (the AAC, iTunes+ format) to a point that it was good enough for most ears and critically, allowed consumers to buy music a track at a time if that’s what they wanted. The lesson is clear: let the consumer buy in a manner of their choosing rather than insist they buy a limited range of pre-defined products.

Secondly and in parallel, the really discriminating audience recognised that none of the digital formats could ever offer the absolute quality and experience in the same way that the vinyl, analogue product could. And so, after years in decline, vinyl sales are now increasing rapidly at the rate 250% plus per year, thirty years after being given the last rites.

Could print magazine and newspaper sales enjoy the same renaissance as the one currently being enjoyed by the music industry, by embracing and harnessing the digital world? The challenge facing publishers is to act now rather than rely on an unforeseen ‘lucky bounce’ similar to the one vinyl sales have seen and one that, in any case, is not high enough to restore the industry its’ former fortunes. Converting casual readers to subscribers of some form so that they continue to enjoy the superior experience of the analogue product is the best strategy for sustaining the long-tail of print readership.

While the mid-market for print and publishing is destined to be characterised by a high-volume and low-cost product, top-end demand for a premium product still exists. The publishing industry has a limited opportunity to address these two markets and within this mix, secure digital vouchers are a tool with infinite flexibility to combine analogue and digital publishing in new and innovative ways to attract and retain readers.