Customer Publishing set to become a billion pound industry by 2011

New Mintel research commissioned by APA reveals that despite a slow-down across the majority of media sectors, the customer publishing industry is still flourishing. It is now worth almost £680 million, with turnover topping £352 million, a 2.2% increase on 2004. This increase is double that of overall advertising expenditure over the same period (1.1%). In contrast, year on year outdoor has increased revenue by just 1.2%.*

Furthermore, based on current trends, Mintel estimates the value of the total customer publishing industry to reach £1 billion by 2011, and turnover to exceed £541 million, an increase of 54%.

Main sources of growth and new business

The growth rate has been attributed to a combination of two factors – increased spending by companies already utilising customer publishing (76%), and an influx of new businesses trying it out for the first time (73%). New customer magazines now represent one third of all titles produced by customer publishing agencies, compared to 11% in 2004. New titles include those by PC World, Standard Life, De Vere Hotels, Prudential, John Lewis and KPMG. This is evidence of the extent to which companies are working to grow the existing market rather than cannibalising existing contracts. 

This is reinforced by the total number of new business pitches, which has enjoyed a 53% increase between 2004 and 2005 equating to an increase of 3 pitches per customer publishing agency. Companies are also being more successful in pitches than ever before, the conversion rate rising from one-third to two-fifths.

Despite the growth of alternative media channels, printed media remains the cornerstone of the customer publishing industry, accounting for 90% of all titles. However, just over half of customer publishers feel that there is scope to convince existing clients to increase their online spend or attract new online customers.

Reinforcing the growth of the industry is the 9% rise in staff numbers at customer publishers to cope with increased demand.

Leading industries in customer publishing

Retailing and financial services remain the two largest sectors within the customer publishing industry, accounting for almost 30% of the market between them (15% and 14% respectively).  Customer relationships in these sectors tend to involve frequent repeat purchasing, the nature of which lends itself to customer magazines as a form of communication. 

The automotive sector has experienced the most growth since the last Mintel report, rising from a 5% share of the market to a 9% share. Whilst the repeat purchase cycle is considerably longer than for retail outlets or financial services, it is important for them to build a relationship with their customers in order to engender their loyalty for additional purchases, such as accessories, second cars and their next purchase. Charities have also seen a significant increase in market share rising from 5% in 2004 to 8% in 2005.

Distribution

Once again the majority of customer titles are mailed through the post. Royal Mail can deliver to 99.9% of the population guaranteeing to brands that they can reach their customers wherever they are. Furthermore, because posted magazines are named and addressed to individual recipients and received at home consumers perceive  them as a far more personal method of communication. Millward Brown research shows that 79% of consumers prefer to receive their customer magazine via the post and 58% of consumers are more likely to read magazines and respond to offers if it is personally addressed to them.    

Pick up was found to be the second most popular method of distribution, accounting for 16% of titles. 

Whilst the UK remains the primary focus of titles produced by customer publishers (71%), the increasing global nature of many businesses is reflected by the fact that almost a 5^th of customer magazines enjoy an international distribution.

Third party advertising

Customer publishing is becoming less reliant on third party advertising for funding publications as clients realise the value of investing in a customer magazine as a marketing communications tool. Currently, approximately 32% of customer publishing revenue is accounted for by advertising, equating to £104 million. This is a 7% decline on 2004, when third party advertising equated to £128 million.

Julia Hutchison, COO, APA comments:

“The latest Mintel Report is great news for everyone involved in the customer publishing industry.

Not only are clients becoming more aware of the benefits of customer magazines, but we’re also seeing increased acceptance from media agencies. Traditionally there has been some scepticism, however this is clearly abating as the market continues to grow and become more developed. One of the main reasons why customer magazines are being regarded as such a valuable weapon in the marketing armoury is that they open the door to a more subtle and interactive dialogue with customers. They are seen as a non-threatening method of contacting a client’s customer database and regularly reminding them of products and services without the hard sell. They are also increasingly becoming more than just a means of contacting customers, but also a way of interacting with them; so much so that audience participation has become a measure by which clients evaluate editorial content.  

Furthermore, customer publishers produce masses of high-quality branded content that can be utilised across different channels, such as TV, radio, online and podcasts. Who knows we might one day see Waitrose Food Illustrated: the programme.. Clearly therefore this is yet another growth opportunity for customer magazines as it can play a valuable role in terms of augmenting and supplementing the printed publication as well as creating fresh, original content for other channels.  

In comparison to other media this industry is showing healthy year on year growth, a trend we expect to continue.  I believe it will be a prosperous and exciting year for this industry and the newly expanded APA is working hard to deliver to members and the industry a portfolio of services that will help support and grow the medium in the long term.”

Adds Emily Travis, Head of Publishing, Royal Mail:

“The latest Mintel Report demonstrates that customer magazines are achieving their client’s objectives. Clients are allocating more of their marketing budgets to customer magazines and integrating them into their mainstream marketing strategies. Moreover, with the costs of new customer acquisition continuing to rise across many market sectors, greater recognition of the role that customer magazines can have in building loyalty bodes well for the industry.

Customer magazines are the perfect vehicle for brands to get lots of information across to a customer cost effectively. It is something you can have in the home and dip in and out of at your own leisure, ideal for today’s consumers who are time poor. Customer magazines, particularly posted titles, can be more tightly targeted with the certainty that messages are reaching the right audience, which is far more difficult to assess for other media such as TV and radio. This combined with the Mintel results and the measurability of The Advantage Study, makes the medium extremely compelling to brands across all different sectors – from FMCG to B2B.”

* Trends in advertising expenditure (£m)

Source: NMR/Mintel

To download a copy of the executive summary click on the link.

For a copy of the Full Report at a cost of £600 email carly.osman@apa.co.uk