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Premiums and Freemiums: Who's Doing What

This article appeared in the 2005 July/August issue of
Subscription Marketing newsletter.

Premiums and Freemiums - Who's Doing What? by Shira Linden

Just like in the fashion industry, premiums have their hot
sellers and their has-beens. The industry is sensitive to
changes in technology that render some premiums obsolete, and to
political events that affect the business climate. Stan Konik,
President of Konik and Company, a merchandise premium supplier
to the publishing industry for over 30 years, reports that
cameras, which used to be very popular, are now defunct, thanks
to digital photography. Calculators and many electronics have
also gone by the wayside, he added. Some premiums simply go out
of vogue. Pens, for example, are now dead. Umbrellas are only
used on a limited basis, because the quality is not there at the
price point marketers want to pay - between $2.00 and $2.50 per
item and decreasing. "People are looking for lower priced items
with high perceived value," Konik declares. He reports that many
want imprinting, so his firm offers customized products as well
as drop-shipping. September 11 turned the premium industry on
its head. "All business ceased," said Konik. He noted that now
business is back to pre-9/11 levels, but the nature of the
business has changed. Scissors and knives were popular before
9/11, but have practically disappeared, save for one magazine
catering to hunters. Conversely, security devices, such as
radios with attached flashlights and sirens are good movers.
Current top sellers include jumbo display clocks with time,
temperature and date, travel alarm clocks with temperature, date
and alarm, binoculars, mini radios and scan radios, databanks
(mini PDAs that incorporate calculators), pedometers, especially
for health newsletters, and tools like the motorized power
driver screwdriver. Stainless steel travel mugs and tote bags
are also doing well. Konik likes to see clients feature the
premium on the envelope, on a 4-color buckslip and in the
letter. He claims that when the premium is predominantly
featured, marketers will see a 28% lift in response versus a
non-premium mailing.

Premiums Can Send Results South Overall, the majority of
marketers who weighed in looked favorably upon freemiums and
premiums. The exception was VNU. Neil Eisenberg, Circulation
Director of VNU Business Publications, stated that American
Artist previously used pamphlet-sized books with repackaged
editorial content, such as 101 Tips for Painters, as well as
canvas duffle bags. When they removed the premiums about three
years ago, response went up. "I can't say why - I don't know if
it was just luck or the premiums didn't inspire our prospects to
reply," Eisenberg stated.

Premiums, Freemiums = Business as Usual On the other hand,
several publications use premiums routinely. For over a decade,
Highlights for Children has been using premiums and freemiums in
their packages to consumers as well as teachers. "We're famous
for our freemiums, said Bill Hummel, Senior Vice President of
Marketing. "We use them as door openers. We get lots of brand
identity with those. They definitely lift response and have a
high perceived value. We create our own - they're unique and
distinctive, and tie into the publication. We've used them for
so long it's pretty much a given with us." Most, although not
all Highlights packages also have premiums. Their gift sub offer
includes a free "Hidden Pictures Calendar" with each
subscription ordered, a premium that refreshes itself, which
makes it attractive. Highlights also mails a teacher package,
which includes a choice of items teachers can use in the
classroom, such as reward stickers.

Premiums Out, Freemiums In For the past year, freemiums have
substituted for premiums at Kiplinger's. The freemium enclosed
in their statement of benefits package, "12 Grade-A Ways to
Build a Nest Egg for Retirement," is an attractive, 4-color
laminated insert. Subsequently, Kiplinger's dropped the
lamination, and went to a lesser paper weight with an aqueous
coating and results still held up. Carol LePere, Circulation
Director and Associate Publisher, indicated they tested the
freemium along with a new package. "The whole package worked
like gangbusters. The freemium doesn't cost much, yet provides a
value-added benefit subscribers have come to expect." Recently,
they redesigned the freemium for their upcoming mailing to keep
it fresh. LePere reports that retirement is the most popular
personal finance topic, followed by taxes. The market changes
too quickly for stock tips. Previously, Kiplinger's relied on
editorial premiums with their renewal promotions. They also tied
editorial premiums into a soft offer.

Combination Offer "We're not a big premium user," said Ken
Godshall, Senior Vice President of Consumer Marketing at Hearst
Communications, Inc. "We like to sell the magazine on its merits
at a reasonable price." But when Hearst tried a combination sale
in the Quality School Plan setting, "It boosted response so much
it got our attention. We wanted to appeal to a younger female
consumer, so the offer was buy Seventeen and get a six month
subscription to Cosmo Girl. It turned out to be one of the
biggest successes in publishing last year." A postcard mailer
enticed prospective Cosmo subscribers with a bonus 6-issue sub
to Marie Claire. Goodshall indicated the combination sale is
quite new - just one to two years old. He called it, "smart
marketing," indicating they've had some success in renewals as
well, which makes the response even more attractive. But every
marketing coup has its down side. "We can't do it all the time.
The limitation is that we can't make this offer continuously,
just a few times per year," he said.

Winners Rely on Premiums According to Hallie Mummert, writing in
Target Marketing, "Blockbuster Direct Mail - Secrets of the
decade's most successful controls," April 2005, "The biggest
predictor of success between long-term controls and those that
burn out within two years can be boiled down to one word: gifts.
Grand Control winners (257 Axel Andersson winners whose mailings
were tracked over the last decade) offered premiums or freemiums
in their efforts nearly 400 percent more than their general mail
counterparts. Specifically, 44.7 percent of the Grand Controls
used such incentives as name and address labels, special
reports, tote bags, plush animals, flower bulbs, stickers,
calendars and calculators to drive response." Or do they? Yet,
according to the CircTrack 2004 study of paid consumer magazine
circulation, premium usage in direct mail control offers has
dropped from 41% in 2000 to 26% in 2003, the last year that
figures were available. When consumers were queried in the
CircTrack 2004 consumer survey, 58% of consumer magazine
subscribers prefer price discounts, 21% favor an extended term
subscription and only 14% prefer gifts. Of those who have
renewed a magazine subscription in the past 12 months, 64.3%
were motivated by a price discount, 20.6% by extended term, 7.4%
by gifts and 6% by the editorial product itself.

The CircTrack findings are upheld by ParadyszMatera, a leading
list brokerage and consulting firm serving the magazine
publishing industry. Glenn Lalich, Vice President, reports
premium use was down across the consumer magazine marketplace,
dropping from 51% in 2003 to 47% in 2004, although not all types
of incentives saw declines. The most common incentive, premium
upon payment, held steady at 36% of consumer magazine promotions
in 2003 and 2004. Freemiums stayed at 7% for both years. As
expected given the growth of hard bill-me offers tied to voucher
packages, incentives designed to increase upfront response
(premium on order) declined from 9% in 2003 to only 6% in 2004.
Lalich reports use of editorial versus merchandise premiums has
seen little movement in recent years, adding that on the
merchandise front, one of the more popular items of the past
year or so has been the personal organizer from mailers like
Time, U.S. News & World Report and even Details. Conde Nast also
offers a variety of interesting fashion bags/handbags for titles
like Glamour, Lucky and Vogue.

Shira Linden is a freelance copywriter and creative consultant.
She can be reached at 203 371-0654 or via email at
SSL16@cornell.edu.

About the Author

SHIRA LINDEN, Copywriter/Creative Consultant 203 371 0654;
SSL16@cornell.edu

PromoWriting was founded in 1990 to provide marketing
communications support to corporations, publishers, direct
marketers, advertising/marketing agencies and trade show
organizers. Shira is a seasoned idea generator, copywriter and
promoter adept at concept development, brand building,
brainstorming, naming and positioning. Proficient in print,
broadcast and multimedia.

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