She gives away money to make money
PORT WASHINGTON, N.Y.--In the land of giant mailers, Publishers Clearing House stands tall. It will mail 25 times this year, and by early next year, will be mailing to more than three-fourths of all American households. PCH has access to more than 450 million names from house and rented lists. We're talking BIG.
But the person who runs the business is slight and feminine. Robin Smith, president and CEO, has been at the helm for ten years. Responsible for keeping PCH king of the magazine subscription hill, Smith is considered by colleagues to be a consummate direct marketer. So much so that she recently was named Direct Marketer of the Year at Direct Marketing Days in New York.
PCH is a company with a fascinating history in a very competitive field. In the old days, the doorbell would ring and a bright-eyed, bushy-tailed salesperson, presumably working his or her way through college, would attempt to sell you magazine subscriptions face to face.
But in 1953, Harold Mertz got a better idea. Let the postman do the doorbell ringing. He formed Publishers Clearing House--the first magazine subscription direct marketing coop. "It was a simple idea but it worked," says Smith.
According to Smith, Mertz's simple idea was that instead of spending their own promotional money to woo subscribers, publishers could do it more cost-effectively on a co-op basis, with PCH laying out the promotion costs, doing the billing and collections, and remitting a small portion of the subscription price to the publishers. "PCH's approach is very attractive to publishers from a cash flow perspective."
PCH has become virtually synonymous with sweepstakes cash and prizes to tempt consumers to take advantage of its magazine values. It has become the biggest multi-magazine subscription agency, representing 200 leading U.S. and Canadian publishers. Annual sales exceed $100 million and the company employs 700 full-time people in its campus- like setting on Long Island. In peak periods, it receives more than 1 million pieces of mail a day.
PCH is proof of how well direct marketing works. In fact, although Smith was honored for "her distinguished career, her outstanding leadership and her contributions to direct marketing," in a real sense her direct marketing peers were recognizing PCH for its track record as a direct marketing innovator.
In Smith's business, innovation is the key to staying alive. Control packages usually last only six months, and a year is rare. But there are certain constants in a classic PCH package. One is the sheets of stamps depicting magazine covers. "Stamp sheets cost about $70 per thousand today," Smith says, "but every time we try to get rid of them, testing always proves they're worth the money." According to Smith, the cost of a typical PCH package in the mail today is between $400 and $500 per thousand.
Another PCH constant is a sweeps contest that can make lucky entrants rich if they have the right numbers. PCH was among the first magazine subscription mailers to use a sweepstakes to attract attention and involve consumers. "I think we followed right on the heels of Reader's Digest."
Since getting into sweepstakes give-aways back in the days when prizes ranged from $50 to a top prize of $250,000, PCH has given away more than $51 million--much of it since 1987, when the grand prize went from a quarter of a million bucks to $10 million. Inflation? "No, competition," says Smith, alluding to American Family Publishers, whose promotional efforts are built around spokesperson Ed McMahon. "We'd rather not give away that kind of money, but we do have to keep up," she concedes.
Despite her aversion to giving away so much money, sweepstakes probably will always be a part of PCH's marketing strategy, Smith believes. "It's been ages since we back-tested a package without a sweeps offer," she notes, "and the reason is that sweeps work." And if she has learned anything through the years, it's: "In direct, you keep doing it until results say stop."
No stranger herself to the appeal of a dollar sign, Smith was recruited ten years ago by a headhunter for the PCH job while she was president of Doubleday's Dell publishing division. She says she listened because they were offering double what she was making at Doubleday. "But the minute I accepted the PCH offer," she says, "competition reared its ugly head."
It was then that American Family Publishers joined the lucrative magazine subscription co-op scene--a business PCH had all to itself since its inception. She blames AFP's heavy use of TV for a blurring in the public's mind between the two companies. "Most people think Ed McMahon is working for us," she says. "When they get our package in the mail they don't really know it's us, and that's the challenge. But our packages are more involving and once people start looking through them, they can tell the difference."
Most publishers tend to use both stamp sheet agencies. But when push comes to competitive shove, Smith says PCH thrives on its longer-standing relationships with publishers. "We give better service, and anyone will tell you that, including Time Inc., which owns half of AFP," Smith says.
While modest in her descriptions of her accomplishments at PCH, Smith feels her management approach--which emphasizes teamwork--has helped create an atmosphere that breeds progress. To her, a team is a group of people sharing the same vision. Her PCH team consists of eight senior executives, most of whom she inherited, representing administration, finance, creative, marketing and relations. Her style is to let senior people focus on a given problem--say new contests, or getting order size up or getting bad debts down--brainstorm ideas and come up with an action plan.
"At PCH, the best brains work hands-on; they're not just people managers," she says. Another of Smith's golden rules is low overhead. She personally approves all staff additions. "I believe in paying people well, but keeping them busy," she says.
If she has made any personal mark on the company, it's been the modest move into diversification. Although it's unlikely that anything will ever rival the magazine business for PCH's affection, under her leadership, the company has tested selling books, merchandise, and audio and videocassettes, using the same formats as for selling magazine subscriptions--jumbo packages, stamp sheets, sweeptstakes contests, the whole nine yards. "We tested other formats, but the magazine package approach worked best."
Smith is still somewhat bemused to find herself in direct marketing. Direct was hardly in the cards after earning a BA from Wellesley College and going on to the Harvard-Radcliffe business administration program--the only way a woman could get into the Harvard MBA program was through Radcliffe. "Harvard wasn't taking women into the business school in those years," she says. "Probably because all young women were either getting married or going to work for the phone company."
After graduation, she moved to the West Coast, where she worked for Carnation and then BBD&O. When she moved back east in 1965, she joined Doubleday and Co. She says she wasn't expecting much, but the climate was right for a fast-track, bright, female business executive and in less than ten years she became the first woman president of Doubleday Book Clubs, which includes the Literary Guild. She then went on to the Dell publishing division and, after five months, joined PCH.
Smith credits her Doubleday years as her learning ground for direct marketing. She says book club marketing taught her some invaluable lessons about direct's effectiveness.
She's in the middle of more hard lessons now, such as skyrocketing postal rates. Smith says PCH takes advantage of every conceivable rate discount and will begin barcoding in the address block just as soon as the discount becomes effective. She views increased creativity as the answer to rising doing-business costs. "Most companies are looking to cut back on mailing costs by reducing volume, but we've never found that approach to be productive," Smith says. She has a practical way of defining creativity: "If it works, it's creative."
One creative concept that apparently works nicely is PCH's approach to network television advertising. "What we've learned about TV over the years is that less is more," Smith says. "Our commercials now are energized, with quick cuts and lots of music instead of narration, to convey a true reaction of the moment when winners are told they are winners." Because of its massive database structure, PCH's mailing mix can target a variety of consumer segments. A $10 million overlay program can run two years, but there are millionaire-of-the-month mailings, fast 50s for early entrants in virtually every mailing, and car give-aways. "People always seem to want the cash instead of a Jaguar, though," she says.
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