An examination of factors leading to abating customer loyalty
towards magazine subscriptions

by

Benjamin Schweizer

 April 2007

Table of Contents

Abstract

1 Introduction ... 1

2 Aims and Objectives ... 4

3 Literature Review ... 5
3.1 Customer Loyalty  ... 6
3.2 Customer Retention  ... 16
3.3 Consolidation of Theories  ... 24
3.4 Previous Related Studies  ... 

4 Research Methodology ... 34
4.1 Research Philosophy  ... 34
4.2 Research Strategy  ... 35
4.3 Theoretical Framework  ... 37
4.4 Operationalisation of Major Variables  ... 40
4.5 Data Collection Techniques  ... 42
4.6 Data Analysis ... 44
4.7 Research Implementation  ... 47

5 Findings  ... 50
5.1 Demographic Data and Buying Behaviour ... 50
5.2 Attitudinal Changes  ... 54
5.3 The Factors that Affect Attitude ... 55
5.3.1 Time ... 57
5.3.2 Compilation  ... 57
5.3.3 Interests ... 58
5.3.4 Substitute Goods ... 59
5.3.5 Pricing ... 60
5.3.6 Advantage ... 61
5.3.7 Convenience  ... 62
5.3.8 Sharing ... 63
5.3.9 Other Findings  ... 

6 Discussion  ... 65

7 Conclusion ... 73

References

Appendix

1 Introduction

What makes magazine readers cancel their subscriptions? This is an interesting question that gains in importance for magazine publishers and their service providers. Within a fully developed market, retaining customers is seen as a key to market dominance and long-lasting profits (Rowley and Dawes, 1999). To achieve this, it is important to understand the factors that lead to abating customer loyalty counter these factors.

From the figures of the advertising market, one finds that the German market spans a volume of 12 billion Euros per year (Rüdell, 2007). It is dominated by traditional media, whereof television, newspapers, magazines and journals are the most important players. About 25 percent of this market is assigned to popular magazines and professional journals. Nearly 6000 different titles have been published in 2004 with a steady upward tendency during the preceding decade (ibid).

However, this trend might be finished soon. As the magazine market is believed to be fully developed, rivalry among competitors emerges (Gassmann, 2006). This proposition is confirmed by the figures for the German advertising market. Where the number of published magazines increased by 20 percent within the last decade, the net advertising income had a peak in 2000 and then, fell down by 25 percent (Rüdell, 2007).

Besides this emerging rivalry, changes in European legislation additionally increase the pressure towards the industry. Whereas the national markets were protected by strong market entrance barriers in the past, the ongoing unification of European law might erode these barriers soon.

For instance, whereas subscriptions in France have to be actively renewed, subscriptions in Germany continue unless a subscriber gives notice. Regulations like this supported separate distribution channels and fragmented the European market into smaller national markets. This leads to a specialisation of many companies within the industry. In Germany, a diverse supply chain emerged with many small companies with a dedicated focus. Today, this supply chain consists of publishers, content holders, news agencies, print offices, distributors, call centres, data processing companies, retailers and others.

However, with the ongoing unification of European law, these barriers are likely to fade and competitors from other national markets might enter the market. Though, many of the smaller companies are highly specialised and thus, very sensible to changes in this isolated market.

So, the companies within this market face new challenges and are forced to take action. Due to the unifications in European law and the increasing rivalry with foreign competitors, they have to adopt their current strategies and prepare for stronger competition. From the Boston Matrix (Henderson, 1970), one can find two generic strategies to counter this. First, companies can enter new markets and grow therein. Second, they can focus on their competitors and try to increase their market share within an existing market.

According to Blank (2006), some US companies decided for the first option: they have placed large investments in online communities and portal sites. This enables them to diverse their investments and allow further growth. However, a similar trend cannot be identified for European companies. Gassmann (2006) states that German publishers are doubtful as most of them have no web strategy at all.

From there, it is consequential to investigate the second option from the decision matrix: increasing the current market share. To do so, it is important to understand the rules of the market and to perform better than competitors. One important component to achieve this superior performance is seen in customer retention. Therefore, it is essential to understand the motivation that makes customers cancel their subscriptions and to create an authoritative strategy to counter this. It is the aim of this thesis to examine the factors that lead to abating customer loyalty to magazine subscriptions and thus, enable companies within the market to adopt their strategies and increase their customer base.

2 Aims and Objectives

Within a hard-fought market, it is essential to have an in-depth understanding of the business. For service providers in the magazine publishing industry, this means understanding their customers and suppliers, competitors and substitutes. At the end of the supply chain, the consumer ultimately decides if he is satisfied with the product and service and if he is willing to spend money.

Thus, the aim of this research is to improve the understanding of the motivation that affects magazine readers within their decision making process. An exhaustive literature review on customer loyalty and customer retention will examine the theories that form the basis of this domain. The status quo of academic research will be asserted and from there, an adequate field of research is chosen.

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