3-Tiered Subscription Service Maximizes Profits for InvestmentHouse.com

CHALLENGE
How does a website - with a limited number of potential subscribers - maximize its revenues from subscribers who have different levels of information needs?

CAMPAIGN
Over the past five years, Eric Aafedt, CEO of InvestmentHouse.com (an online publisher of information for individual investors), has developed a 3-tier subscription marketing system:

Step #1. Gathering prospects with a free weekly email newsletter offer

Aafedt aggressively markets the InvestmentHouse.com free weekly newsletter through direct response banners on highly targeted sites, and by purchasing paid listings for selected keywords at search engine systems such as Overture, Google and FindWhat.com.

Like traditional direct response marketers, he watches cost per acquired name like a hawk. Therefore, the critical measurement for media buying success is not the total amount of traffic garnered, but rather the conversion rate of that traffic from visitors to opt-in free subscribers.

Aafedt notes, "Some sites are better targeted than others, but if we don't get at least a 10% conversion, we cut it off."

He adds, "We try to keep our acquisition cost under $1 per free name. If we get 5,000 new names signed up for the free weekly in a month, we've probably spent about $5,000 on advertising. But we will go over $1 per name on very targeted sites where we know we're going to get a high conversion rate to paid."

"I would spend a lot more on advertising, but you just can't find good sites. I've worked with every John Doe and Harry out there and I've got maybe three good places that I give repeat business - after five years of doing this. Most places you spend $4,000 or $5,000 and you end up with 1,000 names. I just don't know how you can make that work. Maybe it's for companies with a lot more to sell than we have."

Keyword advertising on search engines is more expensive than banners, but the conversion rates are also higher. Aafedt says with the right keywords, InvestmentHouse.com can get up to 25-30% conversion to the free newsletter. "This is the best deal in town."

He tests and measures each term and each search engine carefully. He is tested buying three different types of keywords:

a. A key word or term that is really cheap and could generate some volume - even if it is a little off target and the conversion rate will not be so high.

b. A key word or term that is more expensive because so many competitors also target it, but perhaps the conversions are worth the price.

c. A key word or term that is highly niche ("terms that people wouldn't search for unless they are likely candidates to buy our services") which may not cost much and only brings in a handful of visitors, but these visitors convert so well that they are worth the time and effort to gather.

Step #2. Converting free newsletter readers to a basic paid monthly subscription

Next, Aafedt begins the process of converting free weekly readers into subscribers paying $25-$50 per month for their choice of three daily subscription services.

Unlike other marketers, InvestmentHouse.com does not do email marketing blasts to its opt-in lists to promote paid subscriptions. "We're soft sellers," explains Aafedt. "We rely on them liking the free newsletter and then wanting more detailed products. There are people who send marketing messages to their own members every week. We've probably done it once in five years. We'd get more members if we did, but we might upset more people too."

So how does Aafedt get paid subscribers? Through an editorial sell.

The free weekly (link to sample below) is in html format. It starts with a couple of charts and a market summary from "The Daily," their $25/month service. A line at the end of this section offers a link to: "Try 'The Daily' with no risk for 2 weeks!"

The remainder of the free newsletter consists of a paragraph excerpt from each of the other three paid services, followed by: "Click here for more information on (name of paid report the paragraph is from)." Those links take readers to the sales-pitch Web page for that service.

Step #3. Upselling daily paid subscribers to pricier Alerts

Next, InvestmentHouse.com's marketing efforts focus on upselling paid daily subscribers to an multiple-times-per-day Alert Service for an additional $75/month.

Market Alerts are remarkably easy editorial to create. The editor simply sets up the computer the night before with targets, then the computer checks market data throughout the day. When certain targets are hit, the computer sends out an alert automatically. Just a couple of lines stating the name of the stock, what target was hit, and what the "play" is.

Knowing Aafedt's dislike of email marketing blasts, it will not surprise you to learn this premium service is also sold only through mentions in editorial. Before the general market commentary in each daily report, the first paragraph summarizes the results of the Market Alerts for that day. This summary paragraph is followed by this link: "Subscribers to this report can sign up for Market Alert Service at the following link."

Although this three-tier approach has been very successful, Aafedt continues to test alternate tactics. For example, he has added links to a hard offer for the daily on the free offer- landing page at InvestmentHouse.com. He has also tested sending traffic to alternate mini-site landing pages which do not offer the free newsletter at all -- instead they focus on an immediate hard-offer for the daily.

These efforts worked well enough, that Aafedt decided to make a hard-offer his primary marketing tool for a more niche topic investment news service, SuccessTradingGroup.com (see link below).

Aafedt felt SuccessTradingGroup.com's the marketing message featuring glowing subscriber testimonials was strong enough and the product itself was unique enough that prospects did not need the two-step free-to-paid approach.

He explains, "Each ad campaign for that site goes right to a hard sell page. By the time they finish reading that page, they have two options: sign up or move on." However, if they exit the page without signing up, Aafedt then hits them with the free InvestmentHouse.com newsletter offer. So he will have additional chances to capture them as paid subscribers.


RESULTS
Aafedt is happy to report that, "Pay for content is alive and well."

InvestmentHouse.com currently gets close to 100,000 visitors per month from its banner ads on investment sites and search engine keyword purchases. On average, 5,000 visitors per month opt in for the free weekly newsletter.

InvestmentHouse.com currently has roughly 130,000 free weekly subscribers. Of the search engine paid placements, Aafedt notes that Overture has been most successful for him, followed by Google in second place. (Note: In our experience, this tends to be the case for business-to-consumer marketers, although it's often the exact opposite for business-to-business campaigns.) FindWhat.com campaigns have been "weak" for him.

While Aafedt will not reveal exactly how many free newsletter readers convert to paying, he says that InvestmentHouse.com gets a nice bounce in paid subscribers from the newsletter every week.

The numbers for the Alerts service are not as big, but the profits can be. Says Aafedt, "You're talking the cream of the crop for the top service. Very small numbers. But you'll find it pays for itself right away. These alerts take probably 30 extra minutes a day to set up, so there's little cost. And at $75/month you don't need a line around the block of people to make some really good revenue. Every 100 people represents $7,500. Per month."

The hard offer InvestmentHouse.com landing pages - whereby new visitors only see a paid subscription offer instead of a free newsletter offer, tend to get between 1% and 5% conversion rate, generally closer to 1%.

The hard offer SuccessTradingGroup.com landing pages end up with about the same response rate. Aafedt says, "That service is advertised with banner ads, where we get about a 1.5% click thru. And about 2% of the clickthroughs pay for it immediately."

He has also gotten some fascinating results from price tests for this product. It launched at $39/month, when Aafedt raised the price to $79/month his monthly retention rate went down by only 5%. Now he's planning an increase to $97/month.

Says Aafedt, "I've noticed guys who do a ton of Internet marketing often use a $97 price, so I'm going to try it. The great thing about the Internet is - if it doesn't work, I can easily change it."

We asked Aafedt for his advice for other Web site and email newsletter owners considering subscription services:

He says, "You may be putting a lot of effort into creating your subscription product. But if you look at what you're analyzing every day to create that product, there's probably two or three things in that analysis that could be extraordinarily valuable if it were re-drafted or re-shaped to a premium service."

"We're finding our premium-service subscribers don't want another three pages. They want three sentences. It's experts talking to experts. We're finding the higher our prices go, the less content we have to send out. But it's got to be higher expertise - more focused and more on point."

Perhaps you will have greater frequency.

Concludes Aafedt, "First you develop trust with your basic paid service. (And when you're charging them by the month, they have to like what they're getting -- or they're gone in month two.) Getting them to your site is one thing, but getting them to buy, and then pay a premium, is solely based on quality content."

Sample free weekly newsletter
http://investmenthouse.com/weekend/042102.htm

Sample landing page link in paid daily promoting the Alerts
service
http://www.investmenthouse.com/alertssr.htm

Sample landing page for hard offer campaign:
http://www.successtradinggroup.com