BELOW-THE-LINE: Will Sky’s strategic shift boost returns?

Christmas has arrived early at Sky Television with the announcement of a pounds 1m promotion, designed to be an early celebration of the five millionth Sky customer, who should have signed up before the end of the month.

Christmas has arrived early at Sky Television with the announcement of a

pounds 1m promotion, designed to be an early celebration of the five

millionth Sky customer, who should have signed up before the end of the

month.



The promotion, which BSkyB marketing director Philip Ley claims to be

the biggest of its kind by a UK TV company, is a culmination of Sky’s

rejection of generic TV ads in favour of strategic below-the-line

activity targeting new and lapsed subscribers.



With the company’s declared intention last autumn to concentrate on

event-based advertising has come a renewed dependency on targeted

mailshots, sales promotions and affinity programmes designed to appeal

to distinct audiences and reinforce loyalty.



Sky’s limit



ITV rules prevent Sky running event-led TV campaigns and the company has

not used TV since signing with Duckworth Finn Grubb Waters this autumn.



Instead, above-the-line activity has been concentrating on press and

radio campaigns to support the current promotion and new channel

launches in November.



For a television company which has seen the quality of its programmes

improve dramatically over the last couple of years, Sky TV is facing up

to the challenge of letting consumers know about its service without

using television.



The below-the-line spend has been increased accordingly. Last week, Sky

added a new agency WAVV Rapp Collins to its below-the-line rota, where

it joins Touch and LBM.



‘We are spending more on subscription marketing than ever before,’ says

customer marketing director, David Thatcher. ‘We needed extra hands.’



Event-led mailing is also increasing. WAVV Rapp Collins’ first campaign

invited customers to experience the 100 Greatest Movies season and to

benefit from one month’s free subscription.



The campaign, targeting one million people, broke on 27 November and

will be followed by another push, details of which are under wraps,

before Christmas.



Meanwhile, the company is testing direct mailing of video highlights of

forthcoming programmes to ex-subscribers.



If the test proves to be successful, and Thatcher is very confident that

it will, Sky will expand the direct mailing of video highlights next

year.



For the first time, Sky is confident enough in its programming to

introduce sampling. Investment in programming and the development of new

channel packages have paid off and the company now has some quality

programmes on offer. All it now needs to do is to tell lapsed

subscribers this.



‘As the size of the viewing base grows, it becomes more and more

important to reduce the size of churn in order to maintain the rapid

growth of the last few years,’ says Thatcher.



The company has struggled to reduce churn, the drop-out rate of

dissatisfied customers.



Looking at current figures, BSkyB seems to be winning the battle. The

company admits the churn rate stood at 30.3% in the year ending June

1992. For the year ending June 1995, the figure is 12.7%. A dramatic

reduction, although this still translates into around 580,000 lost

subscribers a year.



Subscriptions currently contribute 84% of BSkyB’s revenue, 74% from

direct-to-home (DTH) and 11% from cable. DTH subscription revenue rose

by 35% and cable by 56% year on year in the three months ending 30

September.



However, with advertising sales currently only contributing 10% of total

revenue, the pressure is still on to maintain subscription growth.

‘Subscription management is very important. It contributes such a large

percentage of our revenue,’ says Thatcher.



Subscriber benefits



In the past, BSkyB has suggested 10% might be an acceptable churn rate.



Following the success of affinity programmes in the retail sector, Sky

has put considerable effort into developing links with a variety of

companies.



Currently, subscribers benefit from 15-20% reduction on selected BT

calls, the Sky Travel Service, the Sky visa card (with no annual fee),

Guardian Direct insurance (£25 cash back), low-interest loans through

Lombard Bank, cheaper membership of the AA and, launched this November,

free crossings with Sally Ferries and free CDs through Firecrest.



Details of all affinity programmes are contained in Sky Plus in Sky’s

customer magazine, Sky TV Guide.



Ironically, at least one mass media player, BSkyB, is finding that one

of the most effective ways of reaching, and keeping, their audience is

via the direct route.



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