Stratfor Has a Fairly Clear Idea of Who Is Buying Its Product Now. It Does Not Have a Clear

Stratfor’s Market

Stratfor has a fairly clear idea of who is buying its product now. It does not have a clear idea who might buy the product nor how the product should evolve to satisfy the market. Stratfor also does not know the degree to which the market already exists or has to be established. During periods of upheaval, such as is currently underway in publishing, the market is not there to be researched. It needs to be created and managed. It is not clear that we are in that situation. The singular reality of Stratfor is that it has limited knowledge of the market place. Finding the resources for this sort of research competes with other revenue generating needs. Market research is extremely expensive when properly done, and we need first to determine its applicability and utility to our case.

The statements about our market needing to be created and managed must be based on some foundational assumptions about what our product is and who are (potential) customers are. It’s very important that you make those assumptions much more explicit in order to make this argument more convincing. Alternatively someone can argue that we do international news and analysis, much like the Economist does. They have 1.6 million subscribers, so our market is 1.6 million-ish. Your contention may be entirely right, but I’d suggest explaining it in substantially greater detail.

We know this about our market from three several sources. First, there were formal surveys we did internally taken since 2006 of existing members and our Free List. Second, there is constant interaction by analysts with existing members, free and paid. [If you’re referring to the response emails to our articles, I’d reword the previous sentence. It makes it sound like more 2-way, on-going communication which I don’t think is as prevalent as that reads.] Our customer service team has all-day, every-day interaction with Members, Free Listers, prospective Members, and canceling Members. The CS team are our richest resource by far in understanding what people think about Stratfor good and bad. We also can deduce a great deal from Sales efforts. The campaign themes that resonate with Free and Paid lists tell us what it is about Stratfor – as well as other media – that’s considered worth paying for. We get very meaningful feedback about Stratfor and its role in the overall publishing world from partners and prospective partners. We’re putting in place analytics tools that will give us empirical understanding of precisely how people use our website, what features/topics/etc. are more or less interesting than others. And we can impute how we’re perceived and why we’re more/less valuable than other sources from the speaking invitations we get – and especially those that are willing to pay speaker fees of $25K + expenses. Finally, tThere is information that has been gathered from media on their state and therefore second hand information on the market. This is insufficient, but it is best available data. We must understand what we have before we devote resources for deepening our understanding.

Begin with our readers. According to surveys our readers cluster above the age of 50 and many are retired. This might be skewed by the higher propensity of retired to respond to surveys (they have more free time) but it is no surprise that we serve and older demographic. The tendency to be interested in world events increases with age, something well known to media researchers. This is one reason why advertising driven publishing is avoiding international news. This is the last demographic they want to reach. The head of the Economist said at a conference recently that they’re average reader is 34 years old. I was stunned by this. The Economist also has over 63,000 fans in its Facebook group, certainly a demo that skews younger.

We also know that our demographic is relatively well to do. From previous surveys the readers claim incomes in excess of $150,000 per household. While this may represent the self-esteem creep known in survey research, it is probably not the case. Our readers report that they also read the New York Times, Wall Street Journal and Economist, and their demographics track without our surveys. In addition, our pricing tends to skew toward higher income individuals. Therefore, the market we have penetrated so far tracks with the markets dominated by our three cohort partners.

Quick stats that provide good context:

We also know from older surveys that our readers buy us in order to “get smart” and not for direct business purposes. They either have a business interest in international affairs or a personal interest. However, it does not appear the norm that our readers use our information directly to make money. This means that we cannot increase our pricing dramatically, as there is a limit to their price tolerance. We need to track pricing carefully with our competitors. There is definitely very different price sensitivity between the people being reimbursed through work versus those that are paying as educated laymen from their own pockets. Figuring out a product/pricing strategy that addresses these two sub-markets is a potential opportunity for us. You also might want to address the difference here between Individual and Institutional buyers. OSIS for example is very safe, arguably regardless of price. The October $99 campaign revealed very clearly that there was a price-sensitive segment of Individuals. And Don is planning – rightly I think – campaigns to our “individual” lists to let them know that we offer Institutional licensing since there’s no question that a great number of our individual Members are using us directly in their businesses.

The size of our market—defined by the Times, the Wall Street Journal and the Economist—appears to be about 2.3 million readers, non-overlapping. We say appears because direct data is not readily available on the non-overlapping portion of the study. Nevertheless, it is safe to say that in the in the United States, Canada, UK and Australasia where these are strong, there is a target audience on the order of 2.3 million readers. Context - the guy from the Economist says that they consider their market to be 3 million people globally.

This means that a small penetration of this market—which is non-exclusive (readers can buy more than one publication—can provide us with sufficient revenue to satisfy our strategic goals. One thing that is not known is this. Since our readers are older and tend to purchase paper publications, their willingness to use online publications has not been properly tested and may represent a hurdle to us. Our demographic is still reading the papers. Context - WSJ online has 1.2-1.3 million subscribers. [I can’t put my finger on it, but I’d bet $1 there’s a Pew study showing online news consumption broken down by age group. I’m almost certain I recall seeing that. Would be a quickie research project for Brian.]

In our institutional sales, we know that there is an appetite for our product as it appears in the American defense and related communities, as well as in foreign defense and foreign affairs establishments. Stratfor is clearly known in these communities, and is validated by users in the intelligence community. This community globally has substantial demand, which we have not tapped. Going deeper into this community is clearly an imperative. Absolutely.

We have some presence in finance, but not nearly the penetration we would want. The same can be said for petrochemical. In many cases—and this applies to individuals as well—the corporations are not aware that we offer additional services, nor is it clear that the services we provide are what they wish to purchase. If we do engage in market research, this is the area in which we need to begin. The two cities with the greatest number of Members are New York and Houston, Finance and Energy. No question we haven’t even begun to saturate these industries.

We also know that foreign affairs have a much higher interest level outside the United States than inside. Moreover, we know that while crises occur rarely for the United States, they are continual events in the rest of the world. There is always and international crisis somewhere that rivets some market. We clearly need to take advantage of the fact that there is more interest in foreign affairs overseas than in the United States, and that crisis drives business for Stratfor and there are always crises for someone, somewhere. Devising a means for capitalizing on this fact is important. Given that about 20 percent of our readers already live outside the United States, a fact achieved without focused effort, this would appear to be an arena with high potential payoff.

I’d suggest including as an appendix, referenced here, the export that Darryl did showing countries/cities where our existing Members live. It makes it very clear that a city like with Houston, with something like 300 Members in it, is still incredibly fertile ground for us. And NYC has like 400. Still wide open.

We know that the market does not universally know that we exist, nor does it have a clear idea of what we offer. Many who should know our name don’t. Many who do think that our free mailings constituted the sum total of what we are. [Previous sentence used to be true, but the free version of the Weeklies now are LITTERED with explicit text/graphics that says that this email is just a fraction of the full package.] They are unaware—and frequently uninterested—in our paid products. In many cases, our free marketing appears to satisfy their appetite for our product. This is a problem we need to address quickly. [The problem aspect of simply not knowing there was more/paid available has been eliminated nearly a year ago. The issue of people being perfectly satisfied with just one or two good emails a week is something else. For the casual reader, that may simply be all they really want.]

There appears to be a positive view of Stratfor. Media mentions and reader responses all seem to regard us as more reliable than the main stream media. It is absolutely critical that we recognize that while we see ourselves as different in kind from the msm, our readers see us as different in quality, not in kind. They clearly see us as a news service that is simply less biased and more effective than the msm. Absolutely right.

We regard ourselves as an intelligence organization, and this imbues us with a mystique that serves us well while we are a niche product. Intelligence appears to have an aura of credibility that the media does not. This is strange, given media intelligence failures, but it is still the case and we must capitalize on it. Intelligence failures aren’t considered to be agenda-driven. The news is. This does not mean that we are in a different market than other media, nor does it mean that our readers appreciate the subtle differences between intelligence and journalism. It simply means that the idea that we are “the shadow CIA,” which is constantly repeated in media and blogs, carries a degree of gravitas with it. It is also noteworthy that outside the United States, there is an assumption that we are CIA, which actually carries authority with it. Denial simply enhances the belief.

These understandings have been sufficient to allow us to increase paid headcount by 50 percent in less than a year. They are sufficient to carry us through the next six months in individual sales. They are not however sufficient to allow us to begin institutional sales outside the defense community. For that to happen we need to be able to dig into the market to determine (1) that there is demand and (2) what exactly that demand is for.

Therefore as we begin to balance revenues from individual sales with institutional ones, we need to direct resources to institutional, both in the form of executives able to successfully execute in that space, and dollars for the kind of research that will be necessary to make that successful. Following this we need to allocate dollars for market research in the individual market, as well as to research follow-on opportunities in other area.

Don would be better to comment on the two preceding paragraphs than me, but I do know that after some hard digging with Debora, he’s found that the biggest challenge to new sales was simply that she didn’t have any time for it, spending her entire day on renewals. In some cases, she wasn’t even getting back to requests that had come in over the transom. And there was essentially zero effort to prospect. I agree entirely that to move into non-defense/govt markets will take some additional understanding of those markets.

Until then, whether we like it or not, we will have to proceed on incomplete data, impressions and intuitions. Like much of life, we will need to exercise best judgment about the market, and practice agility in rectifying errors. Agree. And if we had 10,000 people and an unlimited budget, we still would. New Coke. Res ipsa loquitor.

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Not sure if you want to do this or not, but it might be helpful to do a “Who is our Customer?” set of bullets. The product/pricing/needs of an energy prices hedging manager are very different than the military guy deployed in a war zone than the student working on an IR paper than the Pakistani crisis-buyer. We’ve already seen success from segmentation by campaigning to Mauldin’s list in a way that specifically addresses the needs of investors. The more we can segment our potential market and then deliver intelligence, marketing, and sales that speaks to those groups, the more successful we’ll be.