Where Reader's Digest -- and many other companies -- REALLY make their money....

Here's something I was told by a friend of mine, who has done some research about the publishing industry in order to set up her own company.

(You can check out my friend's company at www.bookface.com -- where you can read some free books! :)

You know Reader's Digest magazine? Well, apparently the magazine is NOT where Reader's Digest makes its money.

The low cost magazine accounts for less than 30% of Reader's Digest's revenue.

It's actual main purpose is as a "lead generator," so that Reader's Digest can sell products (like condensed books, music, and videos) to its subscribers. They make their real money - over 60% of their revenue - on the other products that they sell.

That's where the real money is. This system is true in a LOT of businesses - where you might think they are making the money, is not really where they are making it.

In some cases, a business might make far more from selling sponsorships or advertising than it does from selling the actual product. (This is quite clear in the case of free local community newspapers, for instance.)

Other cases are like Reader's Digest - where you first think they are making money is really just what is called the front end. The back end is another product which they sell to those who buy or receive the front end, and it is at the "back end" where they make their money - like Reader's Digest and their condensed books, music, and videos which they sell by mail to subscribers.

If you read mail order books, you'll see this discussed at length. It is a standard practice in mail order.

For example, you might see ads (especially in the classified sections) where you are asked to write in to get a free booklet, or something like that. That free booklet is really just an excuse for them to send you their advertising material for their real product. That real product could be the main product, or it could in itself lead to an even more expensive product. It is a strategy which works.

It's good to know about! Sometimes, when you read these books about mail order, you might think that only little mail order companies you might not have heard of use this tactic. However, it is a well-known approach even in big business, like the example of Reader's Digest!

Hope you enjoyed the post! Now back to your regularly scheduled presidential election programming.... :)

Dien Rice