Magazines frequently include free gifts on their covers to entice readers. Examp

Question

Magazines frequently include free gifts on their covers to entice readers. Examples have ranged from Bach CDs to scented candles to DVDs. The gifts started as an attempt to increase readership, but some business insiders now feel that they have become a serious problem for the industry. According to Simon Kippin, publishing director of Good Housekeeping: "My colleagues say they wish they had never started doing it because it costs them a fortune." Adds Ian Rockett, business director at MindShare, a media planning and buying agency: "It's often a defensive measure for publishers. ... Publishers are afraid they will lose market share if they don't offer gifts to readers." Noleen Wyatt-Jones, group manager of the press department at Zenith Media, argues that "cover mounting is a very dangerous thing because once you start you cannot get out of it" Analyst, say that the situation varies considerably across segments of the industry In women's magazines, publishers typically bear a large share of the cost of cover gifts. The magazines often use gifts to enhance the brand image of the magazine. For example Elle recently offered its readers an Elle metal key chain.

Explanation / Answer

a. To increase readership and collect profits, there are free gifts to readers in many magazine cover pages This is a situation of perfect competition. There are many avenues and products but free gifts are given to entice the consumer. This increase the feeling of competition in this industry and more people try to improve the quality of their product and services.

b. Initially it is a win win game but later gives way to prisoner's dilemma as more publishers have to give free gifts with low price.

c. Yes, these elements do differ across market segments. In women's magazines publishers typically bear a large share of the cost of cover gifts to entice consumers and to enhance the brand image of the magazine. But there is also increased profit. Cover gifts are very common in UK less so in US.

d. Giving gifts is often a defensive measure for publishers. Publishers are afraid they will lose market share if they do not offer gifts to readers. It may increase production and supply. Hence prices may rise giving profits But in this competition, readers will go to the magazines offering better quality and variety. Hence there is a healthy competition with the rivals trying to improve quality. Hence, here firms are price takers.

By,

Nishant Bhatt

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