Option 1 may not necessarily be the stronger choice. Here are some things you might consider:
Would the initial marketing response rate be higher than 2% if you advertised a two year subscription instead of a one year subscription?
However, even if profit were notably higher for Option 2 (corresponding to a higher response rate):
- How would investors react to volatile revenues?
- Can the cost of free subscriptions in year 2 be better used in a different marketing campaign, perhaps attracting new customers?
- Is profit next year as good as profit today?
What next steps would you recommend the team exploring a magazine business pursue?