New report looks into pricing strategies for digital news subscriptions post-COVID-19 bump
Before diving into specific case studies of successful publishers, it’s good to recap what strategic pricing actually is. Here’s one of the best explainers, from classic pricing textbook The Strategy and Tactics of Pricing by Thomas Nagle and co-authors.
“The purpose of strategic pricing is not simply to create satisfied customers. Customer satisfaction can usually be bought by a combination of over-delivering on value and underpricing products. The purpose of strategic pricing is to price more profitably by capturing more value, not necessarily by making more sales”, the book reads.
That explanation tracks on many levels. Some publishers can argue their goal is to provide as many subscribers as possible with quality journalism. But that’s actually the next step. At a basic level, all publishers have either a revenue number they need to hit to remain sustainable as they move from print to digital or a number of digital subscribers that would deliver the same.
Nagle and his co-authors use the “Strategic Pricing Pyramid” to explain the foundations of successful pricing. Achieving profitability requires more than just managing price levels. First you need to ensure your products and services include features customers are willing to pay for repeatedly.
This foundation is value creation. In the world of journalism, that means producing quality journalism (and packaging it correctly). What I am trying to convey here is that first you need to make sure you have something your subscribers are ready to pay for. Low prices and discounts will go only so far.
Key steps: Subscriber onboarding, newsletters and a mobile app
The Subscription Pricing: From COVID Bump To Sustainable Revenue report was published in late March by the International News Media Association (INMA). It provides a handy overview of some of the pricing strategies used by media companies.
Time and time again I have come across the same three methods various news publishers have used to keep subscribers engaged (and stay subscribed).
Those three methods are also stressed in the case study of The Boston Globe. The paper crossed 270-thousand digital subscribers in late 2020. Tests and risk-taking played a big role according to Tom Brown, senior director of consumer revenue of the Globe.
First, the Globe had to raise prices for digital subscriptions. With that, they tested and later implemented a strategy of a radically lower introductory price for a longer period (6 months in their case).
They had already experimented with charging $0.99 for 4 weeks but a longer introductory period showed better results. Of course, that was just the pricing strategy. Beneath that was the real key to success, the three methods:
- A revamped onboarding series.
- Driving subscribers to Globe newsletters.
- Encouraging subscribers to download The Boston Globe app.
This is pretty much what The New York Times set up some time ago.
When you visit The Times website and want to read an article, you will hit a registration wall. While registering you are encouraged to activate the most popular newsletters of the paper and later you are presented with cheaper-than-regular subscription options ($0.50 per week rather than the standard fee $2 per week; that’s a 75% discount on an annual subscription).
If you opt in, you will be automatically charged the introductory rate every four weeks for one year, then the standard rate will apply. If you do not subscribe while registering you will get a couple of onboarding e-mails over the next few weeks getting you to download the app or subscribe to more newsletters.
The aim is simple and very much the same with both subscription offerings. Set an introductory rate so that the reader has a lower financial barrier to entry, give the new subscriber a tasting period (6 months with the Globe and 12 months with The Times subscription) and meanwhile get the subscribers to create as many habits as possible.
Once the introductory price period ends the subscribers will pay the standard price because they will understand the value.
Sure, after the period not every subscriber will remain, the key is to find that sweet spot where the price is low but high enough so that you filter out most of the speculative subscribers and also you have in place all the retention tactics (onboarding, newsletters, apps, in the case of The Times also podcasts or crosswords).
Another strategy: Subscribers will support a strong mission statement, targeting small segments with promotions work
Among other examples, the INMA report also focuses on Slovak Denník N which has steadily grown digital subscribers by tens of thousands every year, now totaling 68-thousand.
Denník N has three tiers of subscription plans – €4.99 per month for the very basic subscription, €6.99 for the standard product, and €8.99 for the premium membership.
Tomáš Bella, the co-founder and head of digital, explained that they did a research of behaviours and preferences of their subscribers and found that surprisingly, the ones paying the most for the premium membership were less active than other subscribers.
Based on a survey they found out that was because they wanted to support the outlet. Denník N was founded with a clear mission statement of being an independent reader supported voice while the media market at the time was being overtaken by local oligarchs (which has since changed).
Thanks to communicating their mission and reliance on reader revenue first, they were able to gain subscribers keen to support such a mission.
Second piece of the puzzle was a constant experimentation with various trials and promotions priced differently, bundled with books, magazines and other products (e.g. pay more and we will give a subscription to students or teachers) to specific audiences.
Bella said they have tried offering 305 different types of subscriptions, most of them to some small sub-segment of readers.
The report gives more examples of outlets and their pricing strategies stressing that although many managers look to Netflix or The New York Times for setting the sweet spot of the price, it is a misleading strategy.
You simply cannot compare a regional outlet producing local news that no one else is able to create. Pricing is hard and you have to be smart about it.
Most successful outlets have run several experiments before they came up with the right strategy. Data, research, time, tests and understanding your market and needs of your audience are key.
This piece was originally published in The Fix and is re-published with permission. The Fix is a solutions-oriented publication focusing on the European media scene. Subscribe to its weekly newsletter here.