Customer case: VK convert free riders into fee readers

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Customer case: VK convert free riders into fee readers

When Västerbottens-Kuriren (VK), with PriceGain’s assistence, re-modeled their offerings and developed a new pricing strategy they began to analyse the different customer categories. Launching the new service offerings has given VK  the opportunity to set new prices that lead to long-term profitability and business development.

It’s never been trickier to set the right price on a newspaper issue as it is today. Changed media consumtion behavior and a constantly growing supply of new media and news channels calls for a more personally adapted pricing model, new digital services and media package combinations. At PriceGain’s seminar, November 19 2013, CEO Sture Bergman talked about VK:s successful subscription and pricing re-modeling and how they managed to boost profits and reduce the number of free riders.

– A newspaper has never been as cheap, nor as expensive, as it is today. It all depends on who you ask. A paper that never gets read is extremely expensive. Newspaper issues are piling up unread at a growing number of subscribers. They obviously think the paper is rather costly. But still they keep subscribing on the newspaper since they like to read on certain days, like in the weekends, when they have time for it. The newspaper’s biggest problem is not the pricing of it, nor that it’s an old-fashion product. The main problem is how people are using and interacting with the newspaper, Sture Bergman explains.

When VK started creating their new digital media strategy, they began by analysing the newspaper’s customer categories. They discovered that the largest customer group and the most dedicated paper and web readers lives in the Umeå region. This customer group also have the highest willingness-to-pay and prefer local news to national or global news.

– We quickly realised that we have to prioritise our most loyal readers in our new business and pricing strategy, thus increasing the paper’s local news focus. The temporary web visitors, the so-called fly-bys, are not as important to us since most of them live outside our business region. And our advertisers obviously want to fill their stores with people, which makes out-of-town web visitors uninteresting to them, Sture Bergman points out.

Another important discovery VK did was that the readers’ media consumtion behaviour varies a lot through day and night. The average media consumer start the day reading the newspaper at the breakfast table. On the way to work he or she uses the mobile to read or watch more news. Seated at work the web is the primary news and information source. Going back home after work, the mobile or tablet is again pulled out, but now the consumer wants more entertaining type of news and content. And in the evening the consumer shifts between different devices and media channels.

– Our insights have resulted in a totally new product and service structure with more alternatives that offer our customers more freedom of choice and flexibility to consume news, regardless of device and platform, in any type of situation 24/7. We have also restructured our organisation and our web content in order to put more emphasis on local news, and we have improved our customer club added values. The restructering of our offerings have given us the opportunity to set prices that will lead to long-term profitability and improved business development, Sture Bergman concludes.

Sture Bergman explained that the new subscription offerings and pricing have been developed using a so-called conjoint analysis. In this model the prices are set based on the customers’ perceived value of the service or product. It also takes into account the price and cross-price elasticity for all other optional offerings.