Traditional media like newspapers and magazines are under incredible pressure. Rising costs and a slow economy are only part of the picture. Competition from online publishers is taking more and more market share every year, resulting in reduced cash flow and profits for traditional media. How can you use pricing to slow declines in market share without giving away profitability?
Most new magazines dont survive more than a year or two. Those that do survive have traditionally been cash cows that provide their owners with many years of rich returns and profitability. Magazines enjoy multiple streams of revenue, including subscriptions, display advertising, classified advertising, online advertising, sales of branded merchandise, and in the case of many business-oriented publications conferences, seminars and similar events.
Newspapers are under incredible pressure from online competitors today, but this pressure is really nothing new. People have been getting their news from other sources for many years, beginning 80 years ago with the introduction of radio into the media mix. However, online competition represents a completely new kind of threat, since it has become portable, easy to access, and for the most part consumers perceive online sources of news to be free (even though the computers, mobile devices and internet connections they use to access news on the internet are far from free.) In addition, newspapers have historically derived a major portion of their profits from classified advertising, which is largely being replaced by searchable online systems, many of which are completely free.
Traditional pricing for traditional media is now a recipe for financial disaster!
One of the key problems we have seen is that publishers typically adopt a cost plus approach to pricing. In addition, they rarely change prices for fear of losing even more advertisers, subscribers and newsstand purchasers. The combination of these two factors is deadly for profits, regardless of the business you may be in. Add to this the specific challenges faced by magazine and newspaper publishers and you have a recipe for financial disaster. How can a publisher change the way they price their products and their advertising services in order to become more profitable in such a competitive environment?
It is common to see major struggles between the managers who are responsible for the financial health of the publication and the editorial staff who produce the valuable content. Editors and writers are focused on circulation; they want as many people as possible to read the publication, regardless of whether the business benefits or not. Managers, on the other hand, have to pay the bills and make payroll; they are clearly incentivized to keep costs under control, keep revenue flowing in, and improve profitability. How can you implement a new strategy that will improve profits and simultaneously keep the editorial staff happy?
PriceGain helps publishers improve profitability and defend circulation even in the face of massive new competition.
How to avoid the teaser trap.
Many of our clients have tried using various sorts of teaser offers, including give-aways and free or discounted subscriptions, in order to entice new readers to subscribe. You can boost circulation somewhat with approaches like this and can improve ad rates a bit, but we find it to be a trap. Teaser offers rarely result in long term increases in paid subscriptions, since the people who are most interested in such offers will often simply switch to a competing publication as soon as the teaser benefit expires. In general, we recommend against teasers; its better to invest that money in creating more compelling content or in developing new products to drive paid subscriptions.
PriceGain has developed a number of new approaches to subscription pricing to help you defend market share, increase paid subscriptions and improve profits all at the same time. For example, publishers can develop new products designed to better serve specific market segments. This allows them to charge different prices based on each segments willingness to pay and improve overall profits for the company. Our extensive experience in price optimization techniques, including our ability to determine willingness to pay for different customer groups, will help you decide which segments you should address with a new product and how much to charge.
PriceGain helps publishers increase profits by offering the right prices to the right customers.
The advertising side of the business presents almost a classic case where our Price Optimization approach makes sense. Publishers have large numbers of clients who purchase a wide variety of advertising services. Prices vary based on size, position, publication date, product and so on. Publishers are well aware of this and they typically have very large rate cards and sophisticated discount structures that take advantage of this huge variety of customers and services. However, we have seen that publishers do not update their rate cards frequently enough to capture new profit opportunities present in their markets. PriceGain can help publishers ensure they have competitive prices and that they are offering the right prices in terms of optimal profits.
Control discounts by using the facts.
PriceGain can also help publishers with another critical aspect of their advertising businesses: Discounting. We will help you determine exactly how much leeway to give your salespeople during their negotiations. We use historical sales and discounting data to build a market response curve that provides excellent guidance on what your chances are of closing a deal at a given discount. This is not a simple curve but rather is multidimensional. It takes customer type, size of purchase, amount of discount, services purchases, and other parameters into account. Using this tool, you can determine the expected maximum contributions to your bottom line. You can then use this information to define discounting policies for your sales team.