Successful subscription pricing requires belief in value from prospective buyers

By Newsplexer Projects

Newsplexer Projects



If no one seems to be buying your digital subscription offer, Lisa Jäger says it might be because you don’t have an ugly brother.

And she should know. (Not that Jäger has such a soulful sibling — she didn’t actually share that, one way or another, when speaking Thursday to INMA’s European News Media Conference in Amsterdam.) It’s because Jäger is a partner with Simon-Kucher, the international pricing consultants with headquarters in Germany.

Lisa Jäger explained how product pricing may require bundling products to increase perceived value.
Lisa Jäger explained how product pricing may require bundling products to increase perceived value.

Simon-Kucher studies consumer behaviour in the context of how people decide how much they are willing to pay for something. “If you’ve purchased car parts recently, we probably had something to do with how much you paid for those. Or if you’ve needed to buy headache pills,” Jäger said. “But today we’ll talk about just media pricing.”

Media purists might assume selling subscriptions for print and/or digital content is strictly a value proposition: Is it worth what you are asking? And they’d be correct — sort of. Actual value matters most.

“When you want to optimise prices, forget about the actual price of the product,” Jäger said. “You always need to consider the product. You need fantastic products, especially in the digital world.”

But then comes the nagging issue of making sure consumers perceive that value. Enter the ugly brother strategy (also known as decoy pricing in the field of behavioural economics). The idea is to include in your subscription offer something that is clearly of less value than what you want to sell, possibly something you don’t actually want to promote, but priced at a level that, by comparison, makes your real offer look like a really great deal.

In one of the case studies Jäger presented, The Economist magazine successfully boosted sales of both digital-only subscriptions and combined print-digital subscriptions by also offering a print-only subscription at the same price as the combo arrangement.

“Customers often can’t accurately judge which product offers the most value,” Jäger said. “But even uninformed customers can easily identify the product with the best relative value. This is why sometimes an ‘ugly brother’ is needed in the portfolio to steer readers into a prioritized offer.”

At the same time, Jäger warned the audience not to make pricing offers too complicated. It often happens, she said, when a media house is pushing not only its print product and Web site access but also a smartphone/tablet app, an e-newspaper, and especially a paywall linked to the Web site:

“How can you combine that? And how can you make sure your subscribers or potential subscribers understand what a great product you have, and how do you make them want to subscribe for that product?

“The big challenge is to keep it as simple as possible. I could show you tons of examples where publishers have created big portfolios and nobody other than their own (sales) people understand it.” 

Only a few people in the audience of 200 gathered in the INIT Building auditorium raised their hands when conference moderator Robert Whitehead asked how many of their media houses use pricing strategy consultants. After Jäger’s presentation, he suggested the crowd might want to reconsider the option.

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