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Value provision

How do you price your magazine so that subscribers stay loyal? Knowing what keeps them awake at night will, says Michael Smith, enable you to deliver real value, and knowing the dynamics of your market sector will help you ensure that your price is right.

By Michael Smith

Price is the financial sacrifice made by a customer to gain value in excess of the sacrifice made to acquire it. For pricing to be truly efficient, the value added by the purchased product will render the price paid irrelevant to the purchaser. Pitch the price too high and, if the customer cannot see the added value, the result will be deflated sales. Pitch the price too low and the customer either becomes suspicious of your intent or is already the worst kind of customer: the price buyer. Self-evident value is the key to commercial success.

For smaller publishers, where product performance is crucial, often there will already be an understanding of what the publication does and why the customer needs it (although examples continue to crop up where this is not always the case). What is clear, however, is that the larger a publishing business becomes, the more it loses touch with its customer base. As boardrooms cease to focus on products and more on profit lines, so business decisions are taken which are increasingly alien to the readership.

Publisher complacency

I recently had the opportunity to meet with law librarians in practices across the south of England. Although many of them accepted that the books, subscriptions and online services they purchased were useful to their firms, they also had a number of complaints which can be summarised as follows:

1. The price of the services
2. The complacency of publishers
3. The proliferation of product updates
4. That there is no choice but to accept what is on offer

From a value perspective, the most significant of these issues is the second one. Complacency ultimately creates customers who start to look elsewhere. The other three elements are inextricably linked to complacency – or a publisher taking its eye off the ball.

The need for a value-based company focus

Of course, this is not an issue exclusively confined to legal publishing. Increasingly, the larger a publishing company becomes, the more that key performance metrics matter – advertising revenues, subscriber numbers, renewal rates etc. This focus has then led to business decisions which can damage the customer / supplier relationship - focusing less on value delivery to the customer and more on revenue delivery to the publisher. Finance-based decisions (though of course crucial) betray a lack of understanding of the relationship between value, loyalty and revenue.

Examples include:

* Publishers in the late 1990s who launched online services offering no improved functionality over the print version.
* ‘Redesigned’ or ‘relaunched’ print publications, tied in with a price rise and extra pages, but with little or no content change.
* A B2C title relaunched as B2B without consulting or researching the consumer base – result: subscriber haemorrhage; extra marketing cost to acquire new subs.
* A relaunched electronic service using a new platform that was significantly less flexible than the old, causing the customers to question its value.

We know that subscription management is crucial to business success. We also need to reflect that for subscription management to be successful, value provision must be self evident to customers – not just at the point of sale but throughout the customer’s subscription life. In other words the product must deliver - consistently.

How to arrive at value

Of course, as businesses grow it is more and more difficult to keep a finger on the pulse of markets they serve. To help you, here is a brief, six point structure for ensuring lifetime product value provision.

1. Market Definition
Segmentation is crucial to your business. Analyse your target subscriber base and look at those segments which are large enough to be both actionable and profitable. Ignore the temptation to produce a catch-all product – you’ll end up with average customers.

2. Target Subscriber Analysis
This helps you position your product. Ask of the customer ‘what business issue keeps you awake at night’? Knowing the answer to this question will assist both the product definition and, crucially, that most essential of marketing staff – the copywriter.

3. Market Hot Button Analysis
Do you understand the financial stresses of your customers? Undertake research to understand the market’s performance norms. This could involve anything from profitability ratios to output standards. Your product needs to focus on improving those metrics for the customer.

4. Customer Phase Analysis
This is a difficult one to call, but where a customer’s business is in terms of the product life cycle will affect also the type of product and service they are looking for.

* Are they starting up? They may want products which will make them more effective in getting to their target markets.
* Are they in the growth phase? Is your product positioned so the reader can see how it will help their growth?
* Are they in maturity? In which case, the product should be positioned as one which will help them maintain their advantage in their chosen markets.
* If your customers are in a declining market, they may be looking to diversify their business – so be prepared for a demand change.

5. Product Definition
At the outset, define what the product is there to achieve and stick to it. Loosely, this is called ‘knowing your market’ but your focus should be on helping your customers do their jobs better. Maybe the ‘wow’ factor is impossible but focused editorial creates its own loyalty.

6. Publisher Differentiation
Know your own company’s market differentiation. This is crucial not just for generating reassurance at time of initial purchase, but also essential during the subscriber’s life with you. Remember, we’re talking about actual customer experiences: customer service; complaint handling; speed of delivery; additional services; ease of access – all the customer ‘touch points’ which are essential to long term business success. These points are crucial to your brand’s perception and are a subtle tool in your battle to avoid customers switching their supplier.

The importance of pricing

Of course, the provision of customer value also means getting the price right. It is the aim of every producer, whether publisher or otherwise, to deliver a product in such a way that customers will not query the price. Yet, at some stage the issue of price usually rears its ugly head.

Most often, the issues of price and budget rise above the surface only among that catch-all group of non-renewal excuses generated by lapsed subscriber research. So here’s a tip: never include price on any market research survey – it only serves to divert the attention of the publisher away from what really matters: the product, and what it does for the customers. So, when it comes to cancellation research, focus instead on why the product is no longer needed.

Of course, price also occurs at that other most critical point – the point of sale. Here, evidential value is critical – particularly the more expensive the product is. Yet customers make price / value assumptions whatever the price band – including cheap novels (would you buy the latest Jeffrey Archer if it came with a loose-leaf subscription, electronic archive and updating service?). So, when making pricing decisions, consider these seven psychological factors affecting your prospective customers:

1. Be aware that most markets have a market leader – the price and value points of the market leader will be those against which all entrants are judged (for example, think dictionary and you’re probably already thinking of the OED).

2. If your product has no competitors or has a real (ie. provable) unique differential advantage – price high. Customers with no experience of the product’s value are relying on you to define what the value is.

3. Discounting for discounting’s sake is a fool’s strategy. Customers are more likely to believe a discount story if they can tie it to a given event (eg. year end or a new market entry strategy). If customers can see that the discount is tied to an event, they are more likely to accept your "real" prices when the event is over.

4. Some customers prefer their existing suppliers no matter what you do. Remember, that by promoting the unseen elements of the product (customer service, tangibility, guarantees), you’re in a better position to help people consider the switch – ie. get them to think beyond just the price.

5. People believe marketing – but only if the marketing is believable. Don’t let a single marketing pack out of your building unless you know that its value-laden sales message is compelling. If you see words and phrases such as ‘comprehensive’ or ‘up-to-date’ used without back-up provided by substantive fact, scrap it and start again. Vague promises do not buy loyalty.

6. Nobody likes a price which is unfair. If a customer buys a bulk purchase, they expect discounts. The difference between what you think is fair and what they think is fair is a hard one to call. However, by maintaining a robust pricing matrix with product attributes which can be tailored to customers and priced accordingly, everyone will grasp the transparency of your pricing and accept the fairness of it.

7. In the unhappy (and unimaginative) event that your product is similar to others on the market, price to the market level – its pricing will otherwise not be credible. If in doubt, avoid publishing products similar to your competitors.

Understanding and promoting value within and without the publishing portfolio is the key to maintaining happy customers beyond a single year – as is a pricing policy linked to value delivery. With subscribers who are satisfied that the value offered by the publication is higher than the economic sacrifice they needed to make in order to obtain it, a publication will survive. Price will cease to be an issue, subscription numbers will hold or grow, and there will be an additional bonus of satisfied advertisers.