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Price Promotion Strategies – How to Maximise Your ROI

Price is one of the most effective weapons in the subscription marketer’s armoury, but it needs to be used with finesse. Market knowledge, audience segmentation and wider business objectives all need to be factored in. Jess Burney outlines some of the strategy options.

Jess Burney

Posted on: 01 September 2009

In this article, I aim to give some insight into the role of price promotion strategies, outlining the key areas to consider and describing the usual behaviours seen in UK magazine publishers’ subscriber files.

In basic terms, price is a lever which can drive sales upwards or downwards.

That’s the simple part.

The complicated part comes in finding the price promotion ratio which drives the maximum level of sales at the maximum level of profit.

Price elasticity can be calculated by offsetting price reductions or increases against uplift or depression in sales. This can then be related to marketing cost per order, and economies of scale to determine where the best balance lies.

Pricing models

For magazine publishers, cover prices are usually consistent from issue to issue, with price promotions used tactically, for example, to support launches. Bumper issues, with longer on sale periods may be premium priced upwards. Other than that, the price strategy is pretty consistent.

Price increases can be tested and the number of price increases on the newsstand in a given period of time will be the subject of analysis and consideration by individual publishers.

Subscription pricing models are somewhat more complicated than pricing for newsstand sales.

All subscriptions have a Basic Annual Rate (BAR) against which price promotions are offered. In some cases, these are multiples of cover price, but in other cases, publishers may set a BAR that is independent of the cover price.

There are a number of good reasons for doing this:

1. When the BAR is higher than X times cover price. This is likely to be because the cost of postage is very high relative to the cover price, so the publisher needs to pass on some or all of this cost to the consumer.

2. When the BAR is lower than X times cover price. This is usually because the publisher has made a conscious decision to offer all subscribers a cheaper deal than the price they would have paid purchasing every copy on the newsstand. As the un-promoted price is lower than a straight multiple of cover price, the BAR is independent of cover price.

Once a publisher has set their BAR price, price promotion off the BAR is one of the elements that marketers will leverage to drive response to marketing campaigns.

Discounted offers are a frequently used means of driving uplift on marketing campaigns and price is an important consideration in the campaign planning cycle.

How low should you go?

Introductory offers have been a tried and tested means of getting people to sign up for many years but in today’s cost conscious times, people are more than ever looking to get a good deal.

Price promotion is a proven means of driving increased response to direct marketing promotion.

Uplifts of up to four times the control response rate can be driven through an attractive price promotion. This will have a very beneficial effect at Cost per Order (CPO) level.

However, there are a number of reasons why this tool has limitations and this is why some titles barely discount, while others may offer introductory discounts of 50% in order to sign up.

There seems to be a law of diminishing returns and, once you have lowered your prices, you have some pain ahead should you choose to raise them once more. Take a look at the US market where well over 80% of sales are via subscription but yields are low. Although with the steep declines in advertising revenue, volume sales have been traded against revenue, to drive up yield in some markets.

As a general rule, the more committed the reader or the more specialist the title, customers will pay higher prices.

Insight into frequency of purchase, split across the different audience segments can be very helpful here in deciding pricing strategies.

And on another tack, introductory gifts, if well chosen and targeted, can be a good means of getting subscribers on board.

Stepping up prices

The ease with which marketers can step up prices on renewal is dependent on a number of factors.

For simplicity, I have summarised some of the key segments and suggested successful price strategies to improve yield:

* Low price on acquisition. Step up in stages rather than going straight to full price.

* Renewed once at mid price. Step up price for a straightforward renewal but offer a better price for taking up longer term subscription terms / switching to Direct Debit payment method.

* High price at acquisition. Offer a better price for taking up longer term subscription terms / switching to Direct Debit payment method

* Long term Direct Debit subscriber. Segment your Direct Debit subscribers and step up at different levels, testing small numbers before roll out to model the impact on cancellation versus increased revenue.

Managing discount levels upwards

With planning and sensible segmentation, it is possible to have a well-thought out price migration linked to the customer journey you propose for your subscribers.

Sometimes, however, if the goalposts move for a magazine, in the yield versus volume equation, it is important to deliver increases in volume quicker than can be managed through lifetime migration.

Typically this happens when advertising revenue declines and copy sales become more important.

In this case, a good response is to move away from more aggressively discounted acquisition offers and run different offers which deliver a higher yield in year one.

In conjunction with this, renewal step ups should also move upwards in price.

This will undoubtedly have a detrimental effect on volume; whether this is to curtail growth or move a title into decline will depend on individual titles and markets.

On the other hand, the impact on profitability per subscriber can be substantial.

Encouraging trial

Pricing models can also play a key part in encouraging sampling.

Many publishers have been offering colder audiences attractive offers such as 3 for £1, 5 for £5 linked to long term direct debit retention.

These need careful monitoring to ensure that the subscriptions that come on file are retained after the introductory period. A certain level of cancellations is inevitable but this needs to be well-managed. With careful targeting, however, the offers can be very effective in terms of lifetime value and extending market reach.

Managing serial cancellers and multiple-orders is also important, together with keeping a careful eye on any subscriptions generated via affiliates through these types of offer.

For launches in particular, though, this kind of activity can deliver very targeted sampling, some long term loyals and increased awareness. This can be very cost effective compared to other traditional launch activities.

Payment length

There are a number of different payment length models to consider.

For fixed term magazine subscriptions, upfront payment by cash, credit card, Paypal or similar, is usually for a year as standard.

Six months offers will often be used for high price magazines but will undoubtedly increase renewal pressures.

Two and three year offers, especially where price promoted can be popular and add to file stability.

There has also been a trend in some markets, to offer gift subscriptions around fixed points for key gifting opportunities, such as Christmas – ie. any subscription for £20.

This can be very attractive to the consumer with a fixed budget for Christmas gifts and can increase upfront take-up of subscription offers. However, if the gift is a Christmas present, which runs out a few months before Christmas, this will make the renewals challenge harder. Repeat Christmas purchase is likely to be lower and greater numbers of renewed subscriptions are likely to have a break in service.

Migrating from free to paid

Another subscription challenge is where a magazine has previously been distributed free of charge and the publisher chooses to pursue a paid subscription strategy moving forward. Conversions to paid subscriber will be a fairly small proportion of the original circulation in the usual scheme of things.

However, pricing strategies can play a part to maximise migration from free to paid.

Offering a low introductory rate for a generous fixed term (via continuous payment methods) will get some people on file. They may well mean to cancel but some will stick around as paid subscribers.

Offering a gift incentive or added product value will also help to bridge what is a painful transition for any customer.


Pricing strategies can also help increase cross-sell to your customers. If someone is ripe to deepen their relationship with you and your segmentation modelling has identified this, pricing appropriately can be very influential in delivering results.

With your core target market, I suggest that you offer them a good price for a significant term length – a year or six month direct debit.

For your non-core target market, I suggest you offer them a very good price for a trial term of three months, extending to a six month or annual direct debit payment schedule at the end of the trial term.

Final thoughts

It’s essential to manage model pricing before deciding on your final pricing strategies. Different titles respond differently and have wider or narrower reach in terms of target markets. Thinking through the points described above and identifying the right strategy is very important. Following on from this, price testing will refine and confirm your hypotheses.

Finally, a well managed pricing model and strategy will help any business achieve its financial goals and maximise success.

About Jess Burney
(Details last updated: 18 March 2014)

Jess Burney is director of enterprise, CRM & subscriptions at Immediate Media Co. She is also a director of Dovetail Services. Jess is a previous chair of the PPA Customer Direct Committee and a regular speaker at industry events.

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