Why value-based pricing drives subscriber retention for publishers

There are pros and cons to producing an abundance of content. For readers, it offers more choices to consume information. For publishers, on the other hand, it’s diminished the relative value of content overall, creating yet another barrier to a lasting subscriber retention and acquisition strategy. So how do publishers successfully demonstrate value in a saturated content landscape?

Last month, ProfitWell CEO Patrick Campbell joined Chartbeat to guide our subscriptions-focused community through the state of consumer willingness to pay, the root causes of publishers’ issues with showing value — and why value-based pricing could be the answer. 

We’ve summarized his key insights (including a sketch of his presentation from our Product Designer Jess Phoa) below.

A focus on subscriber retention

For years, publishers have assigned the highest level of value to acquisition — a whopping 54% of their budgets. 

profitwell line chart on subscriber retention acquisition costs
Source: ProfitWell

Yet acquisition costs are at an inverse with readers’ willingness to pay. 

subscriber retention consumer willingness to pay line chart
Source: ProfitWell

What this signals is an overdue investment in subscriber retention, said Campbell, adding that retention has proven to be far more effective than acquisition. For instance, from 2013-2017, media companies saw a positive revenue impact of 11.4% from retention efforts.

monetization and subscriber retention impact bar graph profitwell
Source: ProfitWell

Put in the persona work to retain current, unlock new subscribers

Campbell noted that publishers need to invest in refining (or even begin building) buyer personas, which are crucial to justify the cost of subscriptions. No reader profile is alike, so it makes little sense to lump all profiles under a single pricing structure, he said. 

“Too many of us acquire all we can without thinking of the customer and where they see value,” he said.

Therefore, offering a variety of options — tailored to a clearly profiled type of buyer — gives them more freedom to choose a subscription pricing model best suited for them.

Differentiation will distinguish your product

Media companies that rely on subscription revenue have an average of 19.2 competitors if they launch a new offering today. By contrast, five years ago that number was 3.7. To compete, publishers need to offer differentiating features on top of the core product, Campbell said. 

subscriber retention competitors bar graph
Source: ProfitWell

Publishers can maximize their resources by emphasizing value in certain niches, rather than trying to be everything to everyone.

(Related: Leverage emails for engaged readers: Audience growth strategies from GQ)

What your readers value vs what you value

Consumers care less about your costs and more about their own. This makes a value-based approach to pricing crucial. In a nutshell, here’s how it works:

Experimental design. Determine initial personas (buyer types) to analyze based on your current subscriber data.

Data collection and segmentation. Analyze their relative preference to certain product features, intent, and value. Then put that up against a price sensitivity model.

Recommendations. From there, you should be able to see what readers find least and most important to your product.

live sketch profitwell subscriber retention presentation chartbeat

With these analyses and resources in hand, publishers will have the data to better understand their readers’ needs. More clarity into how those readers consume content will translate into the ability to attract and convert subscribers — who now have the valuable product that they genuinely will (and continue to want to) pay for.

More in Event