Increase Revenues Through Improved Pricing
Today’s customers have an unprecedented amount of published information at their fingertips. As content transitions from physical to
digital publishing new competitors emerge every day. To compete in
such a dynamic industry you need to build stronger relationships with clients, while also increasing customers’ average spend.
As one of the world’s leading pricing consultancies, Pricing Solutions has become a key partner to many publishing and information clients as they strategically increase their revenues through more advanced pricing practices. We’ve managed a number of projects that deal with key industry challenges. It is a crucial time to ensure your pricing captures the value being delivered contact us today to discuss solutions.
Digital Monetization Framework – “The 4 Pillars”
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Key Content & Publishing Challenges
Unstructured Discounting Practices
In many industries variable costs form a floor for any sales discounting. However in the publishing industry costs are generally upfront, in content production and building the platforms, and the variable costs for adding new users are typically low. This can create a sales culture that any sale produces profit, regardless of the price level. Using this approach can have lasting damage on your brand, as it creates unfair price differences between customers that put company revenue and reputation at risk if your customers were to ever find out.
Having a strong and structured approach to discounting based on justified discount levels and effective sales force incentives can get your discounting under control and produce 1st-year revenue improvement of about 2-5% with limited risk of losing customers.
Digital Content Publishing vs Traditional Print Content Publishing
Many of our customers have struggled with digital products to achieve the same long-established prices that they had for hard copy published products, despite this being the delivery method that customers prefer. This is largely due to price anchoring from the vast amount of information that is available to everyone on the internet for free. Obviously, strong communication of your product differentiation will help, but this is likely to be a perception that is difficult to change in the short term. The key to optimizing revenues is to combine hard-copy and digital in effective bundles, and to capture incremental revenues when the digital delivery of the product allows customers to use the products in new and improved ways.
Setting Optimal Prices for All Customers
Having one list price for all customers is a heavily dated approach to pricing, as it has been long established that segmented pricing optimised for more specific customer groups increases volumes and revenues. But setting these levels using industry knowledge and past pricing information is a difficult challenge. Many of our information and publishing clients have turned to primary research with customers to establish their optimal pricing levels. Pricing Solutions have developed advanced techniques using conjoint and discrete choice questioning to gain more robust insights on which to base segmented pricing decisions.
User-Based Subscription Pricing is Limiting Customer Usage
Subscription pricing has fast become the standard pricing structure for digital products in the industry. Overall this is a good thing as it ties customers into longer relationships and provides stable recurring revenues. Most of these subscription models are based on the number of customer users, to determine the price. While this does do an effective job of price differentiation between large and small teams, it does have the negative impact of incentivizing the customer to have fewer people access your products. Some companies are now looking at negotiating prices with unlimited users. This encourages customers to get the maximum value out of their products and further integrates the products into their customers’ business. The challenge here is then to set the optimal prices for these more loosely defined deals, developing price calculators for the sales force is a great way to simplify these complex pricing decisions.
Success Story: Content & Publishing Case Study
The Problem
This project had three major challenges that needed to be addressed in order to ensure a successful re-launch.
- Data Management
The content category that was being restructured had around 2,000 customers spread across different industries including manufacturing, research, finance and investment companies. In order to develop a compelling strategy all of the customer data would need to be merged, reorganized and managed.
- Developing a Winning Strategy
A new pricing strategy that captured the increased value customers would get from the consolidation change needed to be developed. The strategy also needed to capture new revenue where additional value was provided while also mitigating the risks associated with migrating more sensitive customers.
- Ensuring Successful Implementation
Finally, the client was unsure what guidance the sales teams should receive, as they knew achieving list price would be challenging for many customers who were on discounted deals and any reasonable target price would depend on a number of factors specific to that individual client.
The Solution
1. Building the Data Set
- Pricing Solutions worked with the IT team to extract data from SAP and salesforce.
- This was combined with excel based reference sheets and pricing rate cards to build one complete data set.
- Created a data set that would continue to provide actionable pricing insight to the client.
2. Mapping The Assumptions
- The second key stage was getting the correct assumptions in place in order to correctly map the customer’s current purchases to their likely purchases after the product restructuring.
- Pricing Solutions worked with the client team to develop and test the mapping assumptions; ensuring that the whole team was happy with the final map of products.
- The sales force found this invaluable as they finally had quick access to information on what customers were likely to want in the new structure, something they would have had to develop on their own.
3. Setting New Target Prices
- By displaying the spread of differences the team saw 9 distinct groups of purchasers who would be impacted by restructuring in vastly different ways (Some would pay more, some less and others expenditure would remain relatively constant).
- Price targets for each group were set by the sales management team so the sales force could focus their efforts on their biggest revenue and highest risk accounts.
- For customers more than 30% below their target price the increase would have been too drastic and so minimum percent price increases were set to ensure that, over time, these customers paid a fair price.
Above: The green band of customers whose current revenue is at 70-90% of the new list price were given one particular pricing strategy, while different strategies were developed for the rest of the customers.
The Result?
The sales team was able to use this strategy to propose tailored price changes to customers. This led to a higher rate of acceptance for price changes than a general approach would have had. Customer churn was also minimized by not enforcing price increases on customers who were already paying the highest prices.
The analytical tools developed during the project were handed over the client so that they could monitor future pricing performance and evaluate future pricing changes themselves. As other divisions of the company have conducted product migrations they have reached out to Pricing Solutions to support their process and ensure success.
What’s the Pricing Solutions Difference?
Ultimately, Pricing Solutions’ hands-on, tailored approach and depth of industry experience made this project a success. Strong data analytics capabilities and experience, allowed the team to manage and refine information from the client.
Finally, the client felt that previous experience in migration models and advising on best pricing practices also set Pricing Solutions apart from the competition.
Contact Us for a Pricing Consultation
Pricing Solutions is one of the worlds’ leading pricing consultancy firms. We are dedicated to helping clients tackle their specific pricing challenges and dramatially grow profitability. Our consultants have extensive experience in B2B and B2C markets within a wide range of industries.
For more information about our services or to get in touch with one of our consultants directly please contact our global headquarters.
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