If Your Business Model Is Based On Hoping Your Customers Never Do Math, You're In Trouble
from the ny-times,-we're-looking-at-you dept
As we get closer to the NY Times finally putting in place its long-promised, often-mocked paywall concept, it's worth pointing to a story from a couple months ago, which I didn't have time to write about when it came out. It involved some comments on a panel from Gerald Marzorati, the Times' assistant managing editor for new media and strategic initiatives, in which he more or less mocked the subscribers of the print publication for being too ignorant to do basic math and realize just how much they were paying:"We have north of 800,000 subscribers paying north of $700 a year for home delivery," Marzorati said. "Of course, they don't seem to know that."Of course, another explanation (which is much more favorable to the NY Times) is just one of general price inelasticity to a newspaper like the NY Times. If that's the case, where the price rises and most people keep subscribing, it suggests that most of those people continue to value the subscription more than the price, and the newspaper might even be able to get away with raising the price further. What's odd, however, is this assumption by Marzorati, that it's the general ignorance of their subscribers that keeps them in business. We're in an age when assuming ignorance on your customer base is a very dangerous position to be in.
As evidence that Times subscribers don't realize how much a subscription costs, he pointed to what happened when the paper raised its home-delivery price by 5 percent during the recession: Only 0.01 percent of subscribers canceled. "I think a lot of it has to do with the fact that they're literally not understanding what they're paying," he said. "That's the beauty of the credit card."
If the company's guy in charge of new media and strategic initiatives seems gleeful over ignorant readers, rather than focusing on ways to make sure they continue to get more value out of their subscription than they pay for it, it makes you wonder how long this sort of setup can really last. There are all sorts of ways that a publication with the reputation of the NY Times can make lots and lots of money. But betting on the ignorance of subscribers does not seem to be like the best overall strategy.
Filed Under: business models, customers, ignorance, journalism, paywalls
Companies: ny times
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Wow...
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Congratulations! You win today's "So Completely Wrong It Hurts" award!
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The readers aren't ignorant, as the subscription price isn't anywhere near the street price. In fact, I suspect they feel they are getting a pretty good deal at 50% off. So a couple of points of moving up isn't an issue for them.
The real value for them in is having 800,000 assured subscribers for advertisers. 800K subscriptions beats the living crap out of 800,000 random website visitors any day of the week.
My point is sarcastic: People are getting a good deal, the value the product, etc. CWF+RtB would have them getting the newspaper for nothing, and paying stupidly out the ass for
hoodies or maybe a phone chat with a reporter.
See, when they don't charge enough, they are stupid. When they charge enough they are stupid. When they give it away for free it is stupid. No matter what, TD will always find printed newspapers stupid. There isn't any news here.
The have long since CWF. TD may not like it, but 800,000 is a really big number.
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There is hope for the NYT
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People of Math:)
I know of so many large companies are taking advantage of the people who are not aware of what they are being charged for. We might assume people don't do the math but I believe it's not the case. People just forget or don't look at it.
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Re: People of Math:)
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I paid...
The value was in the ink delivered to my door every morning. I could take it on the train, through the tunnel, without wifi or 3G or a battery, without stopping to stand in line. I'd leave it lying on the table at work, fueling interesting conversations with colleagues over lunch. Most days, my Times was read by two or three people.
Within reason, I didn't care what home delivery cost. I was paying to have instant, shareable news around all day -- until delivery became unreliable. The NYT quit selling what I was buying.
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Re: I paid...
� H.L. Mencken
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Another thing to consider
With the paywall, people that have never had to hand over their credit card number will now be required to do so. What is the incentive to start paying for information that they might just as easily acquire elsewhere? I believe that getting your current customers to go from x dollars per month to x+5% dollars per month is probably easier than getting your casual reader to go from paying nothing per month to two dollars month (unless that two dollars gives them something they didn't get before).
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Ignorant readers
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about subscribers to newspapers
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