In 2008, the behavioral economist Dan Ariely gave a popular talk where he explained irrational decision-making. One of the examples he used was the subscriptions offer page of The Economist from years ago.
At the time, The Economist offered a standalone yearly digital subscription for $59, a print only subscription for $125 and a combined print + digital subscription for $125.
According to the magazine and also Ariely, it was an offer page set up by the marketing department and after inquiries from Ariely, it was taken down. Soon after, the subscription prices changed.
But Ariely took the ad and made an experiment with his students. He made them choose from the three options. The students preferred the more expensive combined option (84%), noone chose the print-only version that was the same price as the combined option (0%) and a few chose the cheapest digital-only option (16%).
Ariely did another experiment. He took away the print-only option and left only the digital and combined ones. Interestingly, in this experiment students chose the cheaper subscription.
The original intent by The Economist marketing team was a strategy called decoy pricing. It is a tactic used to boost the sales of a high profit earning item by creating a less attractive version of the product which is priced just below the highest priced product. This leads to ‘decoy effect’.
As far as I’m aware it’s a tactic liked by marketers but disliked by product people as they know they have to create an artificial product that you know is not a good fit on purpose.
As The Economist example demonstrated on Ariely’s students showed, the result seemed to be very effective.
Another approach that gets you to the same point is the Good-Better-Best (G-B-B) pricing. You have a “basic” or “standard” product, you create an inferior one with less benefits but a cheaper price tag and another one (or more) with several plus benefits and give it a premium name (Gold, Platinum, Premium, Plus…).
The outcome is usually significant incremental growth. You might even sell less but you have more revenue as the price is higher.
I cannot count the number of news publishers I have seen using one or both of these strategies, they are very popular albeit might be outdated as you look at some of the best performing outlets in terms of subscriber growth (NY Times, Washington Post).
Take a look at the subscription offer page by The New York Times. For years, there was only a single option – a weekly €0.50 offer paid every 4 weeks (€2) for a year which then got bumped up to €8 every 4 weeks.
Now, The Times also has a yearly option for €20 for the first year and then €60. No doubt it is a result of keeping subscribers for longer, the yearly subscribers have usually higher customer lifetime value.
But you wouldn’t find there different products, there is just one. The Times is not yet offering a bundle and doesn’t try to upsell you straight on the initial subscription page. That’s all being done once you are subscribed.
With almost 600,000 digital subscribers today, BILDplus is by far the biggest journalistic paid content offering in Germany, read a recent press release by Axel Springer, the German publishing powerhouse that also owns international brands like Insider and Politico.
Bild started offering a digital subscription to its premium online content in June, 2013.
The outlet introduced three different formats:
Football fans could extend any regular subscription to include the “Bundesliga at Bild” package, at € 2.99 a month, which offered access to clips of highlights of First and Second Bundesliga matchdays along with comprehensive football multimedia coverage.
At first look, it seemed like a good offering and followed years of pricing strategy best practices. By the end of the year, BILDplus already had over 150-thousand digital subscribers after six months.
In a recent blog, The International News Media Association (INMA) told the story of how Bild has evolved its pricing strategy since 2013 and based on several tests running over the years, came to a conclusion to offer initially only one higher priced product called simply BILDplus.
Now, Bild offers an introductory price of €3.99 which is increased to €7.99 after the first year or subscribers can choose to pay yearly (if you are coming to the subscription page from the article there is even less choice, Bild won’t bother you with the yearly offer). It’s almost striking how similar it is now to what The Times offers.
Bild still sells bundles, but now upsells customers once they are on board.
So why the change and what leads Bild to radically change the offer over the course of the last few years?
According to Daniel Mussinghoff, director of premium for Bild, various tests and experiments over the years have showed them that they should keep the initial subscription offer simpler. It started by folding in the sport package into all subscription tiers.
Then they started thinking what would happened if they eliminated two products that targeted a small niche of customers and A/B tested a single subscription of the offer page (only the basic product). The result was more new subscribers and higher overall revenue.
Afterwards Mussinghoff tested a price bump to €7.99 which resulted in a higher subscriber churn, but as he told INMA, a significant portion of subscribers moved from €4.99 to €7.99 and it was able to increase revenue over time.
Looking at subscription offer pages by successful news publishers, they are all different but once you start exploring the reader journey to become a subscriber all have one thing in common: make it as simple as possible. And also, they test and experiment a lot.
Bild’s example doesn’t mean we should all follow them and NY Times. But it provides any publisher with an insight and a chance to test out this theory.
Hi! I'm David Tvrdon, a tech & media journalist and podcaster with a marketing background (and degree). Every week I send out the FWIW by David Tvrdon newsletter on tech, media, audio and journalism.