Pricing is a moving target. But with many experts such as Greg Piechota (INMA Researcher-in-Residence) saying “pricing is the fastest and most effective way for media businesses to increase profits,” it’s no surprise that pricing is top of mind for many publishers.
To increase reader revenue in recent times, publishers are focusing on creating pricing strategies that will help them attract new subscribers and retain the ones they have. Specifically, publishers are turning to behavioural pricing in order to achieve this.
And to help publishers generate a more robust behavioral pricing strategy, this article will discuss 6 key aspects to maximize revenue and persuade more anonymous audiences to sign up and subscribe.
What is behavioral pricing?
Behavioral pricing is a strategy that takes into account a user’s behavior and demographics to determine the best possible offer for subscription products. E.g. If it’s determined that a user is in a high-income job and is highly engaged with content, a publisher might offer more features at a higher price than they would an unengaged user in a lower-income job.
But it doesn’t just stop at basic demographics. Through personalized paywall and subscription management tools, publishers can track on-site behaviour and content preferences in order to offer the best possible packages to their different audience segments.
Since behavioral pricing can help boost conversions in this way, it’s no surprise that it’s favored by some experts as the go-to strategy moving forward. But while it’s a hot topic at the moment, many publishers are still experimenting and working out how to implement it.
Why is behavioral pricing important in the digital publishing industry?
Behavioral pricing can have a direct influence over user buying decisions (and therefore, business revenue). This impact can manifest in three ways:
1. Behavioral pricing maximizes a user’s willingness to pay by offering price points and packages at which they are most likely to convert, based on their individual value perception.
2. Behavioral pricing enables intelligent user journey creation, leading to ‘staircasing’ (the purchase of more valuable products over time), therefore maximizing customer lifetime value.
3. Behavioral pricing enables publishers to better understand what combination of products are purchased the most by each audience segment, and enables them to bundle the best performers and increase cross-sell opportunities.
So with behavioral pricing demonstrating some promising impact, how can publishers implement a robust strategy?
6 Keys to Effective Behavioral Pricing
1. Split-test offers
In the digital world, the data available on customers and transactions is vast and ever-growing. By analyzing this data, publishers can gain a clear understanding of user desires and use that to generate high-demand offers.
However, with such a plethora of pricing options and offers, it can be difficult for publishers to know where to start. Which offer should they be prioritizing? What should the messaging look like? How are those offers presented?
This is where split-testing comes in. Split-testing (or A/B testing) is a technique used to compare two or more versions of something (in this case, pricing) in order to see which one performs better.
Split-testing allows publishers to test different pricing structures and offers on small groups of customers before rolling them out to the masses. This way, they can be sure that the structure they’re using is the most effective and results in high conversions.
2. Segment readers
Hand in hand with split testing comes audience segmentation. After running split tests, it becomes possible to see not only which offers perform best, but also to determine the different user groups in an audience who engage with these offers.
Audiences can be segmented by demographics such as age group, traffic source, gender, location, behaviour, and more. Defining and understanding these segment groups allows publishers to better tailor pricing strategies to suit business objectives.
For example, if a publisher was trying to convert more readers under 30 into paid subscribers, they can run a split test by segmenting their audience based on age and then be able to analyse the offers that had the highest engagement from said audience.
3. Avoid big price gaps
As effective as behavioral pricing can be, it’s important to ensure that price differences between segment groups are explainable and those pricing tactics do not lead to unacceptable price discrimination. If price differences are too great for different users, there’s an increased risk of customer backlash and dissatisfied users.
Since customer trust is one of the key success factors for retention, it is crucial that your support teams are able to answer any questions and address any concerns that readers might have about pricing. Publishers can win customer trust by showing them exactly how price points are determined, and by making sure they’re fair and easy to understand.
4. Acquisition first, upsell later
Since acquisition is key to a subscription funnel’s success, it might not be wise to begin with high introductory prices, even when a user’s behavior shows high engagement. Instead, a more effective strategy would be offering discounted pricing at the start of a new user’s subscription to get them accustomed to interacting with the brand.
Once a user has moved down the funnel and becomes an active subscriber, publishers can then use price laddering or bundles based on their behavior to guide customers to more valuable products that suit their needs.
This approach is more likely to result in upsells and cross-sells, as customers will already be familiar with the publication’s brand and content, resulting in less risk of them churning and boosting customer lifetime value (CLV).
5. Balance options
In a world where we have an overabundance of choices online, it’s easy for customers to feel overwhelmed. Too many price and subscription options can lead to choice paralysis where a customer is so overwhelmed by the number of options that they can’t make a decision at all.
To combat this, it’s important to find a balance between too many and too few pricing options and to offer the right mix of product features at the right price points (this is where split tests will come in useful). Ultimately, analyzing and understanding the user’s needs and what they are willing to pay is key.
Offering a small selection of pricing plans that are targeted to specific customer needs is more likely to result in conversions versus offering an extensive list.
If publishers want to implement behavioural pricing, they should have a way of tracking customer behavior and segmenting readers accordingly. This data can then be used to personalise pricing offers for each individual reader.
With subscription technology advancing at a rapid rate, it becomes possible to easily integrate intelligent paywall solutions with an existing tech stack, allowing for fast data collation, rapid testing and iteration without complex coding.
Above all else, publishers should look to future-proof their tech stack and choose providers who demonstrate flexibility and innovation. This means as pricing strategies evolve, the tech solutions can adapt with them.
Value Still Comes First
Through segmentation, testing different offers, and using the right technology, publishers can develop a robust behavioral pricing strategy. By understanding what readers are willing to pay for, this can result in significantly increased revenue.
But while pricing is a key factor in acquisition and retention, a focus on providing value to readers should still be the number one priority. The bottom line is, if customers feel that they are not getting value for money, then they are much less likely to remain subscribed, no matter what the price may be.
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