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Pricing models: Adding and extracting value online

Pricing models: Adding and extracting value online. February 11 th 2004 Mary Waltham Princeton, USA www.MaryWaltham.com. Are publishers losing sight of emerging markets? . Business models. Who is your customer? What does your customer value? How do you make money?. Strategy.

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Pricing models: Adding and extracting value online

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  1. Pricing models: Adding and extracting value online February 11th 2004 Mary Waltham Princeton, USA www.MaryWaltham.com

  2. Are publishers losing sight of emerging markets?

  3. Business models • Who is your customer? • What does your customer value? • How do you make money? www.MaryWaltham.com

  4. Strategy • How will you beat your competitors? • How do you differentiate what you do? • Publishing permits some sloppiness here because each publication is ‘different’ www.MaryWaltham.com

  5. Strategic Planning Process is required user needs planningcompetition trends

  6. Creating value- typical publishing value chain • Gathering • Selecting and organizing • Synthesizing • Distributing • Key drivers ~ quality, speed and cost www.MaryWaltham.com

  7. Creating value - where will you add it? • Gathering • Selecting and organizing • Synthesizing • Distributing www.MaryWaltham.com

  8. Extracting value – which customer segments will you serve and how? • Institutional • Corporate • Academic • Government • Individual • Society and association Members • Non-members www.MaryWaltham.com

  9. Extracting value – which markets will you serve and how? • Domestic/national • Non-domestic • What % of your revenue comes from each? • Is that changing online? • Are you making the most of the ‘reach’ of online? www.MaryWaltham.com

  10. Extracting value – which products and services to offer online? • Unit of online content – what is it? • What do you offer customers? • Do all customers want the same products and services? • Do you build to order or prepackage? • Can you sell more content by enabling more granular choices – at the article/chapter vs the whole publication level? www.MaryWaltham.com

  11. In order to make a change from “prepackaged” content • Effective and reliable distribution • Understanding of what customers want • Ability to create new products and services • In theory every customer can buy something different online www.MaryWaltham.com

  12. What has changed online? • Digital assets – not used up by consumption • Economies of scale – communicate with authors, readers and customers faster and cheaper • Economies of scope – extract value across many different and disparate markets • Customer records – cost of keeping them and using them low • Publishers have the opportunity to sense and respond to demands rather than simply making and selling products www.MaryWaltham.com

  13. Online pricing models • Institutional/organizational site license sold to libraries/corporations • Individual/members subscriptions • Pay-per-view article sales • Price of each has an impact on the others www.MaryWaltham.com

  14. Impact of price on number of customers

  15. Why online site licenses extract more value and are a win-win

  16. Impact of price on revenue: Revenue = price x no. of users Note the maximum total revenue

  17. Lessons from the PEAK project340,000 users at 10 campuses and 2 commercial companies; 1200 journals with a total of 849,371 articles • Traditional subscriptions – unlimited access to any journal – $4/article • Generalized subscriptions – pre-paid bundles of 120 articles @ $548/bundle - $4.50/article • Per article purchase - $7.00 www.MaryWaltham.com

  18. What is the cost of access? • Pecuniary cost – even small per article fees suppressed usage • Non-pecuniary cost – time and inconvenience to obtain access • Number of screens to navigate • Amount of external information to recall • Action required to have costs subsidized www.MaryWaltham.com

  19. What worked well? • Generalized subscription purchasing – was a success • It had the following features:- • Opened up access to all content by all users • User defined the subscription • It was pre-paid • User cost of access – money and effort – effects the number of articles readers access www.MaryWaltham.com

  20. Examples of article pricing www.MaryWaltham.com

  21. Examples of article pricing 100 10 1 0.1 0.01 100 1 10 100 1000 10,000 100,000 1,000,000

  22. Using examples of article pricing 100 10 1 0.1 0.01 100 1 10 100 1000 10,000 100,000 1,000,000

  23. Using examples of article pricing www.MaryWaltham.com

  24. Some examples- online choice • AIP 12 articles from 9 journals @ $96 or $8 per article • AIP 25 articles from 9 journals @ $150 or $6 per article • AIP Members receive a 50% discount www.MaryWaltham.com

  25. Some examples- online collections • American Geophysical Union (AGU) – “Editors’ choice” for Members only – bundles of selected articles online only from across all AGU journals – 4 themes so far. Price range $45 - $65 • AGU – “Multi- choice” of article packs for Members • 10 articles @ $20 • 20 articles @ $30 • 40 articles @ $50 • AGU – “Personal choice” for Members 27 collections – by theme. Priced according to the amount of content range is $43 to $175 www.MaryWaltham.com

  26. Some examples • Consumerreports.org • Annual online subscription $24 • Print subscribers – special discount - $19 • Monthly subscription $4.95 • Note consumerreports.org online subscriptions all bill directly to a credit card www.MaryWaltham.com

  27. Revenue model – Grateful Dead www.MaryWaltham.com

  28. Thank you! www.MaryWaltham.com

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