Presentation on theme: "Pricing models: Adding and extracting value online February 11 th 2004 Mary Waltham Princeton, USA www.MaryWaltham.com."— Presentation transcript:
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?
www.MaryWaltham.com Business models Who is your customer? What does your customer value? How do you make money?
www.MaryWaltham.com Strategy How will you beat your competitors? How do you differentiate what you do? Publishing permits some sloppiness here because each publication is different
Strategic Planning Process is required user needs planningcompetition trends
www.MaryWaltham.com Creating value- typical publishing value chain Gathering Selecting and organizing Synthesizing Distributing Key drivers ~ quality, speed and cost
www.MaryWaltham.com Creating value - where will you add it? Gathering Selecting and organizing Synthesizing Distributing
www.MaryWaltham.com Extracting value – which customer segments will you serve and how? Institutional Corporate Academic Government Individual Society and association Members Non-members
www.MaryWaltham.com 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 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 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 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 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
Impact of price on number of customers
Why online site licenses extract more value and are a win-win Number of customers..willing to payPossible revenue Each customer group 900$0 10$10$100 10$20$200 10$30$300 10$40$400 10$50$500 10$60$600 10$70$700 10$80$800 10$90$900 10$100$1,000 TOTAL$5,500
Impact of price on revenue: Revenue = price x no. of users Note the maximum total revenue
www.MaryWaltham.com Lessons from the PEAK project 340,000 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 - $7.00
www.MaryWaltham.com What is the cost of access? Pecuniary cost – even small per article fees suppressed usage Non-pecuniary cost – time and inconvenience to obtain access Number of screens to navigate Amount of external information to recall Action required to have costs subsidized
www.MaryWaltham.com What worked well? Generalized subscription purchasing – was a success It had the following features:- Opened up access to all content by all users User defined the subscription It was pre-paid User cost of access – money and effort – effects the number of articles readers access
www.MaryWaltham.com ProductCost ($)Number of articles Cost/article Inter-library loan (ILL)301 Document Delivery251 Pay-per-article- PEAK717 Institutional subscription ~ one online journal 4311433 Journal bundle price ~ large society publisher 24,99544,5000.56 Journals and proceedings ~ large society publisher 48,588699,2890.07 Examples of article pricing
Using examples of article pricing 1 10 100 1000 10,000 100,000 1,000,000 100 10 1 0.1 0.01
www.MaryWaltham.com Using examples of article pricing Number of articlesPrice ($) per articleFee 15$5.00$75 150$3.50$525 1000$1.80$1,800 10,00060 cents$6,000 100,00011 cents$11,000 1,000,0006 cents$60,000
www.MaryWaltham.com 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 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 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 Revenue model – Grateful Dead