Digital engagement creates economic returns
A benefit of the emergence of digital platforms as distribution channels for news and content, despite the disruption it has caused publishers, is the ability to observe how the audience consumes content. Traditional print newspapers do not offer this capability to publishers, and much of the insight as to what content was read in print media, by whom, is generated through surveys and interviews. Clearly, those insights are not quickly available, and they are often not accurate. In today's publishing environment, it is possible to see precisely what content leads to the most engagement, meaning how many readers are consuming content and for how long, and thus we can use these insights to manage the business.
One of those ways that information can be applied to the business of publishing is to categorize the audience by what content is important to them. In our work with publishers, Mather Economics observes patterns in audience consumption and engagement, and we have verified these patterns with other publishers who are doing their own research and analysis. Typically, there is a segment of the audience that reads a cross-section of the content with a strong affiliation for local news as the "anchoring" point of their relationship with the publication. There also are segments that have an almost one-dimensional relationship with the publication such as with the coverage of their favorite sports team. Even though the level of consumption by customer may be the same for these two segments, the behavior of these groups in response to subscription offers will be markedly different. Generally, the more broad an individual's consumption of content, the more likely they are to subscribe to the publication. Those customers that are highly engaged with only a content category can be monetized through other means, including targeted products and newsletters.
Another opportunity for using consumption information is to change subscription offers and prices to consumers based on these data. Mather Economics provides suggested pricing to publishers by customer account to maximize retention and revenue from their audiences. In our work with pricing for print products, we must rely on other observed customer characteristics such as tenure, delivery frequency, acquisition channel, and demographic information to suggest subscription offers and prices. As we add digital consumption data to our pricing analysis, we find that these data are a powerful indicator of how customers will respond to offers and subscription prices.
In a recent subscription pricing engagement, we applied an average 15 percent price increase to a publisher's print audience. Some customers received more than the average increase and some less, depending on their estimated sensitivity to prices, called their price elasticity. We identified a control group that was a statistically representative sample of the customers and excluded them from the price increase so that we could observe changes in stops, customer service calls and changes in subscription levels in the target group due to the pricing change. The group targeted for the price increase and the control group was tracked for six months following the price change with weekly reports sent to the publisher.
At the end of the six-month reporting period, we worked with this publisher to add each customer's digital engagement to the performance reporting, and we found that digital engagement was highly correlated with acceptance of the pricing action. For customers that had not activated their digital access, which was about 50 percent of the subscribers, the incremental stops due to the average 15 percent price increase was 2.6 percent. For customers that had activated their digital access but were not frequent visitors, defined as less than one visit per week, the incremental stop rate was 1.5 percent, a 41 percent reduction in price elasticity. That group included about 40 percent of the subscribers. For those customers that consumed content digitally at least once per week, about 10 percent of the customers, the incremental stop rate from the average 15 percent price increase was 0.8 percent, which is a 71 percent reduction in price elasticity relative to the non-activated group.
Some important comments on these results are in order. First, the price increase that was applied was targeted using all of the information such as demographics and account behavior available at the time, and the control group was selected using these data in the sampling process. Second, the digital engagement was added afterwards, and the control group was not selected using that metric as one of the criteria, so there are statistical differences between these three groups across other metrics. Despite these considerations, we believe that the results observed here are an important indication of the role that digital engagement plays in a customer's perception of value and willingness to pay for their subscription. This publisher has proceeded with a designed test of digital engagement on price elasticity, and those results will be forthcoming in the weeks to come.
As newspaper publishers' products have evolved to include digital access, there has often been a lot of investment without clear economic return. Using new data tools and analytics, we are now able to measure the economic benefits that are possible for publishers that invest in their digital products. The benefits observed in this case study are not from new digital-only customers, but from existing all-access subscribers. We expect that publishers have a significant opportunity to use digital access to improve retention and grow audience revenue, both from print and digital distribution channels.
Matt Lindsay has more than 20 years of experience in helping businesses improve performance and grow revenue through economic modeling. In consulting roles over the past 15 years, he has shared this expertise and developed pricing strategies and predictive models for clients, including the Intercontinental Exchange, Gannett, The Home Depot, NRG Energy, Tribune, IHG, McClatchy, the Everglades Foundation, Walton Foundation, Dow Jones and The New York Times.
Lindsay can be reached at matt@mathereconomics.com or (770) 993-4111.
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