Possible Ways of Growing Your Income
Once you’ve started to monetize, one question will be looming on the horizon whenever you think strategically about your self-publishing venture: ‘How can I grow my business?’
The possible answers to this question are quite obvious. You can
- Win more paying readers/viewers/listeners
- Improve your retention, i.e. find ways to reduce the number of cancellations of subs or ways to raise the frequency of voluntary payments
- Upgrade your paying audience to higher value levels
- Raise your prices
This time, I will have a look at #4: raising prices.
Don’t be Afraid of Price Rises
To make your offers even more expensive for many of you will be a distressing idea (after having shown the courage to ask for payments in the first place). You might not want to be regarded as greedy. There is the fear that your audience will be prompted to cancel when confronted with a higher price. You might fear the feedback which comes necessarily with a higher price: am I regarded worth being paid not only $X but $X+Y? Or a more theoretical doubting: will I cross a price threshold?
With such questions you are not alone. When I was working in the legacy publishing industry, I’ve managed hundreds of price increases. And there was not a single one where not some people involved in each of the accompanying discussions would warn: ‘This is too much. We cannot increase our price (again). Our product is much too expensive yet.’
Explainer: Publishing newspapers or magazines was (to a lesser extent still is) a double-sided business. There is the reader revenue side. People coming from this side generally would have a more positive attitude towards price rises. After all, higher prices should lead to more revenues out of their part of the business. On the other hand, there is the advertising people. Basically, they sell the sheer number of readers, regardless of what the readers have paid. So people from the advertising side have nothing to win with higher subscription or copy prices. That makes them even more risk averse: ‘oh no, let’s keep our price where it is’.
Being overcautious when it comes to pricing is a widespread phenomenon. Probably it has something to do with the general attitude towards being optimistic or pessimistic. The latter fraction primarily sees the risk, that the next step might be a step too much, the price rise might backfire. Isn’t a bird in the hand worth two in the bush?
That’s why so many prices aren’t changed over very long time periods.
For any product or service, certainly there is a price which is too big, which hinders too many sales, which causes potential buyers not to buy. Economists theorize of an optimal price, where the product of [(number of buyers) x (price)] reaches a high. In practice, nobody really knows what this specific price for any given real world-situation is. There is only trial and error, often wrapped in market research mumbo-jumbo.
But I see a general rule: IF you seriously consider rising a price for what you have to offer and if you do not know of any hard facts which make raising the price not advisable THEN, probably, you should sell your product more expensive.
Mind this: a $1 step is not the same at different stages of monetization
When reflecting upon prices, it is important to know, that with installing any kind of audience monetization you’ve already mastered the most difficult, the steepest step.
Let’s imagine prices as a staircase. You might automatically picture something like this:
But this is not a realistic imagination of pricing. In reality, it’s rather like this:
The steepest step, the highest threshold is to get people to pay at all. Every other step is much easier to climb. Of course, everybody prefers to pay $3.99 instead of $4.99. But, hey, the difference is only $1! Who would cancel a sub or stop supporting a beloved creator only because of so little a difference?
From the creator’s perspective that looks very different. Going from $3.99 to $4.99 means an increase of revenue of +25%. So, let’s say there are 100 people paying regularly $3.99. The creator, then, would cash in $399. But after rising the price to $4.99 he would cash in $499. So even if ten (it holds even for twenty!) of his or her supporters stopped paying, he would total more revenues than before.
Legacy Publishers Best Kept Secret
And now comes legacy publisher’s best kept secret to raise audience revenues: subscribers don’t cancel their subs because of higher prices.
Some years ago, newspapers started to raise their prices. When Google kidnapped the advertising market, websites and apps became by far the most often used sources of information. When Social Media much more often than editors decided what is news, what is of interest, newspapers slid into an existential crisis. For many years now they are losing readers and advertising clients.
But at the same time, they managed to increase their prices.
Have a look at this graph. Since 1995 newspapers lost
- Readers (around -10%)
- Sold copies (around -25%)
- Advertising revenues (close to -40%)
In the same time, newspapers were sold at ever higher prices. Compared to 1995 a newspaper today is 125% more expensive than it was in 1995. The average price has more than doubled.
So even IF all readers lost would have been caused by the increasing prices (which isn’t the case. Mostly, newspapers are losing readers and buyers because of an outdated product) a loss of 25% sold copies is more than compensated by an increase in revenues of 125%. That so many newspapers still aren’t dead mainly is due to them asking their remaining readers to pay much more than in earlier days.
Please note: the quoted study is based upon data of German newspapers. German newspaper industry provides excellent data for such kind of analyses. With a grain of salt, similar conclusions can be drawn for all developed markets).
As you can see, after for years of growth it is around three years now, that I can’t grow my subscriber base further. I am still fighting for growth on this side. But maybe, being such a niche publication, I have to accept that the market for my publication isn’t bigger.
Nonetheless my revenues are still growing. That is the result of two price rises. pv digest today is nearly 18.5% more expensive than at the beginning 7 years ago. (And it should be even more expensive! As you can see, I did not stick to my own expertise before beginning of 2018. I was so happy seeing my subscriber base growing, that I didn’t think of increasing the price in the first years).
Now, again, the secret: To my knowledge, I haven’t lost 1 single subscription because of the cost of my product. Certainly I do have cancellations. Very few, though. The churn-rate hovers around 1% per month. And it hasn’t changed ever. People cancelling pv digest most frequently cancel because they lose or quit their current job, because of company mergers or of people retiring or even deaths. I try to follow up to every cancellation, to find out the reason (and, possibly, to win back the reader). And, having asked why the subscription was cancelled, up to now I never got the answer ‘because of the increase in price’.
The consulting company Mather Economics tested price rises at 4 big publishing companies.
“It tested price increases ranging from 16% to 100% on consumers who had been subscribers for at least six months, and who paid anywhere from $1.68 to $3.99 a week to start”, reports Mediapost. They found only minimal impact on the number of subs but considerable positive impact on total revenues.
I would like to give you a simple rule of thumb. But I must add an advisory note to this: here, I am trespassing the boundaries of personal experiences and empirical facts.
My rule of thumb is this: as long as you charge less than $10 per month, I recommend to increase your price by $1. Hopefully, to your audience this is “only $1”.
But to you, depending on your actual price, it will at least lead to a 10% increase in income. And e.g. even 25% if your old price is $4 (or $3.99) and you rise it to $5 (or $4.99).
If your price is above $10, then you should play around with increases between +9% and +20%. Just do the math and choose a price point which sounds convincing. If there are other publishers offering similar content as you do, of course you should adjust your pricing to their level. That doesn’t mean that you have to ask for the same price as they do. It just means that there is a point of reference and probably your audience will judge your price with reference to the prices of similar products. When you want to sell more expensive you must make clear that your product is worth the surplus.
In principle, you should rather rise prices with a regular frequency than doing very big steps only on rare occasions. I know of experts in pricing strategies who speak of ‘price acceptance’ being a muscle which can be trained. I am not sure of the empirical evidence for this assumption. But I like the picture.