If Your Business Model Is Based On Hoping Your Customers Never Do Math, You're In Trouble

from the ny-times,-we're-looking-at-you dept

As we get closer to the NY Times finally putting in place its long-promised, often-mocked paywall concept, it’s worth pointing to a story from a couple months ago, which I didn’t have time to write about when it came out. It involved some comments on a panel from Gerald Marzorati, the Times’ assistant managing editor for new media and strategic initiatives, in which he more or less mocked the subscribers of the print publication for being too ignorant to do basic math and realize just how much they were paying:

“We have north of 800,000 subscribers paying north of $700 a year for home delivery,” Marzorati said. “Of course, they don’t seem to know that.”

As evidence that Times subscribers don’t realize how much a subscription costs, he pointed to what happened when the paper raised its home-delivery price by 5 percent during the recession: Only 0.01 percent of subscribers canceled. “I think a lot of it has to do with the fact that they’re literally not understanding what they’re paying,” he said. “That’s the beauty of the credit card.”

Of course, another explanation (which is much more favorable to the NY Times) is just one of general price inelasticity to a newspaper like the NY Times. If that’s the case, where the price rises and most people keep subscribing, it suggests that most of those people continue to value the subscription more than the price, and the newspaper might even be able to get away with raising the price further. What’s odd, however, is this assumption by Marzorati, that it’s the general ignorance of their subscribers that keeps them in business. We’re in an age when assuming ignorance on your customer base is a very dangerous position to be in.

If the company’s guy in charge of new media and strategic initiatives seems gleeful over ignorant readers, rather than focusing on ways to make sure they continue to get more value out of their subscription than they pay for it, it makes you wonder how long this sort of setup can really last. There are all sorts of ways that a publication with the reputation of the NY Times can make lots and lots of money. But betting on the ignorance of subscribers does not seem to be like the best overall strategy.

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Companies: ny times

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Comments on “If Your Business Model Is Based On Hoping Your Customers Never Do Math, You're In Trouble”

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23 Comments
Anonymous Coward says:

Re: Re: Re:

Sorry, I read the post. Their monthly subscription price is around $70 a month (confirmed by other sources) but their newsstand price is nearly twice that (if purchased every day).

The readers aren’t ignorant, as the subscription price isn’t anywhere near the street price. In fact, I suspect they feel they are getting a pretty good deal at 50% off. So a couple of points of moving up isn’t an issue for them.

The real value for them in is having 800,000 assured subscribers for advertisers. 800K subscriptions beats the living crap out of 800,000 random website visitors any day of the week.

My point is sarcastic: People are getting a good deal, the value the product, etc. CWF+RtB would have them getting the newspaper for nothing, and paying stupidly out the ass for
hoodies or maybe a phone chat with a reporter.

See, when they don’t charge enough, they are stupid. When they charge enough they are stupid. When they give it away for free it is stupid. No matter what, TD will always find printed newspapers stupid. There isn’t any news here.

The have long since CWF. TD may not like it, but 800,000 is a really big number.

Isaac (profile) says:

People of Math:)

People don’t read their credit card statements as they should. I believe most people do the math. Maybe some don’t or they’re not good at math at all.
I know of so many large companies are taking advantage of the people who are not aware of what they are being charged for. We might assume people don’t do the math but I believe it’s not the case. People just forget or don’t look at it.

Derek (profile) says:

I paid...

I was a paying subscriber. The value wasn’t in the content per se, of course I could get that on my computer or phone.

The value was in the ink delivered to my door every morning. I could take it on the train, through the tunnel, without wifi or 3G or a battery, without stopping to stand in line. I’d leave it lying on the table at work, fueling interesting conversations with colleagues over lunch. Most days, my Times was read by two or three people.

Within reason, I didn’t care what home delivery cost. I was paying to have instant, shareable news around all day — until delivery became unreliable. The NYT quit selling what I was buying.

Lance (profile) says:

Another thing to consider

Marzorati’s comments are completely ignoring something very simple. Raising the rates by 5% on a $65+ per month bill is not likely to raise a lot of eyebrows. People will usually accept a small enough raise in the prices for goods that they find useful. It is easy to allow your credit card to be charged an extra $2 to $3.

With the paywall, people that have never had to hand over their credit card number will now be required to do so. What is the incentive to start paying for information that they might just as easily acquire elsewhere? I believe that getting your current customers to go from x dollars per month to x+5% dollars per month is probably easier than getting your casual reader to go from paying nothing per month to two dollars month (unless that two dollars gives them something they didn’t get before).

BestGames (profile) says:

Why does that fool think the readers do not know how much they are paying? He can say that in his opinion they are not getting their monies worth. But he cannot know what is in (or not in) the minds of it’s readers. The NY Times is one of those authority sources that a lot of knowledgeable people feel they cannot be without. The newspapers in the rest of the country seem to be getting smaller and less valuable. After 40 years getting daily delivery, we cut down to just Sunday delivery – and that is just to get the TV schedule (which is also in a pathetic state).

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