Report Finds Digital News Subscriptions Driven By Customer Perception of Exclusive Content
UPDATE - 5/21/18: With many publishers pivoting toward or increasing their existing efforts in digital subscriptions, we’ve covered some of the challenges publishers face in growing subscription revenue and some of the key considerations for evaluating a paywall solution. While those articles focus on the tactics and strategy for growing a subscription business, it’s important to expend some thought on why consumers actually purchase digital content subscriptions. This article contributed by Daniel Burstein, director of editorial content at MECLABS Institute, explores the motivations consumers have for subscribing to content. Though it’s a few years old, the factors behind news subscriptions are pretty evergreen. As Burstein suggests: “By optimizing these factors in their marketing and customer acquisition funnel, companies are able to close a value perception gap. These factors are essential because they are fertile ground for helping you build a more powerful value proposition that is aligned with your readers’ motivations."
Want to know the secret of the digital age? What’s behind all the trendy products being fawned over in the business press, from the Samsung Galaxy S7 to the iPad Air to 4G LTE data service to Oculus Rift?
And your journalists. And your archive. And your op-ed pieces, articles, videos, graphics, interviews, and other reporting.
Content Powers the Digital Age
In the early days of radio, manufacturers like Westinghouse started radio stations to encourage people to buy radios. There wasn’t enough content yet to sell the devices.
Today, sales of new, buzzed-about devices is partly driven by the desire to consume your content. So much so that even though the iPhone 4 frequently dropped voice calls (“Antennagate”), the phone was wildly popular. Because a phone is no longer a phone -- it is a content receiver.
Netflix, Amazon Kindle Ebooks, and Apple iTunes are all examples of digital content consumption success stories. The media industry has been built on quality content since the Gutenberg press debuted.
We launched a research project to further explore these questions, culminating in the publication of the latest freely available MECLABS Institute Executive Series issue: Newspaper Paywalls and Digital Subscriptions: Research with 900 U.S. news consumers reveals four key insights.
In this article, I’ll share a portion of data we collected in this research, some of which has never before been published.
Data Point #1: Customers see value in magazine and newspaper content
What is the barrier for consumers buying digital content? Do they simply not see value in the underlying product? Through MarketingSherpa (a publishing subsidiary of MECLABS Institute), we asked 2,021 U.S. consumers about their purchase preferences for certain products.
While 75% of Americans would buy print magazines, only 42% would buy digital magazines.
The numbers were similar for newspapers: 71% would buy print newspapers while only 41% would buy digital newspapers.
This data may simply reaffirm what you already know. So let’s dive a little deeper…
Data Point #2: Customers say they value credibility, variety, and investigative reporting
In separate research commissioned by MECLABS Institute, we surveyed 900 U.S. consumers with the following characteristics:
- Aged 25 and older
- Household income of $40,000 and above
- Who spend three or more hours in a typical week consuming news in print or digitally
One of the questions we asked was: When choosing a news source, how important are the following to you?
As you can see, “known for being a credible news source” was the most important factor, receiving an average ranking of 5.44 out of 6 for degree of importance. Diving deeper into the data, 62% of respondents rated this factor a 6 (extremely important), and 24% rated it a 5, so 86% of news consumers think it’s important.
The least important criterion for choosing a news source was “gives me an opinion on the news,” averaging only 3.35 out of 6.
But how do these attitudes affect likelihood to subscribe?
Data Point #3: Only one of these criteria affects how likely consumers are to subscribe
As part of this research, we took a look at 48 factors and attributes that might influence propensity to subscribe (including the above 13 criteria for choosing a news source mentioned above) and ran a regression analysis to see which factors are the most important drivers of the decision to buy.
We found 7 out of the 48 factors predicted news consumers’ likelihood to be a subscriber. Four of the significant predicting factors were news topics that were important to consumers. These factors are essential because they are fertile ground for helping you build a more powerful value proposition that is aligned with your readers’ motivations. You can read more about them in the aforementioned Executive Series research report.
However, in this article I want to call your attention to the fact that 12 of the 13 factors in the above chart did not predict consumers’ likelihood to be a subscriber. (The one exception was “aligns with my political point-of-view.” The more interested consumers are in finding news content that aligns with their point-of-view, the less likely they are to be a paid subscriber to news sources.)
What are we to make of this data? Customers tell us certain factors are important criteria for choosing a news source. For example, “known for being a credible new source” and “covers a wide variety of news.” Yet these factors are not driving paid subscriptions.
The Big Takeaway: There is a Value Perception Gap
Data point #1 suggests that customers perceive the core value proposition of newspapers and magazines. The disconnect is when they consider the product-level value proposition of digital magazines and digital newspapers.
Data points #2 and #3 show us that while consumers value certain factors when choosing a news source, these factors are not driving purchase behavior.
Why might consumers be acting this way?
From years of previous research MECLABS Institute has conducted into value proposition with companies in many industries, we’ve identified factors that help create a powerful value proposition. For example, appeal, exclusivity, clarity, and credibility. By optimizing these factors in their marketing and customer acquisition funnel, companies are able to close a value perception gap.
And make no mistake, there is a value perception gap. You may know this in your bones. But some publishers complain about this fact and blame the consumer. A value perception gap is never the consumer’s fault -- the burden lies with the company to communicate that value.
And here’s the good news…publishers can close this gap. It has happened before.
The perfect digital content example is Apple with its iTunes product. Before iTunes, customers mostly looked at digital music as something they could download for free on Napster. Now, 46% of the recording industry’s global revenue comes from digital, according to IFPI. That’s $6.9 billion in revenue, and it grew at a pace of almost 7% in 2014.
Apple wasn’t just reactive to the fact that customers didn’t want to pay for music. Apple created a product that was focused on usability, and then proactively used marketing to help the consumer perceive the value of its product, in effect, changing the conversation.
When publishers think of marketing, they may think of a wide range of topics from online advertising to direct mail to marketing automation to affiliate marketing.
But these are mere tactics. Marketing, at its core, is about identifying and communicating a value proposition. Marketing turns actual value into perceived value. Because, if the consumer does not perceive the value your publication is creating, it might as well not exist.
When we looked at their attitudes, we discovered that consumers are hungry for the news. In fact, 73% of consumers age 56 and older ranked the statement “It’s my personal responsibility to keep up with the news to be a good citizen” as a 5 or a 6 on a six-point scale.
It’s up to publishers to identify and communicate clear value propositions through their marketing so consumers understand the value of paying for digital subscriptions. Like Apple, this will take more than messaging. It also requires a buying process and product that has been optimized for usability.
Here are three ideas to get you started down that path…
Idea #1: Give Customers a Taste of Your Value
If you’re challenged by value communication, you might want to find ways to let customers sample the value of a subscription before purchasing, such with 30-day free trials or offers to “get X issues free” where customers can cancel before paying.
But another way of sampling value that includes a value exchange is having customers buy subscriptions with airline miles. According to our research, 11% of news consumers are very likely to consider paying for subscriptions in this way.
And in conducting the background interviews for this report, we learned of The Economist’s experimentation with this tactic. .
“We have programs where we let people cash in air miles to subscribe and that can work really well for publishers,” says Michael Brunt, CMO and managing director of circulation for The Economist.
“What you get is an opportunity for readers to sample your content,” says Brunt. “And of course, behind the scenes, revenue changes hands with the airlines, not with the individual. And then at the end of that time, there's a good volume that then convert into subscribers that pay more directly. So that can work well for subscribers and I think that can actually be a good way for publications to reach a new readership or reach a new audience that might be challenging for them to reach with other marketing methods.”
Idea #2: Test Your Way Into a Solution
One way to increase the usability of your digital product, identify the right marketing messaging to communicate its value, and optimize the subscription process is with A/B testing.
Testing is also important because, as we saw in the above data, customers won’t always know why they act. You can use surveys to get an understanding of why customers may purchase. But then you should test those hypotheses in real-world settings with customers to see what actually has an impact for your product.
Peter Doucette, vice president of consumer sales and marketing, The Boston Globe, is a big proponent of testing. When I went to the Globe to interview Doucette, he told me “When we test things, we try and understand things that will change our trajectory of the user journey…getting users to identify themselves. How do we do that? Where? What sequence? Creatively, what's the value exchange? We test all these different things.”
Here is an example from a metered article test:
Consumers could read 10 free articles per month. By removing the pop-up that said “This is your last free article in a month” on the last free article, paywall conversions increased by 61.1% (with a 95% level of confidence).
Because users were getting to the paywall at a faster rate, they were more likely to see the value in a subscription and convert.
The Boston Globe has also seen significant results from price testing, especially when the newspaper increased the digital price by 74% based on subscriber tenure.
“We do price testing all the time. But we were pleasantly surprised with the results of our digital pricing – significant increase in rate with nominal churn. So it's generated significant revenue for us,” says Doucette.
As you can see in the data, customers value publishers’ primary value proposition --high-quality content. But the case has yet to be made as to why a subset of that value -- digital content -- is worth paying for. Publishers that rely on a paid digital subscription model must create a compelling product-level value proposition through their marketing. Then use A/B testing to understand which messages resonate and improve the usability of the subscription process and the product itself.
Idea #3: Identify and Communicate Exclusivity to Create a Powerful Value Proposition
As I mentioned above, four of the significant predicting factors were news topics that were important to consumers, opportunities to leverage for your value proposition.
One of those news topics is local news. News consumers for whom local news is an essential news topic are more likely to be subscribers. With each one degree increase in importance of local news to that individual (all other predicting factors kept constant) the likelihood to be a subscriber increases 1.26 times.
This may be because customers more easily perceive local news as an exclusive value from newspapers. After all, while there is some local competition (TV, radio, local bloggers, free alternative newsweeklies), many metro newspapers dominate their market. So in this case, the customer’s value perception is more closely aligned with the actual value offered by the newspaper.
But in what other ways can you message exclusivity in your value proposition through your marketing, advertising, and customer conversion funnel? For example, if credibility is an important criterion for customers in choosing a news source, how can you better communicate the exclusivity of the credibility your product offers to close the value perception gap and get more subscriptions?
There is no one right answer for every newspaper. You have to test this exclusivity messaging with your consumers to determine the most effective marketing that help potential customers better perceive the true value in your product in relation to your competition (any other choice the customer may make).
“The value proposition is we can provide exclusive engaging, relevant content, trusted content to you. We're competing with free. So that's a different equation than competing with traditional news brands,” Doucette said. “We think our core value proposition is exclusive premium content.
Daniel Burstein is the Senior Director, Content and Marketing at MECLABS Institute. Daniel oversees all content and marketing coming from the MarketingExperiments and MarketingSherpa brands while helping to shape the marketing direction for MECLABS — digging for actionable discoveries while serving as an advocate for the audience.