Archive | Yield Optimization

Why Metered Pricing Models Maximize Revenue

Maximizing revenue from digital subscriptions is dependent on monetizing usage rather than the users themselves. Comparing print subscriptions to digital subscriptions highlights why usage behavior is the basis of revenue, and applying the principles of yield management shows why metered pricing models produce the most revenue. Why Usage? Comparing Print vs. Digital Subscriptions Based on the fact that print is a physically distributed product and digital is an on-demand service, print subscriptions differ from digital subscriptions in three critical ways: Fixed vs. Variable Content Delivery. The print product has a fixed definition of content delivery which is received by every customer that purchases a subscription. A digital service has a variable definition of content delivery because usage varies across customers. […]

Leveraging the Multiplier Effect of Renewals to Increase Profits

In subscription-based services, revenue comes two sources: customer acquisition and renewal acquisition. Once renewals become more than 50 percent of the revenue, sales and marketing costs associated with the renewal process begin to become a larger factor in managing profitability. The interesting dynamic is that while the acquisition phase occurs once during the lifetime of a customer, renewal acquisition is an annual event. The multiplier effect of reducing renewal acquisition costs can increase customer lifetime profits substantially. The best way to measure sales and marketing contribution to profits is to measure the ratio between gross-margins generated and the associated sales and marketing costs. So for calculating the customer acquisition cost (CAC) ratio, it would simply be the revenue from new […]

Value Rating Part 2: Targeting in Subscriptions

In subscriptions, how can a sales manager differentiate the up-sell vs. the retention risk between two customers with same number of page views and visits? Value Rating is the answer, or the percentage of page views that are units of value (full description of Value Rating in Part 1 of series). Using Value Rating as a metric, Scout Analytics has found that categorizing engagement on page views alone, will incorrectly classify the revenue opportunity of 15 percent of customers. The consequence of using page views as a primary metric is that sales managers will use wrong negotiation tactic with customers 15 percent of the time. Chart 1 to the right will help illustrate the limitations of page views only. The horizontal […]

Finding Meaning in Engagement Metrics

Posted by: Matt Shanahan I am never surprised when someone says they measure subscriber loyalty only to learn they are really measuring engagement. How and why a subscriber engages can be a loyalty driver, and understanding these drivers can help paid-content providers create loyalty programs. When it comes to measuring engagement, it’s hard to argue with the approach of measuring everything. The incremental cost of collecting three or three-dozen quantitative measures is negligible. Why not have duration and frequency of visit, click-through rate, bookmark data, RSS subscriptions, downloads and blog comments metrics available at your fingertips? My view gets a bit more controversial when we start talking about how to derive meaning from all the engagement data points that are collected. The […]