Estimating Revenue Uplift Potential From Unit Cost of Engagement

Posted by: Matt Shanahan

In the previous blog post on unit cost of engagement, the Demand Map™ was used to correlate subscriber engagement with subscription fees. Using minimum and maximum unit costs of engagement, the Demand Map™ segments subscribers into those that are overpaying and underpaying for the service. Aligning actual subscriber engagement to be within the minimum and maximum unit costs of engagement is the revenue uplift potential for a publisher.

How can a publisher quantify the uplift potential? Well, the Demand Map™ can answer that question. The chart on the right is a sample of what an actual Demand Map™ looks like. Let me explain the what you will see in the DemandMap™

  • The horizontal axis is the unit of engagement for a subscriber (page views in this sample).
  • The vertical axis is the subscription fees in dollars.
  • Three segments are defined as retention risks (red), nurture (blue), and up-sell (green).
  • "Demand Map"The minimum cost of engagement is represented by the green line separating the nurture and up-sell subscribers.
  • The minimum cost of engagement starts at $0.40/page view and has volume discounts reflected as engagement increases.
  • The maximum cost off engagement is represented by the red line separating the nurture and retention risk subscribers.
  • The maximum cost of engagement starts at $2/page view.

The chart to the right shows that the up-sell potential of a subscriber is the difference of their current subscription fee and the minimum cost of engagement. Additionally, the revenue risk of a subscriber is the difference of their current subscription fee and the maximum cost of engagement. An overall uplift potential can be calculated by summing the up-sell potential and revenue risk of each of the subscribers.

Recently, we announced research findings that publishers have between 20-30 percent uplift potential by aligning engagement and licenses. Analyzing unit cost of engagement is the key to finding it. Publishers using this technique are typically realizing half of the uplift potential, which means they are seeing an actual increase of 10-15 percent!