Paid subscriptions versus the power of free

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Interesting article by Russell Adams in Tuesday’s Wall Street Journal regarding newspapers and their efforts to increase revenue through digital subscription paywalls. The article chronicled various publications (from the Wall Street Journal to the Los Angeles Times to the Star Tribune in Minneapolis) and their individual successes and failures at extracting revenue from their online readers.

My personal experience with newspapers and paywalls centers on the effort by the New York Times about a year ago to convert non-paying readers (like me) to become paid readers. In my case, I was already paying for access to the Wall Street Journal (and quite satisfied) so I would imagine that I was the perfect prospect for the Times to target. Funny thing was, before I even had a chance to make the decision to pay (or not to pay), the Times removed the paywall. I didn’t have to do anything. It was as if a gift from heaven just dropped into my lap. Here’s the email message I received from the Times:

Though NYTimes.com will soon begin charging for unlimited access*, Lincoln is offering you a free digital subscription for the remainder of 2011. Enjoy all that NYTimes.com has to offer every day — investigative news and special reports, videos, blogs and more. It’s all yours at no charge, compliments of Lincoln.

When the Times came out with this offer, some experts thought this was a great move by the Times and Lincoln. A Time magazine article that came out immediately after the Times’ announcement had this to say:

“…there’s some likelihood that readers who take up the offer may somehow feel indebted to the Times for its benevolence. Freebies have been demonstrated to hold amazing power over consumer behavior. A psychology professor, discussing freebies at the supermarket or department-store makeup counter, explained that consumers are far more likely to buy stuff after they’ve been given a free sample:

Why does this work? You’ve been given something, seemingly for nothing, and now you feel obligated to reciprocate by buying the item.

In the same way, readers who’ve been given the Times may be more inclined to pay for an online subscription down the line. They may feel like they owe the Times something after receiving access for free through the end of 2011—by which time, the idea that everyone used to get digital access to the Times entirely for free might be a distant memory. The thought that the Times and Lincoln have been paying for your content will be much fresher in your mind.

So fast-forward to 2012 – my unlimited access subscription has ended. I can still access Times’ digital content but not on an unlimited basis. And whereas I was ready to pay for my subscription a year ago, now I’ve been conditioned to wait. I suspect that most of the 200,000 other readers who received this a year ago have been conditioned to act similarly.

The problem with giving services away for free (and in this case it was for almost ten months) is that consumers become conditioned to wait for the next (free) deal. It’s the same environment that astute car buyers face when deciding on when to buy a car from the Big Three; waiting for the next deal has always paid off.

Like I said earlier, I’m pretty sure I would have pulled the trigger on the Times paid subscription offer a year ago…but not today. I’m waiting. I’m waiting for the next offer… And I know it’s coming. Trust me on this one.

Republished with author's permission from original post.

Patrick Lefler
Patrick Lefler is the founder of The Spruance Group -- a management consultancy that helps growing companies grow faster by providing unique value at the product level: specifically product marketing, pricing, and innovation. He is a former Marine Corps officer; a graduate of both Annapolis and The Wharton School, and has over twenty years of industry expertise.

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