Inside Dallas News's Price-Hike Strategy
Before the Morning News made such an audacious move on pricing, Belo did some homework by hiring The Modellers, a Salt Lake City-based market research firm with clients like Toyota, Starbucks, AT&T, Burger King and Gatorade, to create some price elasticity models. The group turned to 1,500 "core" Dallas Morning News subscribers who had taken the paper for three years or more. Moroney recalls, "We wanted to talk to our core readers and find out if you raise the price, what happens to sales on home delivery." ...
The group wasn't just asked about price. The graph also included a curve on news coverage. "We felt we need to tie it to content," says Randy Hill, the Modellers' vice president of client services. The results were startling. When asked about the perception of content in tandem with price increases, the survey found a 4-to-1 gap in price versus defection. For example, if the paper raised the subscription price but readers felt they were getting more content, the fall-off in volume would be around 10%. At the same price, if readers felt like they were getting less content, volume would fall by 40%.