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    July 15, 2019, 1:40 p.m.
    Business Models

    Nearly 7,000 people threatened to cancel their newspaper subscriptions. Here’s what got them to stay.

    Hint: Don’t just throw discounts at them.

    You’re a print newspaper subscriber, and one morning your paper doesn’t show up. You call customer service (how brave of you!) and threaten to cancel. The apologetic customer service rep offers you a discount for the remainder of your subscription, which you accept. But what will you do when that subscription comes up for renewal?

    According to a new study from Notre Dame and Emory, newspaper subscribers who receive a short-term price adjustment to quell the disappointment of a delivery failure are actually less likely to renew their subscription when the time comes — suggesting that newspapers might want to adjust their tactics for addressing customer complaints. Among the things they can try instead: Renewal discounts, extending or upgrading the subscriber’s existing subscription, and regularly taking the opportunity to remind customers of what the “full” subscription price is.

    “Discounting the cost of a subscriber’s service may lead subscribers to adjust the price they believe is fair for the service,” the authors write. “When their contract becomes due for renewal and subscribers compare the renewal price with the lower recovery-based price to which they have adjusted, they may hesitate to renew their contracts.”

    Vamsi Kanuri, assistant professor of marketing at Notre Dame, and Michelle Andrews, assistant professor of marketing at Emory, looked at data from a U.S. newspaper (which goes unnamed in this paper) between January 2010 and March 2013. The paper “offers daily and weekend print subscription plans, along with custom offerings in which subscribers select delivery days. The newspaper also published free website content at the time of our data.” (The majority of this particular newspaper’s revenue — nearly 70 percent — still came from print advertising in this 39-month period; its circulation was over 500,000, and it had no competition in the region.) During this period, the researchers assembled a sample of “6,919 instances of subscriber threats to defect, triggered by verified newspaper delivery failures” (failures included the papers not being delivered, being delivered but in bad condition, and so on).

    The newspaper had one response to these threats: “A single discount on the price of the subscription,” offered at the time that the customer got in touch to complain. This price would last for the remainder of the contract period; when the subscription came up for renewal, there would be a new, higher price.

    Kanuri and Andrews looked at what these nearly 7,000 subscribers went on to do with their subscriptions when it came time to renew; they also looked at how the subscribers differed from each other, recording variables like a subscriber’s “life stage” (young/family/mature), household income, and whether a subscriber had threatened to quit before. Then they came up with a model to predict the likelihood that a subscriber would renew service. Here’s what they found:

    — “The fact that monetary compensation leads to fewer renewals is our most surprising finding,” Kanuri told me — surprising both for the authors of the paper and for the newspaper that let them use their data. “When we went in and talked to the managers at this [newspaper], they were of the general opinion that giving monetary compensation was the gold standard. But some of the younger managers thought they might be leaving too much money on the table. When we went in, it was our intention to find the optimal point — the least [the newspaper] could do in order to keep the customer.”

    — “Full price service reminders,” sent out between the time that the “recovery incentive” (a lower price for the remainder of the subscription) and the renewal, were helpful in reminding subscribers what the “normal” price of a subscription was and decreased the likelihood that they’d cancel when the subscription was up because the new renewal price seemed too expensive compared to what they’d been paying. It also helped, not surprisingly, if subscribers were offered the chance to renew at a discount.

    — Subscribers who first signed up via “personalized campaigns” (email targeting or digital advertisements, for instance) were more likely to perceive renewal prices as fair than subscribers who signed up via a nonpersonalized acquisition campaign (like a kiosk or corporate subscription).

    — Surprisingly, people who had been subscribers for a long time were not more likely to renew their subscription at full price. “One possibility is that the service failure could have minimized the effectiveness of rapport to a point where it can no longer counter the negative reference price effects of recovery incentives,” the authors write. (In a 2018 PwC survey of global consumers, 32 percent of respondents said they would walk away from a brand or company they love after just one bad experience. This varies by nationality: 17 percent of U.S. respondents said they’d do this; 49 percent of Latin American respondents said they would.) However, older subscribers were more likely to renew after a service failure than younger ones. Other research also shows that the main indicator of how likely someone is to renew their newspaper subscription is whether they read the paper regularly, even if they’re just skimming.

    — People who had threatened to quit before their current threat to quit were actually more likely to renew their subscription even after a service failure, “suggesting that such subscribers opportunistically make threats to obtain discounts.”

    “People who threaten to quit more are more likely to stay,” Kanuri told me.

    — Rather than immediately offering a discount, newspapers should think about what other benefits they can offer to subscribers who complain: They could consider upgrading a subscriber’s service level, or increasing the days that they receive a print product, as an alternative to slashing prices. They can also consider extending subscribers’ subscriptions at the “recovery-based price,” because increasing the time between the recovery price and the renewal fosters “forgetting of the recovery-based price.” In other words, if it has been a longer time since they had to renew, people seem more willing to pay a higher renewal price.

    — The findings are likely to apply to other types of newspaper discounts as well. For instance, many newspapers offer very low introductory rates followed by higher ongoing subscription prices. “These reference price effects should hold,” Kanuri said, pointing to research that shows that a steady, step-by-step increase in prices is more likely to be seen as favorable by customers than a sudden increase to a high price. “Papers that steadily increase the price, or decrease the discount, are more likely to benefit than those that go from, say, $0.50 a week to $10 a week.”

    Photo by Joanne Bourne used under a Creative Commons license.

    POSTED     July 15, 2019, 1:40 p.m.
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