Build Your Pricing Strategy On The Foundation of Testing and Iteration

Digiday published an interesting piece yesterday on the subscription pricing strategy of the Daily Beast. For those that don’t know, the Daily Beast is a news and opinion site owned by IAC that was originally founded by Tina Brown in 2008. It has publicly struggled to find a sustainable business model over the years.

When the Daily Beast first launched its subscription paywall, they charged $9.99 per month or $100 per year. They admit that this subscription rate came more from art than science. They didn’t ask about the pricing in any of their initial user research. They knew that users were never honest or accurate about what they would be willing to pay for a service.

But once the Daily Beast launched their paywall, they started testing multiple price points. They tested conversion rates in various marketing placements. They watched retention rates.

From the Digiday article:

Over the past 15 months, the price of a Beast Inside membership has dropped 65%, to $35 per year or $4.99 per month. That offer is the fourth pricing combination that the Beast has tested since launch, but it delivers the best combination of conversion rate and retention; conversion rates on the $35 offer were five times higher than the rates on the membership’s initial price points of $100 per year or $9.99 per month.

I’m often asked questions about pricing for a new product or service. Certainly doing market research is important. But ultimately you need to be able to test into the pricing strategy that best balances customer acquisition and retention. If you have a paid product or service, you need to invest in this capability from the very beginning.

Even if you have an offline product or service, you should be using digital marketing tools to test your creative, your value proposition and your pricing.

Your investment in marketing needs to include the data analytics and digital marketing capabilities that make this kind of testing possible. You can use a combination of internal tools, third party platforms and agencies to make it happen.

But being able to do this kind of testing and optimization of creative and pricing is a critical part of finding product-market fit.