Pricing models for books and physical media (CDs, DVDs, audiocassettes) are straightforward, whereas the current pricing models for online content can be baffling—a mixed bag of sponsored content and motley subscription and licensing models, with little market consensus on what online access to various products should cost. Buyers favoring subscription models are motivated to eliminate advertising from their reading and searching experience. Still, some subscription products—like magazines and newspapers—contain advertising, though less of it than their free versions. Avoiding advertising may be an incentive to subscribe to a service, but it does not address the value proposition, or help to establish a pricing benchmark. Online pricing models vary quite a bit, especially when competitive products in certain subject areas give consumers multiple choices. With more specialized, or scarce information, where premium options are more limited—like financial or authoritative health information—we find less price variation.
For educational products, sold to schools, districts, states, and sometimes even countries, annual subscriptions are typically based on the population served, and an imputed price per user that the publisher and buyer agree upon. But there is no standard for this. I have made countrywide licensing deals with both small and large countries like Egypt, Wales, and Brazil that provide free access to a website for everyone in those geographical areas for a fixed price regardless of how much usage the website attracts. In each case, the negotiated price was primarily based on what the market would bear rather than any intrinsic value placed on the product’s website or anticipated traffic. Even heavy user interest after the first year of service did not allow us to increase the price, though low usage usually meant that the price could be negotiated down, or the contract canceled.
Enormously successful subscription content sites like Netflix, HBO, The Wall Street Journal, The New York Times, and Financial Times use a standard consumer model—a fixed monthly fee for unlimited use—where the end-user and the buyer are one in the same. Consumers can evaluate the features and benefits of the competitive products, compare pricing, and pick the best options for themselves. With educational products, the end-users (students, teachers, patrons, et al) are the beneficiaries of the subscription purchase but not the buyers. Institutional buyers have different motives in making their decisions as to which services to subscribe to, based less on the cost of the subscription and more on what they believe the value is to their constituents.
In addition to the pricing variability of online products, inconsistency in access permissions is equally common—from full, unlimited simultaneous access; monthly download limits per license or per user; single-use or multi-use licenses per product, to micro-charges based on a short amount of time spent on a site (kind of like a parking meter). Though not the most common option, multi-year licenses can be desirable for both the publisher and the user—the publisher collects several years’ worth of revenue up front and, in exchange for locking in the renewal, the user is protected against price increases, which is often a win-win for the content or service provider and the user of indispensable subscriptions. For example, I pay my website hosting provider for three years of service in advance because I want to lock in my cost and, at the same time, I do not want my site to go down. I feel quite differently, however, about my cell phone carrier—I pay by the month with no long-term commitment. I would happily switch to a cheaper service because I am confident that it will not be any worse at a lower price and I would just as soon save the money and use video chat if possible—where I can hear, as well as see, the person I am speaking to.
It is difficult for institutional buyers of online products to know in advance how the products will be received before using them in a classroom setting for an extensive period. Unlike a book, which you can browse through and glean its contents and relevance in a short period of time, an online product requires much more scrutiny over a longer period with a cohort of potential users. For this reason, most educators tasked with picking online products will request a trial period to test the product, or even a semester- or year-long pilot to get as many students and teachers as possible to kick the tires. In fact, even if the prospect does not request a pilot or extensive trial period, the publisher should strongly suggest it. It will create goodwill and more loyal customers over the long run. Luckily, it is a lot cheaper for a publisher to equip a school with enough licenses to conduct a pilot than providing sample textbooks, as was done for print pilots in the past.
Similarly, freemium models in the consumer market are used to develop product awareness—giving potential customers a free period to test a product before committing to an annual subscription. A freemium period will give the consumer an ad-free experience to see exactly what the product will look like if they were to subscribe.
Freemium trials for individuals and trials and pilots for institutions are useful tools to build deeper awareness of a product prior to making a long-term commitment. Awareness tools and strategies are the front-end equivalents of usage statistics. If awareness helps to predict a product’s value for the consumer and instill a level of confidence that the product is the right fit and will deliver on the promise, usage during the subscription period will either prove or disprove it.
