High Price Poor Quality Death Spiral

By Scott Francis on Pricing Strategy, customer value, value, Online competition / Post a Comment

sam-wheeler-95303-unsplash_newspaperFor my daily news, I subscribe to the Wall Street Journal, Miami Herald, New York Times, Washington Post, and the Florida Times-Union.  Interestingly, I am likely to cancel the Times-Union soon because it charges the highest price and delivers the lowest quality.  It is an excellent example of a business that tries to save itself as markets change by cutting costs and raising prices.  However, the Times-Union does not appear to be getting healthier.  More likely the paper is circling in a death spiral.  The good news is we can all learn what not to do in those situations.

Each publication I subscribe to has a different value proposition for me.  I have enjoyed the WSJ throughout my career for its coverage of business news and for what I perceive is an unbiased view of economics and politics.  I read it daily.  I have been reading the Times and Post online for the past several years for their more liberal points of view and counterpoints to the Journal’s positions.  The Herald provides sports coverage of the Miami Heat, Dolphins, and Hurricanes, all of whom I follow.  The Times-Union provides Jacksonville area local news as well as national and international news.  Each publication delivers the service I am looking for to some degree, but when we compare the value of that service to price, my local paper seriously under-delivers.

The quality of the Times-Union is poor in my opinion.  There are typically four sections, Front, Sports, Metro, and Life.  Each section is usually eight pages, with about half of the space taken by ads.  The amount of content is limited, paragraphs are sometimes repeated verbatim, editors regularly fail to correct typos, the grammar used by the local writers is often incorrect, and the editorials seem to regurgitate trite conventional wisdom rather than providing any real insight.  These problems seem to be getting worse, while the price has been increasing.

When my wife and I first subscribed to the Times-Union in early 2017, we paid $28 per month for papers delivered Friday through Sunday.  That price was substantially more than we were paying for 7-day service of the Pittsburgh Post-Gazette and more than we pay for any of our other subscriptions.  The price is now up to $34 per month for 3-day per week delivery.  There is also an online-only option for about half the rate we are currently paying.

It is not a surprise that a newspaper is struggling.  Media companies globally have been forced to adjust their business models to reflect the easy access of news online.  Consumers have more choices.  Subscriptions are down for nearly all publications, which causes decreases in the prices for advertising.  (Fewer readers means less value per ad.)  Compounding that, Google and Facebook have become the preferred destination for advertisers since they are able to more effectively target ads to specific consumers.

The solution to this predicament is not raising prices while decreasing quality.  Retailers have faced the same challenges as news media – online challengers have created new options for consumers with features consumers like.  The ease and convenience of shopping online is reducing store traffic and increasing price comparisons.  The retailers who are successfully navigating this landscape change are blending the convenience of online shopping, with in-store pickups, improved in-store expertise, and live features that could not be offered online.

Customers will pay for products, features, and experiences that provide value to them – compared to their next best alternative.  When markets change, or new competitive threats emerge, businesses must find a way to deliver value to their customers.  Only then will those businesses be able to retain their customers.  And only when the value they deliver exceeds the customer’s alternative can they charge a higher price.

Certainly, when revenues decline, costs must be cut to reflect the lower sales.    Businesses must reduce features that do not add value and efficiently deliver the services that are preferred; but those features should be focused on customer needs.  Cost cuts that reduce the quality of a product or feature, and cuts that eliminate the things customers value most will simply drive more customers away.  If, like the Times-Union, you add price increases to those value-destroying cuts, you are likely to enter a death spiral.

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