Magazine Pricing: Strategies for Newsstand Success

Cover price has a noticeable effect on profitability for new titles and well-established titles alike. Each dollar added to the price increases revenue per copy sole, makes each copy more profitable to wholesalers, and may increase retailer rankings. However, every additional dollar also makes the potential buyer think a moment longer about whether or not to buy your product. When deciding on your cover price approach, keep these points in mind:

1. Choose Added Value Over Lower Price. Years of testing show that added value is more appealing to a potential newsstand buyer than lower cover price. If you have the option, make your magazine thicker, add a special section, bind something in or bag something on, and you will see your sales increase; if you reduce your price it is possible that you will see an impact, but you might not. It is difficult to gain sales momentum by reducing the price, even if the lowered price is announced on the cover of your magazine; an extra dollar from the cover price makes a big impact when added on, but less of an impact when taken off.
2. Remember the "Thud" Factor. Concurrent with the idea that value has an important impact, the thickness of your magazine - "the thud factor" - is one of the most influential elements in determining the magazine's success on the newsstand. A thicker book is justified in costing more, and a thin package just doesn't build sales as well.
3. Be Aware of "Avalanche" Points. A rule that seems to hold true in pricing for the most part is for every dollar added to the cover price, you will probably lose about 10% of your sale. However, there are times at which the loss becomes steeper, and even becomes so large that it is not counterbalanced by the end gain. For most magazines of most categories, five dollars is still an avalanche point, but lately some magazines have been establishing higher avalanche points. A magazine that offers special value, offers essential information for specific needs, or covers technology related fields might find that it can establish higher cover prices without losing too much money. Find out what your own avalanche points are and keep them in mind while developing your pricing technique.
4. Go for the "$.99" Price Point. There doesn't seem to be much benefit in going with the $.25, $.45, or $.50 price points, with only a few exceptions. Tests show that consumers are just as likely to buy a magazine prices at $3.99 as they are to buy one at $3.25 or $3.50. These seems to be true even after taking into account the sales taxes that take the price over the next dollar point, even when putting the price beyond the avalanche point. Those extra pennies can be a good advantage in revenue, and won't be much of a sacrifice in sales.
5. Consider the Competitive Environment. If you see three publications of 100 or more pages priced at $3.95 in your competitive set, it would be a bad idea start with a launch of 80 pages priced at $4.95. No matter how much value your publication adds to the category, whatever you offer you're your competitors don't, you will increase your chances for success if you take your competitive publishers' prices into account.
6. Consumers Lose their Price Sensitivity Over Time. If you want to test higher prices, test on several issues. It is possible that you will see that the sales drop drastically for the first few issues, but then begin to get better over time. Publishers often find that after half a year they have recovered all the readers that were lost when the cover price first rose.
7. The Avalanche Point Retains its Impact over Time. The principle mentioned above does not apply to your title's avalanche point. Any sales lost at an avalanche point will not be regained. After the avalanche point, you must budget for long term reduced sales.
8. Time Your Increases. A strong issue overrides a bit of the resistance to a price increase, helping you get through the reduced sale issues more easily. Make sure that your increases coincide with special issues, buyers' guides, or any other type of added-value release. Your seasonality may also play in your favor; increase your price during your strongest seasonal issues to lessen the impact on sales.
9. Remember Wal*Mart. Wal*Mart must not be ignored while you plan cover price changes, as they represent as much as 20% of your magazine sales. Increases in price have to be approved by the Wal*Mart buyer or you risk losing this significant chain. A free copy of the Special Report "Ways to Win with Wal*Mart" is available with a subscription to the PTSS "Ways to Win Workshop" series, click through for details.
10. Test. Although split testing on the newsstand is more difficult than it used to be-Wal*Mart, for instance, refuses to offer the same title at two different prices in its chain, and that single chain will shape the majority of your wholesale distribution-you can still create successful price tests on the newsstand. Look for testing ideas and templates, in the "Ways to Win" Workshop series offered by Publishers Total Sales Services.