In this week’s Briefing:
- The psychology of subscription products: The behavioral phenomena that help influence value perception.
- No sign of peak subscription: People who subscribe to digital publications continue to add more subscriptions to their portfolios.
- Consumers say they are less likely to cancel subscriptions to digital publications now than they were in 2022.
The psychology of subscription products
Subscription marketing approaches have become increasingly sophisticated in recent years, and many publishers now rely on psychological cues to help boost consumers’ value perceptions and influence purchasing behavior. Price anchoring, decoy pricing, social proof, and dark patterns now feature in many subscription marketing strategies and are employed as standard across many publishers’ properties.
But as FT Strategies notes, other concepts from behavioral economics could become increasingly significant for publishers in the years ahead as they look for new ways to combat churn and maximize subscriber revenue.
The endowment effect, for example, is a cognitive bias that leads individuals to ascribe more value to things simply because they own them, while the similar concept of sunk-cost fallacy can lead people to ascribe greater value to products and services they’ve already invested time and money on.
These principles can prove powerful for driving “stickiness” and retention for any subscription product – particularly via personalization and customization features. If a user invests a significant amount of time familiarizing themselves with a product, customizing it to their preferences, and even “training” algorithms and artificial intelligence systems on their tastes, they may be reluctant to start from scratch somewhere else even if it makes financial sense.
Streaming and social media platforms such as Spotify, YouTube and Netflix offer good examples of these concepts in action. As their recommendation algorithms and personalization capabilities improve over time, the prospect of switching becomes less appealing for some consumers. I’d save money by switching from Spotify to Apple Music and would have access to many of the same features, but I’d lose my “90s Brit pop deep cuts” playlist and Spotify’s recommendation algo just gets me.
The concept of choice paralysis also takes on a new light in an era of ubiquitous content. The choice of content on the internet is already vast and is becoming more so as AI-produced content proliferates. Publishers could play an increasingly important role in helping consumers navigate the maelstrom and, crucially, offering trustworthy curation that helps them separate signal from noise.
Publishers with a firm understanding of the underpinning psychological factors that influence value perception could be best placed to succeed in an increasingly competitive subscription market. Large technology platforms have carefully leveraged these concepts and baked them into their product offerings for years. As their subscription efforts mature and evolve, it stands to reason that publishers will increasingly hope to do the same.
Subscribers say they’re less likely to cancel now than they were in 2022
Consumers say they are less likely to cancel subscriptions to digital publications now than they were in 2022, according to research conducted by Toolkits and National Research Group. The findings suggest that consumers may be spending on subscriptions less cautiously than they were last year when fears of a recession were more acute.
In a study of 1,007 U.S. consumers who have subscribed to digital publications, 56% said they’ve canceled a subscription in the past year, down from 63% who reported doing so in September 2023. Looking ahead, 22% expect to reduce their number of subscriptions in the coming year, down from 29% in 2022. Thirty-two percent expect their number of subscriptions to increase or stay the same, while 46% expect it to remain consistent.
Lack of use, budgetary concerns, and price increases topped the list of reasons for canceling publication subscriptions, remaining broadly consistent with 2022. Fewer consumers reported that value for money was a reason for canceling compared with last year, suggesting publishers may be doing a better job of delivering value through their subscription offerings and/or communicating value more effectively.
No sign of peak subscription: Consumers continue to grow their subscription portfolios
People who subscribe to digital publications continue to add more subscriptions to their portfolios, according to research conducted by Toolkits and National Research Group.
In a study of 1,007 U.S. consumers who have subscribed to digital publications, 29% of current subscribers said the total number of subscriptions they hold has increased over the past 12 months, while just 7% said it has decreased. Sixty-four percent said the number of subscriptions they hold has remained consistent. Eighty-one percent of subscribers said they now own subscriptions to more than one digital publication, up from 71% in 2022.
Advance Local experiments with day passes
In an effort to appeal to less engaged segments of its audience, Advance Local has experimented with offering day passes to users who are familiar with its brands but are not ready to commit to a subscription. “We needed an offer that fit between a free trial and a monthly or annual subscription,” writes the company’s director of digital consumer revenue, Debbie Tolman. The company tested day pass prices between U$0.99 and $3 in three local markets and found that 12.3% of day pass purchasers went on to convert to a full subscription. Two percent of day pass purchasers were also repeat buyers. This indicates a portion of its audience rejects the commitment of a subscription and is willing to pay a premium price to avoid commitment, Tolman said.
AI services rely heavily on content from premium publishers
The News Media Alliance, which represents nearly 2,000 news publishers in the U.S., published research stating that developers of generative artificial intelligence systems such as OpenAI and Google “have copied and used news, magazine, and digital media content to train” their bots. The research also indicated that AI companies have trained their bots to give more credence to information published by credible publishers versus material elsewhere across the web. As we’ve explored previously, publishers recognize that new AI-powered platforms and experiences could pose a significant threat to their business models if they’re widely adopted, potentially disrupting their relationships with audiences, undermining the value of their content and products and otherwise diminishing their ability to monetize their output. While it continues to raise new questions for publishers across the board, AI could have more significant implications for those attempting to charge for access to digital content.
Traffic to publishers’ sites from news aggregators stalls
Traffic driven by news aggregators — as a percent of total traffic referred by social, search and links — has gone down from 18-20% in 2020 to a range of about 13.6% to 15% in 2023, according to Chartbeat data shared with Digiday. However, news aggregator referral traffic remained roughly steady when compared to 2022, when it made up 14% of total referrals.
Ad spending in the UK is going to platforms rather than publishers
The U.K. advertising market is expected to grow 2.6% this year to £35.6bn, but tech platforms will account for all that revenue growth, Press Gazette reports. The advertising outlook for publishers is looking grim. Advertising on national newsbrands is estimated to be down 8% in the first half of 2023 with print and online declining at roughly the same rate. Magazine brands will be down 7.3% overall in the first half, with online magazine advertising down 10.5%, according to new Advertising Association/WARC data.
Advance Local drives subscriptions with high school sports content
Coverage of the 2022-2023 high school sports season across nine local markets has driven at least 16,000 news subscriptions to Advance Local publications, the company said. It’s now working to broaden its coverage of high school life in an effort to attract more subscriptions from parents.
DMGT hopes Telegraph purchase could boost its subscription efforts
Daily Mail publisher DMGT says it’s hoping to acquire U.K. news publisher The Telegraph in part to help kickstart its subscription efforts. “The Telegraph’s success in building a subscription model will help us reinforce the strength of our existing business,” the company told Vanity Fair. While Mail Online is free to read, DMGT is attempting to build subscription revenues through a separate Mail+ product, with limited success. The i, which DMGT bought for £49.6m in 2019, also launched a digital subscription strategy nearly two years ago.
YouTube cracks down on ad-blockers
Google-owned YouTube is testing pop-up dialogs that demand viewers disable ad blockers or lose the ability to watch videos on the world’s most popular video-streaming service.