How HBR Came Up With the Right Pricing

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Take pride in your pricing, one price almost never fits all so give options, and survey.

That's pretty much what Kennedy Center president Deborah Rutter did in her state-of-the-center speech I attended Monday night. She spoke about the free music they present every day at 6 pm, the reasonably priced symphony concerts they offer, and the diverse number—and pricing—of ballet and plays. Oh, and Hamilton.

Of course, Rutter knows that Hamilton prices were exorbitant, but people gladly paid it. In fact, the only audience groan came when she mentioned the slow-loading website it took wading through to buy them. Instead, she talked about the pride she has for bringing Hamilton to Washington, D.C. (In fact, Hamilton will be the first entity to be a Kennedy Center Honoree in December.)

Pricing is tricky, to say the least. An article earlier this year in Harvard Business Review based on a large B2B survey listed three pricing attributes for top-performing companies:

  • employ truly tailored pricing at the individual customer and product level;
  • align the incentives for frontline sales staff with the pricing strategy, encouraging prudent pricing through an appropriate balance of fixed and variable compensation;
  • invest in ongoing development of capabilities among the sales and pricing teams through training and tools.

In a Folio: interview last week, HBR's group publisher Sarah McConville said that instead of raising the annual price of their digital product from $99, they chose a different route: a monthly payment option. "For the convenience of being able to pay monthly and cancel, we charge a bit of an increase. But it's interesting, because there's fairly high click-through on email offers around the monthly and annual subscription together. People get attracted to the monthly, but when they see that it's actually a better deal to sign up for the year, we're seeing a pretty nice uptick in the annual subscription as well."

Brittany Carter, president of Columbia Books & Information Services, has talked about the success they've had with offering monthly subscriptions for their service. There it is side-by-side: Premium Annual $3,000; Professional Annual $1,099; Monthly $142.

"For a long time we went by the all-or-nothing mindset but realized that rather than try to push people to buy something in the way we thought they should, we switched the model and started offering a monthly subscription that was a higher rate than if they paid all at once, but allowed them the access they needed," she said. "It has been successful, and many of our monthly subscribers upgrade into annual subscribers."

Another thing that HBR has been able to do better of late is show subscribers everything they get with their subscription—almost educating them about the advantages of digital at the same time. "We're putting a lot of value-add messaging first, talking a lot about what comes along with your subscription, beyond the print magazine," said membership marketing manager Caty Trio. "We've found over time that many of our subscribers didn't know what they had access to in a subscription."

In that B2B survey, it was pointed out that "managers often criticize sales reps for losing a deal, but rarely for pricing a deal too low, so reps learn to concede on price in order to close the deal. Moreover, companies rarely reward sales reps for exceeding price targets, which means few reps take risks to push for a higher price. Misaligned incentives push deals down to the minimum allowed price."

For HBR, feedback is invaluable. "We're in the market every single month with subscriber satisfaction surveys and other types of research, so we had a good sense of what people were finding interesting, useful and valuable, and it was a matter of then amplifying those messages," McConville said.

Rutter at the Kennedy Center spoke time and again about wanting to hear from people. She even gave an example of something big that got changed because of a customer email to her.

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Ronn Levine began his career as a reporter for The Washington Post and has won numerous writing and publications awards since. Most recently, he spent 12 years at the Newspaper Association of America covering a variety of topics before joining SIPA in 2009 and SIIA in 2013 as editorial director…