October 04, 2001
Case Study
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SUMMARY:
If you are a content Web site or email newsletter publisher, you will definitely want to read this article to learn how one clever publisher generates significant revenues by selling archives of his content that originally appeared for free! Plus, his pricing advice is, well, priceless.
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CHALLENGE
Allen Wyatt has been in the computer-related publishing industry for "years and years and years." He's written more than 40 computer-user books, such as 'Success with Excel for Windows', published by IDG, Prima Publishing and others. He was also Director of Operations for a print computer book publisher in Berkeley CA.
By the mid-90s he began to mull over how he could take his expertise online. Wyatt says, "I realized the real value in any publication is the content. I wanted greater control over my content. So I decided to start an email newsletter for people interested in how to use Word."
He bought the URL VitalNews.com and launched his first free weekly newsletter, WordTips, in March 1997. At first it was just a hobby, but Wyatt soon became enamored of the idea of turning it into a real moneymaking business.
CAMPAIGN
Wyatt figured he needed at least 20,000 opt-in subscribers to be able to sell ads. Since he only had a few thousand subscribers early on, he needed to find another revenue stream. So, in October 1997 he took his first six months of issues and turned them into an ancillary product called 'WordTips Archives'.
Figuring out the right pricing was difficult. Wyatt explains, "At first I said, 'I want to price so everybody can afford it and I'll sell a million.' I sold it at $9.95 and I played it up in the newsletter with a nice long publisher's note at the start of each issue about why they should buy this. I think I got nine buyers.
"One of those buyers wrote to me and said, 'I've been with you from the beginning - that's why I'm buying this. I know it's valuable. But there's such a thing as perceived value. When you price something at $9.95, people perceive that's all it's worth, and they’re not going to go out of their way to do it. It's like a penny on the sidewalk versus a dollar bill. People will bend down for the dollar."
Wyatt immediately stopped promoting the archives, waited 60 days, and re-launched the product at a higher price. He says, "I came out with the exact same product at $29.95, but with an introductory sale price of $14.95, and I sold 800 of them. It was a very valuable lesson!"
From then on, whenever he had enough back issues saved up, Wyatt launched another archives product.
Along with promoting the product in his newsletter (especially with periodic special offer announcements tied to a particular excuse -- such as his 100th issue anniversary) and on his site, Wyatt decided to support archives sales by launching a subscription version of his free newsletter in May 1999.
For $29.95 per year WordTips Premium subscribers receive a special version of the free newsletter that's got double the content (free subscribers get four tips a week, paid get eight tips.) There are no ads in the paid version. Plus, buyers also get 80% discounts any and all archives they want to purchase.
Wyatt hoped this would result in additional archives sales without cannibalizing the full-priced sales he got from free-newsletter readers. He explains, "I looked at the cross-over and figured out how many extra volumes they had to buy for me to stop losing money. I'm playing the averages here. My whole thing is I don't care about cannibalization as long as my net revenue doesn't go down. I just want to entice them to part with their money. That's all."
RESULTS
Each time Wyatt sends a special archives sale offer to his free subscribers about 1% of them purchase. Plus, about 1% of free subscribers have converted to paid subscriptions, and most purchase additional archives without discernable sales cannibalization.
Wyatt says, "I can tell you exactly why people subscribe to my premium service. They email me and let me know. They subscribe because they want the discounts on the archives. It's cheaper for them to get five-six archives at 80% off plus the annual subscription." He feels there hasn't been any cannibalization because those subscribers almost certainly would not have bought as many archives at the full price. Instead the additional 80% off sales are incremental revenue.
Although archives PDF-versions are priced at $22.95 while CD ROM versions are priced at $29.95 plus $2 shipping, just 47% of buyers prefer the PDF. Wyatt says they tend to be Americans who want "instant gratification" and buyers outside the US who don't want to wait for surface mail.
90% of Wyatt's archives' customers order on his Web site, and 10% call his toll-free phone number to order. Just a handful -- less than five orders this year -- arrive via postal mail. However Wyatt thinks it's important to prominently mention a postal mail address and phone number on an ecommerce site. He says, "It's a security blanket. It lets them know there's a real company on the other end."
Although he sells archives throughout the year, Wyatt consistently gets the biggest sales bumps from special offers linked to holidays, anniversary issues, or any other excuse he can come up with.
Currently Wyatt's total revenue stream breaks down to about 40% archive sales, 25% subscriptions (mostly motivated by archive discounts), and 35% ad sales.
He's also gained a second benefit from adding the subscription product -- because subscribers get twice as many tips, he's turning out twice as much content … which means he can produce more archives products!
Useful links related to this article
eCommerce WordTips Site
http://www.vitalnews.com
Wyatt's Corporate Site
http://www.dcomp.com
