Readers have become less sensitive to newspaper cover price rises according to a new study.
Research by the consultants Simon-Kucher & Partners claims that while The Guardian’s recent 20p cover price hike saw its readership plunge 4.4 per cent the increase was ‘not as damaging as first assumed’thanks to a 20 per cent rise in circulation revenue.
Using National Readership Survey circulation data from 2007 to 2010, the company found:
- The Times price rise from 65p to £1 saw circulation revenue up 16.7 per cent.
- The Guardian price from 70p £1 saw circulation revenue up 15.8 per cent.
- The Independent price rise from 70p to £1 to saw circulation revenue up 13 per cent.
- The Daily Telegraph price rise from 70p to £1 saw circulation revenue up 7 per cent.
Simon-Kucher director Jonathan Baillie said: ‘In our experience, broadsheets avoid slashing prices to ‘replace’ circulation losses.
‘This is very sensible, especially in rapidly declining markets, as it would inevitably result in a price war that ruins margins, profits and lead to losses.
‘The only winner is the customer, and often even this is short lived as businesses need profits to innovate and continue to improve their value proposition.”
Another benefit, according to Simon-Kucher, is that cover price increases are often complemented by unchanged weekly subscription fees – leading to rise in the number of ‘locked-in’ customers.
Simon-Kucher managing partner Mark Billige added:’Based on the classic price elasticity calculations, broadsheet newspapers appear to be relatively inelastic in demand; essentially, an upward price shift does not necessarily have significant impact on demand.
‘The Guardian’s, price elasticity is only -0.2; anything between -1 and 0 can be interpreted as inelastic or relatively inelastic.
‘We conducted a survey recently which revealed that only 15 percent of 498 respondents considered The Guardian newspaper as ‘poor’ or ‘very poor’ value for money at a price of £1.”
But Baillie also warned that a fall in circulation impacts advertising revenue, and that it ‘remains to be seen whether The Guardian’s cover price increase will more than offset potential loss in advertising revenue”.
Baillie added: ‘Advertising and new media revenue accounts for approximately 53 per cent of Guardian Media Group‘s revenue.
‘The net impact of the price increase is difficult to quantify due to the lack of publically available information. However, this is the third year of double digit price increases so one would assume this strategy is working, for now”.
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