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Willingness to pay for newsletters - Q & A

Carrie calls in from LA wondering how to determine what customers would be willing to pay for an online newsletter from her business, which provides consumer advice for parents.

Rich Sloan: And we have Carrie out of Los Angeles.  Welcome to the show, Carrie.

Carrie:   Thank you.  Hi, Rich and Jeff.

Rich Sloan:  Hi.  How can we help?

Carrie:   Well, first of all, let me thank you for your incredible website and your book.  Because I was clueless when I started to think about creating my company which is a consumer website for parents.

Rich Sloan:  Okay.  Cool.

Carrie:   And my question is to --

Rich Sloan:  You're not clueless anymore, right?

Carrie:   I'm not clueless, no.  I'm in the process of finishing up -- or starting, I should say, the business plan.  And because one component of my website would be a subscription-based newsletter --

Rich Sloan:  Uh-huh.

Carrie:   -- I can't figure out how to find out what consumers would pay for something like that.  And then how to determine how many subscriptions I would be able to sell.

Rich Sloan:  Okay.  And is this the primary form of revenue for your business, the subscription to the newsletter?

Carrie:   It would be initially, yes.  And then later there would be other things that could be sold on this site.  But this is basically the main component.

Jeff Sloan:  You know, there are a couple of different business models when you float a newsletter out there.  One is to charge a subscription fee to the newsletter.  The other is to send the newsletter out for free but to then sell advertising against the newsletter and the website space.

Carrie:   Uh-huh.

Jeff Sloan:  And another use of a newsletter is to just announce product offerings, and then people will come and buy products and so on.  But those are kind of the ways you monetize or take advantage of a revenue opportunity associated with a newsletter.  Now you've chosen to go with the subscription model.  And you know what?  I read an article just last week that announced that that -- that consumers would rather pay for a newsletter without advertisement.

Carrie:   Uh-huh.

Jeff Sloan:  In other words, pay for content.  They're willing to pay for content if it doesn't have advertisement, than to get it free and to get advertisement.  So you're on the right path there in terms of your strategy.  The key obviously with any of these things is making sure you get broad enough distribution so that your revenues are sufficient to warrant the business effort.

Carrie:    Sure.  And that is, of course, something that I have to think about next, how to market this and get maximum exposure on the newsletter.  I do agree though about the idea of no advertising in the website, because I think parents, especially, don't want to be distracted by that and think that the publication is just a little more credible.

Jeff Sloan:  Credible, right.

Carrie:   Without it.  Uh-huh.

Rich Sloan:  Can I offer a strategy?  See, what you need to do as quickly as possible is ramp up the traffic or the usage, the subscription rate of your newsletter.  And people may not be able to figure out if they really want to pay for it or not until you've given them a lot of experience with the newsletter.  What about, you know, first month free of the newsletter?

Carrie:   Uh-huh.

Rich Sloan:  So that you basically get them hooked, and after that, they opt to pay the subscription or not.

Jeff Sloan: I'll tell you, another strategy -- that's a good strategy.  Another really good strategy, I think, is to send out a newsletter that has a certain amount of minimal content --

Carrie:   Uh-huh.

Jeff Sloan:  -- that is free and then, in fact, there are models like this out there.  If you check out -- I believe that there's a website called marketingsherpa.com.

Carrie:   Okay. 

Jeff Sloan:  marketingsherpa.com.  What they do is they'll send out a newsletter, provide some information for free, but for more detailed information, you need to pay.  And it's very, very effective.  And that model's been used by a lot of different companies.  So you provide some basic information.  If you want to learn more, you've got to be a premium member in order to get the additional information.  And that's on a paid basis or subscription basis.

Carrie:   That's a great idea.

Jeff Sloan:  Yeah.  That way you tantalize them sufficient to want to get the information and that's very, very effective.

Rich Sloan:  Good luck to you, Carrie.

Carrie:   Thank you so much.

Rich Sloan:  All right.  Thanks for reading our book.