Micropayments and the rise of the ‘pay as you go’ model
Guest column: Tim Hunter, Director of Marketing for paywall solution iMoneza, discusses the reasons for the growth of micropayment systems and the implications for publishers
The way digital purchases are made is changing. While monthly and annual subscriptions are still widely available, smaller, individual transactions are slowly becoming more mainstream. These micropayments, as they are often called, are leading to the rise of the pay-as-you-go model. This approach allows the consumer to purchase only what they want, versus having to make a larger purchase that includes additional, unwanted content. The rise in popularity of this pricing model can be seen across several industries and can be attributed to several factors.
Apple’s iTunes was the first to successfully introduce the pay-as-you-go concept, letting users purchase individual songs in addition to the entire album. Apple knew that consumers didn’t want the entire Vanilla Ice album; they were after only one song. More recently, mobile gaming has experienced great success by offering small, one-time transactions. These micropayments are popular not only due to their price point, but because consumers are in immediate control of how they choose to engage. If they don’t make the prompted purchase in a mobile game, that doesn’t mean the game is over. They have simply chosen to wait versus pay to continue playing right away.
Two other industries that have had notable success with a pay-as-you-go model are gyms/workout facilities and cellular providers. The rising popularity of fitness boutiques featuring classes in yoga, Pilates and CrossFit, to name a few, has led to a move away from the traditional monthly membership/contract model prevalent at large health clubs. At these fitness boutiques and franchises, consumers are able to purchase packages of workouts that can be redeemed at any time. A monthly membership might not always make sense and being able to attend and pay for only the time spent at the gym has proven quite popular.
A similar tale can be said for a growing portion of the cellular industry. The idea of signing a two-year contract with a service provider seems to be losing popularity. Many people, for various reasons, are opting for the pay-as-you-go model for their cell phones. This allows them to purchase a finite amount of data/minutes/texts each month. They are also able to change that quantity each month depending on their predicted usage.
Let’s examine a few of the possible causes of the rise of the pay-as-you-go model.
- Age of the customer
A new era is upon us. Publishers used to be solely in control of what content was shared and when; those days are now behind us. Customers have nearly unlimited options when it comes to getting news or watching videos. Ignoring the customers’ wants and needs will ultimately lead to less engagement. The moral of this story is that customers want options; they do not want to be told how they can engage. Having the option to make a one-time sale to someone versus only offering a subscription could help reveal an undiscovered segment of long-term customers. The rise of the pay-as-you-go model can certainly be partially attributed to the increase in consumer demand for options.
- Changing demographics
We are all tired of hearing the term millennial, but this particular demographic has signaled a huge change in consumer behavior. They have grown up with iTunes, Netflix and mobile gaming. They are tech savvy and are comfortable with paying for digital services, both via subscription and pay-as-you-go. This could be the most valuable demographic when rolling out a paid content model. This is not the entire story though. There is great promise beyond the millennial market as long as publishers realize that the control now belongs to the customer.
- Budget, time and life
Not all consumers are the same. Therefore, the impetus behind decisions is also different. Getting into a contract/membership commitment is often times avoided due to budget, time or other life event. If you purchase a gym membership and don’t go at all that month due to time constraints, odds are you won’t have that great of a feeling about your gym membership, nor do you get your money back. On the other hand, if you had purchased a package of workouts and not used any, that isn’t a problem. You can easily use them the next month, or whenever you see fit.
Whether publishers, both large and small, will adopt the pay-as-you-go model is still uncertain. What is certain is that the landscape is changing and publishers must decide how to change with it. Often times, adaptation to change can be slow. Could those who are slow to adopt experience long term effects of being behind the curve?
Could the addition of a pay-as-you-go option be the right fit for your content moving forward?
Tim Hunter is the Director of Marketing for iMoneza, a paywall solution that integrates with publishers’ current model to offer new, flexible revenue streams via micropayments and subscription models. He has over 10 years of experience in the digital marketing industry.