June 8, 2016 Last Updated 3:39 pm

Should publishers consider adding activation fees to the price of their services?

Guest column: Matt Lindsay, president of Mather Economics, discusses how digital publishers can add a significant potential revenue source with activation fees

If your newspaper is not charging activation fees for new subscription accounts, you could be missing out on a significant potential revenue source. Activation fees are commonplace in the services industry and, in recent years, also have been getting the attention of newspapers.

What are typical activation fees?

Activation fees are charged to new subscribers and former subscribers restarting from a previous permanent stop. A typical activation fee is an additional $3 to $5 fee in addition to the subscription payment. While some newspapers may choose not to charge the activation fee to customers who sign up for Easy Pay to provide an incentive to make their payment automatic, the decision varies from paper to paper. Activation fees don’t apply to customers who resume service from a temporary stop, otherwise known as a vacation resume.

Activation fees are non-refundable and debited to the subscriber’s account at the time of the order. If a customer neglects to include the activation fee in the payment received from his first bill, the fee is still debited against the account, leading to a reduction in the paid-through date. For live orders, call center agents and direct salespersons add the fee to the taxed total amount they collect when an order is closed. When a representative concludes a sales call, they say “the total for XX weeks, including tax, delivery and fees is $XX. How would you like to pay for that?”

What if customers inquire about the fee?
If customers inquire about the fee, which happens surprisingly infrequently, offer a simple explanation that the fee is instituted to help offset the expenses related to account and delivery set-up and data entry work experienced by newspapers for new and returning customers. You do need to make sure you communicate the fee upfront by adding language to your print and online order forms, or Easy Pay authorization forms once you make the decision to implement this program.

What are newspaper circulation executives saying?
Jake Gervin, regional director of retention and engagement for McClatchy’s Carolina properties, said McClatchy’s Myrtle Beach publication implemented a $3 set-up fee for all new customers not on auto renewing payment plans in December 2013 and increased the fee to $4.99 in December of 2014. “The implementation was very simple and I have heard very little negative response from our subscribers. This has proven to be one of the easiest and most seamless ways to generate revenue,” he said.

At the Cape Cod Times and New Bedford Standard Times, Circulation Director Rob Sypek implemented a $4.95 activation fee in the summer of 2014. “The revenue impact from this has been substantial and the pushback or concern from customers has been minimal. This was virtually seamless to implement and one of the easiest new revenue initiatives that we’ve tackled,” he said.

Other newspapers have instituted fees for sending paper bills. One publisher started with a $5 fee for non-auto pay customers to send an invoice in the mail. They have experienced remarkably little resistance, and they have recently raised the paper-invoice fee to $9 per bill. If a customer renews four times a year, they will pay approximately $36 in fees.

Prior to the drop in gasoline prices, several publishers had added fuel surcharges to their delivery customers. These surcharges have remained as fuel prices have declined as the higher delivery costs have remained, too. During the fuel price spike, the carriers were paid more for their higher costs, and customers felt that higher fuel costs justified the surcharge.

In summary, adding a non-refundable acquisition fee to new or returning subscribers is one of the simplest and least painful revenue initiatives we have seen undertaken in the last couple of years. Anticipated revenue opportunities are based on, and can be modeled from, your start transactions and most newspapers should be able to generate thousands of dollars in additional revenue each month with little to no pushback from customers.

Matt Lindsay is president of Mather Economics LLC, a global consulting firm that applies analytical tools and hands-on expertise to help businesses develop and implement pricing strategies

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