(If you’d rather listen to me explain this, I did a LinkedIn video on this topic.)
Let’s say I have a service on the Fair Labor Standards Act. It covers the whole Act, but the subscribers are always calling and asking the editors questions about chapter 4, which covers whether an employee is exempt or non-exempt.
The service sells for $400. Subscribers and potential subscribers frequently tell the editors it’s not worth $400, since they only want chapter 4. They resent having to buy all that other stuff they don’t want.
The editor proposes a new service, which is essentially chapter 4, with a couple of enhancements. He proposes a cost of $100.
If you’ve been around publishing for a while, you already know what management is going to say.
“But that would cannibalize the FLSA service. Instead of getting $400, we’d only be getting $100.”
I think that response is wrong-headed. If people only want chapter 4, then sell them chapter 4.
This isn’t communist China. People have choices, and they want to buy what they want to buy. If you’re not going to provide it for them, somebody else will. Your competition isn’t constrained by wrong-headed concerns about “cannibalization.”
If you take the editor’s suggestion, you may sell so many more copies of the $100 service on chapter 4 that you’ll make more money. Or … it may be that you’ll simply exchange your $400 customers for $100 customers, and it will be a huge loss.
Here’s the ugly truth. It’s going to happen anyway. Your $400 customers won’t renew, and they’ll find somebody who’ll sell them what they want at a lower price.
Let people buy what they want, at a fair price, and don’t try to force them into bundles. That’s what cable companies do, and the only reason they’ve been able to get away with it is they have people trapped. As other options become available, people drop that bundled mess and buy what they want.
We live in a time of consumer choice. You can’t force people to buy your bundle if they don’t want it. Go ahead and cannibalize. Break up those bundles. Or at least consider it, and do the proper research to test the idea. Don’t reject it out of hand because of “cannibalization.”
Having said all that, it’s worth mentioning that subscriber calls to editors are not the only or even the best way to get feedback from the market on a new product. What matters is what people decide when they get out their wallets, not what they say on the phone (when it doesn’t cost them anything). So be sure to test your ideas in the real world — where money is on the line.
