Selling a Commodity vs Selling a Service

by Dan Blank on December 7, 2009

Why is it difficult to charge for news and information in the online economy? Because a fair amount of this news is "common" and easy to find. The Google News homepage indicates how much duplication of effort their is in news coverage nationally and globally. 153 articles on President Obama visiting Allentown, PA? So, which one of these articles would you pay for?

Even for highly targeted information, it is often easy to find a reasonable substitute to the real thing. For instance:

  • An article covering the highlights of Consumers Reports’ analysis of best vacuums. Most of the CR data is behind a paywall, but for most consumers, it is enough to know that the Eureka Boss SmartVac 4870MZ model is the top buy, which is indicated in numerous free articles, and perhaps in some online product reviews.
  • A Forrester research report may cost $1,749, but the main points are often shared for free by Forrester, are available in other articles, or found in derivative formats, such as people’s use of its data in presentations, webcasts, speeches, etc.
  • "Breaking News" is often no longer either for more than 60 seconds. This week, the Comcast NBCU deal was finally announced; How did I hear about it? At least 3 people "reported" it on Twitter at 6am, and it was everywhere after that time. Even for stories that are sourced by a single journalist or newspaper, the moment after it is released, hundreds or thousands of other newspapers pick up the story, not to mention online-only media outlets and bloggers.

What this means is that oftentimes, news is a commodity. Even business media is more often a partially processed product whose value can be better defined as "potential" than "actionable." It is easy to use an example of The Wall Street Journal or Bloomberg terminals as being the future of all business media – supported by paid models to access content. But there are few industries that operate with split second actions that affect the movement of billions of dollars like the financial industry.

What’s more is that you are seeing the people formerlly known as advertisers create their own articles, white papers, webinars, training sessions and blogs. These companies, after all, are filled with experts in their field, and now the publishing tools are easily available for anyone to create and distribute high quality content.

People Buy Benefits, Not Features

So then, what is the solution for business media if paywalls for online content aren’t the easy answer? I would argue that people don’t buy a product based solely on its feature list, that there are deeper reasons that affect someone’s decision to pay for a product. Here are three examples:

  • Identity/Affiliation
    Buying a product because it helps you define yourself. I am not just talking about wearing a shirt with a Nike logo, but even subscribing to The New Yorker can give you a sense of identity; a wall full of books gives you an identity; paying $6,000 to go to the TED conference (if you are lucky enough to be invited) is an identity builder.

  • Emotional Need

    Why is consumerism so big in this country? Is it because we desperately needed that pasta maker, even though we went to the store for lightbulbs? So much of what we buy – and what we eat – is often rooted less in practical need than it is in emotional need.

  • Intent as Action
    Do we buy self-help books because we will be following their advice to the letter, or are we buying the promise that by paying for the book, we have already somehow taken a step in the right direction. That intent somehow equals action.

Let’s consider a few examples of products that people are willing to pay MORE for in order to not just get a better quality product – but get greater forethought, service and support around that product. In other words, paying for things for reasons besides just the features of the product alone.

  • Patagonia vs Arc’Teryx
    Both brands sell high quality, technical, outdoor sportswear – stuff for mountain climbers and folks hiking through the arctic. Arc’Teryx tends to be at least as expensive as Patagonia, perhaps even moreso. But the big difference is that Patagonia sees their core mission as not just creating high quality products, but doing so in the most sustainable & environmentally friendly manner possible. So, part of what you are paying for with Patagonia is the research & development of materials and processes, which they are innovators of in the apparel industry. Arc’Teryx contends that they make their decisions more on quality, not environmental costs, but the fact of the matter is that we are talking about the final .0000001% difference in quality between both brands. Not the type of thing that will save a mountain climber from hypothermia or give a jacket an additional year of usage.
  • Cat Breeder vs Free Adoption
    Recently, my wife and I got a new kitten and we went with a breeder. I am not very familiar with the debate over adoption vs breeders, but there were some very clear benefits to shelling out $800 for a kitten through a breeder: knowldege that the cat was well attended to, held, talked to, and everything possible was done to ensure it would be well attuned to humans. We know the entire health history of the kitten’s parents and grandparents, and it has been tested for the most common feline illnesses. The kitten has been served only the best food. The breeders are fully aware of developmental needs of kittens – what to do when, and the assurance that it needs a full 10-12 weeks to properly wean from the mother. Not only that, but we are able to ask the breeder questions at anytime. So really, we didn’t pay $800 for a kitten, we paid that money for the services of the breeder – their expertise and their tending to the kitten before, during and after its birth.
  • Apple vs Dell
    A few years back my parents were in the market for a new computer, and unbelievably, chose to switch to Apple after a lifetime of PC use. Heck, my dad even works for IBM. Why did they go with a Mac? It was not just about their ease of use, which did help, but also for their security (built in virus protection & constant updates) and the ability to walk into a store go to the Genius Bar, ask a question, and get a free & easy answer. What sold them on the Apple was not the product, but the service – the ability to talk to a real human being whenever they had a simple question about it. There is an emotional comfort in that. For that service, they spent at least TWICE the amount of money as they would have spent for a comparable PC.

Defining Quality

While I imagine 99% of brands out there would describe their product as "high quality," what most mean is "the highest quality that we could produce for this price." This is why your "high quality" hamburger patties contain "filler" – animal byproducts that you absolutely don’t want to know about, and certainly don’t want to think you are consuming.

Here is an example of one brand’s commitment to quality: Saddleback Leather Co, makers of leather bags. They explain in excruciating detail why their products are better than their competitors. You will never look at a leather bag the same way again. They educate their customers not only as to what makes a high quality bag, but all of the tricky shortcuts that other manufacturers can take so that they can make the claim of one thing, while selling you another.

In considering all this talk of quality, I can’t help but feel that this is the opportunity for B2B media brands. The issue gets muddled when people focus only on the arguments around "media" and not discussions on the business needs of their market. The fact of the matter is, ad supported media will just be one part of the future of many business media brands. An important part – no doubt, but just one part of a broader revenue and product mix.

Business Media as a Service, Not a Product

The commoditization of breaking a news story is not the issue as much as the the services provided around that market and business. Your brand is not a magazine. Your brand is not an article.

Your brand is a service that provides solutions to the businesses in your market
and the careers of those in your audience.

The "product" you sell may take many forms:

  • Print editions
  • Web articles
  • Data services
  • Connecting those in your market based on specific need (classifieds, pricing, leads, etc)
  • Blogs
  • Events
  • Webinars
  • Newsletters
  • Training
  • etc.

The strategy and services underlying these brands need to provide deeper and direct benefits to your market. One can’t produce content in the same way they did in the 20th century for several reasons, not the least of which are:

  • The revenue models that support it has shifted.
  • Publishing & distribution channels have become incredibly cheap and easy to use.
  • Your partners are now your competition. And your competition are now your partners.

This is why the recent discussions of "newspapers vs Google" are largely missing the point and serve as a distraction from providing meaningful services to B2B markets. Do you want to be the journalist whose articles covering President Obama’s trip to Allentown is hidden behind a paywall? Is this the best way to take a leadership position? Will the subscription revenue be enough to make up for the loss of other revenue streams?

Business media is not just about reporting, it is about solutions. We know that people are willing to pay a lot of money for a solution, but it is a largely untested market as to how much they will pay for an "article." And the argument that people paid for articles for a century before this is a false one… they were also paying for sports scores, stock tables, coupons, classifieds and a single channel that gave them access to their community. Each of those other things are now easily available elsewhere, leaving "articles" to stand alone to support a massive and expensive publishing system.

The future is not about content – it is about solutions. And if anything, 2009 has proven that we are not talking about media companies jockeying for positions 1 or 2 in their market, they are fighting for survival. How are you aiding this fight? How will you be approaching your role differently in 2010 than you would have in 2000?

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