The day old bread discount and other variable pricing

Magazines usuallly have a hard enough time getting their current issue in front of the public through the byzantine maze of the single copy sales network. Often, we don't give a thought to the fact that, in many instances, back issues of the magazine have untapped potential. I was prompted to think about this by a presentation this week to a group of "creative industries" types in Toronto (part of a launch of a new goverment funding initiative).

Ajay Agrawal, a professor who teaches at the Rotman School of Management at the University of Toronto, made a presentation about the economic aspects of "creative clusters"; why they exist in some places and not others and what drives them.

His view was that among the new business models used in creative industries (in which I would definitely include consumer magazines) the first was "flexible pricing". He gave the example of the whole range of prices offered for tickets at the Tarragon Theatre in Toronto or the auctions being run by Ticketmaster to sell up to 30% of the tickets for major tours. (Until recently, Ticketmaster had been selling fewer tickets at higher prices; people in the concert industry say pricing has meant that only 45% of tickets released to the public get sold).

It occurred to me that the magazine industry is pretty good, but somewhat secretive, about its own pricing regimen. We all sell subscriptions at variable prices (hence, the "average" price on our audit statements). We are masters of special offers and testing. But most of us wouldn't consider auctioning subscriptions. Our only solution seems to be to sell magazine subs more and more cheaply.

Unlike airlines and concert promoters, whose inventory vanishes like lamplight the moment the plane takes off or the first chord crashes, magazine publishers have products that stretch beyond their sell-by date. Yet we have no mechanism to offer "day-old bread" discounts and never make last month's issue available in any way that a sensible member of the public would take advantage of. (If a reader wants a back issue, they must come to us and, often, pay a premium.) Many, many magazine issues have a timelessness that would lend themselves to, say, having a rack of "recent valuable back issues" or a "missed an issue?" rack, where people could buy at a significant discount off the current cover price. Say, 50% off. Has anyone ever tested whether this would cut sales of current issues? Or would they bring in incremental revenue? Surely anything that gets the magazine into readers hands rather than the knives of the shredders is a good idea.

Something to think about.