This week, Professor Akie Iriyama of Waseda University Business School talks about issues based on management theory. I refer to the teacher’s book “Global Standard Management Theory”. However, this series can be easily read without this book.
The Asahi Shimbun raised the subscription fee from May. Professor Iriyama praised it as an “extremely reasonable move,” but cautioned that it was “the last possible strategy for newspapers that are already in decline.” If you were the manager of a newspaper company, what kind of strategy would you use to rebuild?
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Reasons why it can be said that “raising prices is the right answer”
Hello, I’m Akie Iriyama.
Do you subscribe to newspapers? When I was a child, it was normal for each household to receive a newspaper every morning, but today, the number of households that receive newspapers may be in the minority.
BIJ Editorial Department Tokiwa
A little while ago, the Asahi Shimbun announced that it would raise prices. A set of morning and evening papers will increase by 500 yen to 4,900 yen per month.
However, the number of subscribers is declining for all newspaper companies today. Although there are various circumstances such as soaring raw material prices, raising prices when sales are declining may lead to further cancellations. Isn’t the price increase a strategy to strangle itself? Professor Iriyama, what do you think?
uhm iRaising prices is a very reasonable moveI think. However, this move may even accelerate the decline in subscribers. Still, if I were the manager of the Asahi Shimbun, I think I would do the same thing.
BIJ Editorial Department Tokiwa
Do you mean to take it from where it can be taken?
Yes, That’s right. For example, the popular Tokyo Disneyland has been raising prices for a long time. And I think it’s also a good strategy. The reason why it is correct was discussed in Part 121 of this series, but “price elasticity of demandcan be explained by the idea that
Intuitively speaking, price elasticity is a measure of how sensitive customers are to price changes.
For example, if the number of customers decreases by more than 10% when the price of a product is increased by 10%, it means that the customers of that product are sensitive to the price increase. This is called high price elasticity.
On the other hand, if a price increase of about 10% only reduces the number of customers by 4% to 5%, it means that customers are not so upset by the price increase. This means that the price elasticity is low.
and in general,Prices should be lowered for products with high price elasticityIt is. This is because even if the price is lowered a little, many customers will jump on it, so sales will increase, and an increase in total income can be expected. Conversely, if you raise the price of a product with high price elasticity by 1%, the number of customers may decrease by about 5%. In that case, profits will decrease in total.
On the other hand, you already know what to do with products with low price elasticity.The opposite of high elasticity, the correct strategy is to raise the price.. For example, if a 10% increase in price only reduces the number of customers by 5%, raising the price will increase the total income.
On the other hand, products with low price elasticity do not attract many customers even if the price is lowered. If the number of customers increases by only 3% even though the price is lowered by 10%, total sales will decrease.
in short,”Pricing strategies should rely on price elasticity”.
BIJ Editorial Department Tokiwa
So Tokyo Disneyland seems to have low price elasticity.
that’s right. The price elasticity of Tokyo Disneyland should be very low. You have so many loyal fans. These people are often insensitive to Disneyland price changes.
Tokyo Disneyland is partially managed thanks to the “Disneyland enthusiasts” who visit the park many times a year. Such people do not stop going to Disneyland even if the price rises a little. Or people who come all the way from overseas will visit Disneyland even if the price goes up by 10% or 20%.
Tokyo Disneyland has been gradually raising prices since before Corona, but perhaps Corona has taken the opportunity to review the overall strategy. I already know that even if I raise the price, the number of customers won’t decrease so much. In addition, if it is too crowded, you may not be able to ride the attractions you are looking for, and the customer’s experience value will decrease. In that case, it would be better to raise the price in order to keep the number of visitors to a reasonable level. I think it’s probably a strategic way of thinking about it.
Newspaper’s final strategy
Then what about the Asahi Shimbun? Unlike Disneyland, unfortunately, the Asahi Shimbun is in a state of declining circulation. But in my viewAsahi Shimbun subscribers have extremely low price elasticity. I don’t think these people will say, “Well, let’s stop reading now,” even if the price goes up a bit.
There are several reasons. First of all, newspapers are periodicals, so the cancellation procedure is troublesome like a subscription. So even if you raise the price by 10% or 20%, not many people will unsubscribe.
In addition, most of the people who read the Asahi Shimbun today are probably elderly. This generation has strong loyalty to the Asahi Shimbun brand, which they have subscribed to for many years, and many of them are economically wealthy. Of course, there are people who live on their pensions, but even if the newspaper bill goes up by 500 yen, they can still afford to pay it. I might get mad at you, but the Asahi Shimbun is currently being subscribed to by people like that out of inertia.
In other words, the remaining Asahi readers should have low price elasticity. If so, according to the logic above, no matter how you look at it, raising the price will increase sales and make up for the decrease in subscribers. Of course, by raising the price, the number of copies will decrease slightly. However, only a portion of the price-sensitive demographic will stop subscribing, and there shouldn’t be many Asahi subscribers.
BIJ Editorial Department Tokiwa
I see. But after all, if you raise the price by 500 yen, even those who were considering subscribing will say, “I’m going to quit after all.” Existing customers are also important for services, but if new customers do not come in, they will not grow. In that case, it is difficult to imagine how the Asahi Shimbun will continue to grow.
To be clear, it is hard to imagine that it will continue to grow in the future. Therefore, the Asahi Shimbun’s price increase this time is, without speculation,The last possible strategy for already declining newspapersis.
For example, if you offer a discount only to young people, such as “student discount” or “half price for those under 20”, you may attract new subscribers. But then there will be resistance from other generations.Basically, you can only put one price on one product.It is.
After that, it was the exact opposite, positioning the Asahi Shimbun as a luxury newspaper for the wealthy.There is also a strategy to raise the price and give a sense of luxury. However, even if you do that, the market itself will not grow any further, so the only thing left will be digitization.
In the United States, newspapers such as The New York Times, News Today, and The Wall Street Journal were quick to make the transition to digital. In Japan, the Nihon Keizai Shimbun started the digital shift relatively early, but other major national newspapers lagged behind. Partly because older people in Japan don’t use digital devices such as the iPad very often, the delay in digitization was fatal.
People often say, “The newspaper has gone bad,” but from my point of view, it’s not the newspaper that’s gone bad. I think it’s a failure of the management of the newspaper company.
BIJ Editorial Department Tokiwa
What should newspaper companies do to survive in the future?
“Easier said than done” and let me take it easyI create digital media not only for Japan, but also for Asia.. From now on, using AI tools like ChatGPT will make it easier to write articles in English. Looking at Asia as a whole, even though Japan is in decline, I think there are still things to see economically and culturally. It’s popular, so I’m aiming for high-quality digital media from Tokyo while appealing that well.
At present, there are not many newspaper companies (or media like newspapers) that are strong in the Asian region. In Europe, we have the Financial Times, and in the world, we have the Wall Street Journal, the New York Times, and the Washington Post. If it were me, I would position the Asahi Shimbun as a high-end newspaper like the New York Times in Asia, and digitize it to cover all of Asia.
BIJ Editorial Department Tokiwa
I think the hurdles are high, but I’m sure there’s no more. It will be interesting to see how the newspaper companies open up new avenues.
Akie Iriyama:Professor at Waseda University Graduate School of Business Administration (Business School). He graduated from Keio University Faculty of Economics and completed the master’s program at Keio University Graduate School of Economics. After working at Mitsubishi Research Institute, he obtained a Ph.D. from the University of Pittsburgh Graduate School of Business in 2008. In the same year, he became an Assistant Professor at the Business School of the State University of New York at Buffalo. Since 2013, he has been an associate professor at Waseda University Graduate School of Business Administration (Business School). He has been in his current position since 2019. His books include “What are the world’s management scholars thinking now?”
(Composition: Kiyoko Nagayama, photography: Takuma Imamura, serialization logo design: Mio Hoshino)
Source: BusinessInsider
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