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The Kelsey Report® White Paper

Directory Pricing Innovations
Carlotta Mast , 6/14/2004

EXECUTIVE SUMMARY:

Executive Summary

Pricing is entering a new era in global business. No longer just the fourth marketing "P" after product, place and promotion, price is becoming one of the most urgent issues in business particularly as companies confront increased global competition and the dilemma of growing top-line revenues in the context of aggressive price competition. Cutting costs can help, but focusing on price can have an even greater impact. After all, even small changes in price can have a significant effect on the bottom line.

Like most businesses, Yellow Pages companies want to become smarter about pricing. Facing growing print and online competition and no longer able to use across-the-board rate hikes to increase their revenues, publishers are realizing the traditional "one size fits all" strategy may not be best for business. In response, a few publishers are instituting real pricing model changes. BellSouth Advertising & Publishing Corp., for instance, has rolled out a variable pricing system that uses return-on-investment (ROI), penetration and other data to categorize directory headings into three pricing tiers.

In Italy, SEAT Pagine Gialle uses a similar value-based pricing structure for its print products. On the digital front, Verizon Information Services has added a pay-per-click advertising model to its SuperPages.com site.

While significant, these changes represent only the tip of the iceberg for what could be possible in the world of directory pricing. Some directory publishers, for example, are experimenting with pricing optimization methods long used in other industries. Zilliant is a pricing optimization firm that recently formed a partnership with directory systems vendor Amdocs. It is one of a growing number of technology companies that use sophisticated analytical software to help businesses dynamically set optimal prices for specific products and buyers, based on the purchasing behavior of past customers.

Pricing optimization may be new to the directory industry, but the idea of tying directory product price to value is not. The Kelsey Group (TKG) has long argued that Yellow Pages publishers must link the price of their products to the value they deliver to specific advertisers. This was true three years ago, when we first began beating the value-based pricing drum, but it is even more important today, given the rapid advances of performance-based advertising and the increasingly cutthroat competition among directory publishers and with other local media. Still, we realize that many sales, systems and resource barriers currently stand in the way of publishers implementing new, more sophisticated pricing systems.

This White Paper seeks to explore those challenges and the many other issues surrounding potential directory pricing innovations, including price optimization and value-based, pay-per-click and pay-per-call pricing.

Copyright � 2005 The Kelsey Group. All Rights Reserved.
This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under Federal law. The Kelsey Group disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or consequential damages that may result from the use or interpretation of this information.

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Copyright© 2006 The Kelsey Group. All Rights Reserved.