During a 1999 interview,
then Coca-Cola CEO Douglas Ivester said the company was experimenting
with vending-machine technology that would allow the beverage behemoth
to change the price of its drinks in accordance with the weather. Since
hot temperatures increase the value of a cold Coke, "it is fair that
(the product) should be more expensive" when the mercury rises, Ivester
went forward with the technology, perhaps in part because of the consumer
outrage unleashed by Ivester's remarks. Still, the notion of dynamically
tying product price to the value delivered at different times or to
different customer segments is one that in theory makes
good business sense. It is also an idea that many industries have embraced
over the last decade.
The Kelsey Group
(TKG) would argue that the concept can and should be extended
to Yellow Pages advertising. After all, the value delivered by directory
advertising differs substantially for different types of businesses
in different locations. By aligning price with value, publishers can
assure that they provide roughly the same positive return on investment
(ROI) to all businesses.
Today, a growing
number of publishers throughout the world are moving toward, or at least
considering, a more value-based pricing system. BellSouth Advertising
& Publishing Corp. is in the process of rolling out a five-tier, value-based
pricing system for all of its markets. Verizon Information Systems says
it will launch a similar pricing structure this year. In Europe, Italy's
SEAT Pagine Gialle has been using value-based pricing for more than
As these companies
know, by differentiating prices according to the value delivered to
individual advertiser segments (or even specific customers), Yellow
Pages publishers can grow their revenues while expanding their customer
base to include more businesses that have traditionally not invested
in directory advertising.
Of course, the road
to implementing such a dynamic, value-based pricing scheme is not an
easy one. In fact, it is riddled with potential pitfalls and challenges.
This White Paper
seeks to address the myriad issues that surround the notion of aligning
Yellow Pages prices more closely with value. We also offer insights
into actions publishers can take today to begin successfully adapting
their pricing structures to grow revenue and advertiser penetration.