Chapter 4: Price Structure
Science Library Case
Science Library Inc. (SLI) publishes many of the world’s leading scientific and technical
journals. To maintain that position and meet the needs of its business and individual customers,
SLI has invested heavily in providing online access to its journals. SLI’s online database offers
A current subscriber (individual or organization) enjoys unlimited, online access to the archived
articles of the title, which includes all articles published since 1968, or since the founding of the
publication (if after 1968). The current offer and pricing structure is outlined below.
Individual journal
subscriptions
Unlimited access
package
Offer includes
For each journal purchased:
• One printed copy
• Access to all journals
(online only)
Annual subscription price
$700–$1,200 (per title
depending upon title)
$80,000 (all 21 journals)
$1,600 for each additional
seat
Note: All subscription rates are for 12 months.
Despite the boom in technical publications, SLI is currently suffering from declining revenues
and profit, driven primarily by a decline in corporate and library subscriptions. Early in the
technology boom of the 1990s, SLI simply increased subscription rates by 10–15% per year for
its print and online journals to reflect growth in their size and in the cost to maintain the online
services. Now, however, with the annual cost of a subscription ranging from $700 to nearly
$1,200 per title, price increases do not appear to be solving the revenue problem. SLI has
• Large companies and universities were maintaining their subscriptions, although they
aggressively negotiated discounts off the Unlimited Subscription prices, usually in the
form of free seats.
• Many smaller companies, colleges, and libraries cancelled their unlimited subscriptions
in the past three years. Most replaced these with a smaller number of individual
subscriptions, reducing their overall expenditures.
customer segments uses SLI subscriptions (for a summary of results, see Exhibit 1). John hopes
that he might see some usage or needs patterns that would provide some insight as to how to
meet the needs of the various market segments without further jeopardizing the number of
corporate and academic subscriptions. He believes that if he raises individual subscription prices,
the corporations and libraries will pay more but he will lose even more individuals. Still, he
somehow needs to be able to increase revenue to improve profitability.
Exhibit 1: Customer Research Findings 2003
Customer
segment
Primary use of data
Quotes from interview subjects
Consultants
Need to know recent
breakthroughs, technology
“The newly released articles are really where I get a lot
of my good ideas. I only go back five years to enable
– Consultant specializing in innovation
Individual
professionals
Personal and professional
interest in their chosen field.
“I really regret that these journals no longer have a
commitment to the practicing professional. I love what
I do and keeping up with what my peers are doing, but
neither I nor my company is going to pay $1,600 for me
to do so. I could go to the company library to read the
print journals, but who has free time at work these
days.”
– Practicing metallurgist for a large industrial company
“We recently dropped our corporate subscription and
purchased several individual subscriptions for a
limited set of journals. We are a small research firm in
an industry that has not changed much in the last 30
years. Our 20 engineers need access to ten or so
journals in our specific area on a regular basis, but
only at the abstract level (not the full articles). Very
rarely do we need the full details of one article.”
– Manager, engineering, small industrial products
company
Students and professors use
the information in research
on the origins of theories and
ideas. Their research can
span back as far as 25 years
and cover a variety of
subjects.
“We have professors and students in this university that
specialize in anything from microwave technology to
nuclear energy engineering. We need to be able to
provide them with the information they need when they
need it. How do you run a Microwave Engineering
major or expect professors to write grant proposals if
they can’t read the Journal of Microwave Technology?
The library has to carry it!”
Assignment
Your assignment is to recommend a new offer/pricing structure to enable SLI to increase
subscription revenues and profits. Explain how your structure will achieve the goal of increased
revenue and profit. To start, you might use the matrix below to identify the various attributes of a
Subscription
attribute
Consultant
(individual)
Professional
(individual)
Corporation
Large
library
Small
library