My Take on the NY Times Pay Wall

February 10, 2010 BY danariely

A few weeks ago, the New York Times announced that they would start charging readers for online content in early 2011, and since then the million-dollar question has been: will it work? Will readers fork over the cash to keep reading the Times, or will they go elsewhere?

The main problem of this approach is that over the years of free access, the New York Times has trained its readers for years that the right price (or the Anchor) is $0 – and since this is the starting point it is very hard to change it.

So, should the New York Times give up?  The trick with anchoring is that although we are not willing to pay more for the same thing, we are willing to pay more for different things.  What this means is that one approach that the New York Times could take is to present us with a new experience so that we don’t associate it with the previous anchor, and are open to new pricing.

Let me explain. Because we’re not very good at figuring out what we are willing to pay for different products and services, the initial prices that new products are presented with can have a long term effect on how much we are willing to pay for them.  We basically can’t figure out how much pleasure the New York Times gives us in terms of $ — so we go back and pay the same price we have paid before.  This means that getting people to pay for something that was free for a long time will be very challenging, but it also means that if the New York Times were to offer some new service at the same time that they start charging, they might be more likely to pull it off.

It’s a strategy that Starbucks founder Howard Shultz put to good effect. Before he came along, consumers were used to paying much less for coffee from spots like Dunkin’ Donuts. So to incite us to shell out more for his coffee, he worked hard to separate Starbucks from other coffee shops. He designed it to feel like a continental coffeehouse, putting in showcases with croissants, displaying french presses, and coming up with exotic drink and size names. He redefined the coffee experience, and by doing so, convinced us to pay more.

The Times could try to take on a similar approach …

Irrationally Yours,