Tiered Pricing

Factors that influence tiered pricing

An increasing number of publishers have adopted tiered pricing models. In the print era customers may have
purchased multiple journal subscriptions and several copies of books in order to meet the needs of their
patrons. The availability of electronic products which are accessed outside of the physical library and are
available across campuses has meant these multiple purchases are now less common. However, it seems fair
and appropriate that the size of an organization and the number of potential users for a product should be
considered as a criterion for pricing with smaller institutions paying less than larger organizations with higher
use. The basic idea is to have different price bands or tiers for a group of subscribers depending on various
factors such as:
size, counted by FTE, relevant staff with advanced degrees, number of researchers or other measures
previous (print) subscription history
organization type/status and perceived significance
research intensity, including whether advanced degrees are granted
usage
number of locations and geographical sites of the institution
geographical location of the institution (i.e. whether in developing world)
There is no standard model, though some classification models such as the Carnegie Classifications of
Institutions of Higher Education (Carnegie Foundation for the Advancement of Teaching 2005), used in the
United States, and the JISC Banding Model (JISC, no date), developed for the UK, may be helpful in some
territories. Tiered pricing is used for journals, databases, e-books, data sets and other resources.
Why (not) move to tiered pricing?
As part of standard business practice it makes sense for publishers to consider implementing tiers in their
pricing structure. However this is also a change that brings the journal to the attention of the librarian, thus
opening it up for review and evaluation and possible cancellation. Key points to take into consideration are:
Simplicity librarians and agents need to understand the criteria (bear in mind that libraries often fall into
different tiers with different publishers)
Timing sort out in early Summer for the following calendar year (i.e. in May 2013 to take effect for
calendar year 2014 subscriptions)
Expect questions and attrition explain why you are implementing tiered pricing. Be prepared for
questions, later renewals than usual, more after-the-fact changes and cancellations. Post tier pricing,
definitions and the explanation for the change on your website.
Publishers should model the financial effect of moving to tiered pricing to see what percentage of existing
customers will experience what sort of price change. Consider whether the change is intended to be
revenue neutral (aiming for fairer allocation of costs) or revenue positive, aiming to increase overall
revenue.

General advice
1. Keep tiers to a minimum
Do not have more than five tiers with the largest being the "negotiated" tier for which there is no published
price (instead the price is calculated and negotiated on an individual basis dependent on various factors
including but not limited to size, research output, number of sites). If there are more, the pricing gets too
complicated and hard to manage for all concerned. Also too many tiers compress the pricing range often
leading to minimal pricing differentiation. Consider the impact of the pricing in future years and if the top tier
will become too expensive over time. Use the same tiers for all journals one publisher tried to set a five-tier
structure for their flagship journal and a three-tier structure for their other journals, and chaos ensued.
2. Be able to assign a tier to your customer list
Publishers must be able to assign the tier to their customer list. Pick a standard to set the tier and apply it to
your subscriber list to ensure that it can be fairly applied and explained. Preferably avoid "usage" tiers
these tend to cause the most consternation/customer push back. If a journal or other product goes to a
usage-based model, the publisher will need to track usage and tell the agents each year of any tier changes.
3. When publishers switch to tiered pricing, librarians evaluate the journal
Thus publishers will probably experience higher than normal cancellations. Library budgets are tight and the
same "medium" and "large" libraries are hit with price increases. If the journal is not core to the mission of
the institution they often will cancel and depend on interlibrary loan and access through aggregation
databases. If the journal is not available through a database then libraries tend to keep it as online only
(dropping the print).
4. Consider offering a print or print + online bundle option
Some customers want to keep their print subscriptions. In general, public and hospital libraries in the US
have continued to request print subscriptions. This may change if their patrons demand it, but the wholesale
switch to online for these libraries hasnt happened unlike medium to large US academic libraries who have
switched to only online access.
5. It is better if the publisher does the initial assignment
Ask your subscription agents to provide a list of current subscribers in order for you to assign the customer
tier. There tends to be fewer questions if the publisher assigns the tier. However, if the publisher has
difficulty assigning tiers, ask your agent for assistance. Expect questions and have a dedicated contact for tier
change requests with a turn-around of five days from the initial tier change request to the final decision by
the publisher.
6. Timing is important
Tier assignments and pricing must be provided in the spring of the year before implementation. Agents need
time to update the orders in preparation for the upcoming renewal year and librarians want to know how
their subscription will be impacted. If publishers want agents to assign the tiers then the agents need the
pricelist with tier definitions by April in the year before the change; if publishers do the assigning then the
information should be sent to agents no later than early June.
References
Carnegie Foundation for the Advancement (2005), The Carnegie Classification of Institutions of Higher Education
JISC (no date), JISC Banding Model