The following piece is a LinkedIn blog post about another subject area that I write about, financial industry technology operations, including data management. I'm posting it here because it uses an example that touches on the audio entertainment world and themes I've covered before in the blog here.
More stand-alone blog entries coming soon.
Some recent remarks at FISD’s New York general meeting by James W. Watson, global head of sales, market data, for global interdealer broker Tradition, about the ways that selling and distributing pricing data can be outmoded, reminded me of my experience as a SiriusXM satellite radio subscriber. Watson spoke about changes in the music industry to illustrate his points. Technology advances have shaken up such a wide range of industries and business sectors, but the principles around purchasing products of any kind still remain the same as they ever were. You just have to identify them in their new clothes.
Previously, telling SiriusXM that you wanted to cancel their service at the end of a subscription term prompted them to give you a better price. But by the beginning of 2018, that tactic was no longer working as well as it had in 2015 or 2016. Had SiriusXM gotten the upper hand over its customers? Maybe not. After letting the subscription lapse in February, I’ve gotten multiple offers to return that gradually got better and better the more I ignored them.
It’s exactly like the unsuccessful example Watson related about a bank being sold a package of market data for one region, that normally costs about $5,500 a month. The weaker salespeople, eager to sell the package, would immediately offer it for a “finger in the air” price of, say, just $800 a month. This leads to confusion and no price consistency, especially as it then gives the buyer an opening to talk down the price even further.
There are two other forces, however, that feed into these kinds of market data buying decisions. The first is package pricing and the second is per user pricing. Watson described the pitfalls of each with an eye toward guiding the industry to find some better way. He had his own analogy to frame his argument – about the seismic shift in the music industry since the rise of Napster followed by the rise of the iPod and iTunes, which broke down the old ways of getting listeners to buy whole albums for one or two favorite songs.
“Pricing needs to match the product value,” Watson said. “The conclusion here, continuing, with the music theme, is that I only want the one Metallica song because I only value that song. If your users and your clients only want a specific thing, then you've got to have that thing available, but at the right value for that, as there’s got to be a perceived value for the data.” Watson added that users or customers should have more control in how they consume the data through client-friendly pricing.
For example, that weaker salesperson in Watson’s example might have gotten more than $800 if they packaged the right pieces of data – more relevance of the dataset equates to more value to the consumer – together, to truly meet that customer’s needs. “It’s Sales 101,” Watson said. “Tell me how you want the data. If they open up to you and you're honest with each other, what will happen is that you'll create something where you're both winners, you're both happy.”
Per-user pricing, as Watson describes it, is another model that requires challenging, because it risks losing valuable accounts by nickel-and-diming those clients. “The amount of times that I go into places and they say to me, ‘Oh, we don't really use your data.’ I say fine, I’ll turn it off,” he said. “Then they find out there's a pile of people over there that use it. … We have taken the decision in our company that we don't count users so the value of the data to the business has to be sound and well understood. We decided that it's a pain in the client’s neck, certainly a pain in my neck to spend hours counting heads and doing administration audits. So therefore, our pricing in some cases could be slightly elevated versus our competitors because when I give it to my clients, I say, ‘I don't care how many people look at the data. You're buying data from me for your business as a whole and not based on how many people sit on a floor. We contend that this is a better way to manage your costs and worth a small premium to remove the admin overhead.”
The lesson other providers can learn from Watson’s approach with Tradition is one part confidence in one’s product – to avoid the temptation to discount deeply to keep or attract customers, and another part willingness to craft bespoke solutions rather than demanding customers pay for items they don’t want or need. Think about combining these two principles. By assembling market data packages at the customer’s direction, Watson and Tradition are ensuring that their product has greater value, and by treating each company that is a customer as a single account, they’re gaining loyalty and trust despite the disruptions that technological advances can create.
Michael Shashoua writes thought leadership pieces and blog articles for fintech industry service providers.
