Free to Fee – Kraft Charging For Its Magazine

Kraft Foods has a magazine called  Food & Family that is basically a recipe book that pushes brands owned by Kraft in all its recipes. The print version of the magazine, published quarterly, used to be free to its subscribers. Not anymore.Kraft decided to charge its subscribers $13.98 for an year. Not all customers are amused. The reader comments in discussion boards hosted at KraftFoods.com ask why Kraft is charging for what is a book of advertisements for its brands. Here is one example:

How can you charge for what is nothing more than an advertisement for Kraft products? As a free magazine, I liked looking at the ideas for using your products in the recipes, but upon receipt of my issue today including the invoice, I promptly tore the invoice in half and threw it in the trash. I don’t know how the idea of paying for a bound advertisement for Kraft came to be, but I will not be doing so.

I have written about Kraft’s effective price management before. I like their current decision to charge for their magazine. I believe they would not have decided to charge for this without the required analysis. I can think there is data that shows pricing for this magazine delivers them incremental profit over the free offering. Here are my reasons:

  1. Cost: Kraft wants to move to move their customers from print version to digital version. This is clear in their messaging and from the bulletin board discussions. Moving customers to digital version does result in savings. While one way is to incent customers to switch to digital version charging for print has its advantages. They are applying prospect theory (like some mobile phone providers did for paperless statements) to nudge customers to move to digital version.
  2. Analytics:  With print magazine it is difficult to track to the impact of Ads and promotions on sales unless they use coupons. There is better traceability and ability to run targeted Ads with digital version. This improves their model of customer margins and make better predictions about profitability.
  3. Sharing in value: If the print magazine adds value to customers and if there exists customer segments that only wants to receive the print version then Kraft should get their fair share of the value added. For example, here is one customer comment:

    This is such a beautiful, and well done magazine. I just love it, and this time was almost better than ever, if possible, with the wonderful calendar included. I was as thrilled as a kid in a toy shop. Thank you Kraft!!! :) We all just pour over it reading and rereading it and looking at the lovely presentations, each of us deciding on what to make first, and there are so many good recipes in it.

The net is I think Kraft’s decision to charge for their magazine makes very good business sense.