YPG Committed to Value-Based Pricing

Yellow Pages Group CEO Marc Tellier offered some more color on his company’s plans to roll out value-based pricing (VBP). According to Tellier, the company should roll out the new pricing approach by 2009 or 2010. One key to value-based pricing is YPG’s Customer First customer relationship management platform, which aggregates all the publisher’s customer data into a unified view.

Tellier talked about VBP on the company’s second-quarter earnings call this morning. YPG announced today that it had generated adjusted first-half revenues of C$797 million, up 20 percent over the same period last year. The publisher reported that in the second quarter, organic growth in print Yellow Pages was 2.4 percent. The total directory business, including online, grew 5.1 percent.

Value-based pricing links the rate card to return on investment. For example, headings that generate relatively few calls at a low average value per sale would be priced at a lower level in a VBP plan to put ROI more in line with the ROI in higher value categories. YPG hopes to use VBP to tap into at least some of the 59 percent of Canadian businesses that are not current Yellow Pages advertisers.

Among the comments Tellier made today on VBP:

• The focus will be on developing under-penetrated headings with price reductions. Tellier said YPG will not pursue a “milk the cow” strategy that targets high ROI headings for steep rate hikes.
• He sees VBP as “an enabler to get to the untapped potential” of Yellow Pages.
• He tried to manage expectations for reaching the 59 percent of businesses that do not advertise in Yellow Pages, noting that many businesses are simply not suited to Yellow Pages under any pricing program.

During the question-and-answer session, Tellier was asked if YPG would consider expanding into the United States. While insisting YPG is not “a hammer looking for a nail,” Tellier did not completely rule out the idea.

“We are focused on finishing what we started,” referring to integrating recent acquisitions across Canada. He added that if YPG ever did look to international expansion, the U.S. would make more sense for it than buying a publisher in Europe.