Books Without Price Points

Most retail products have price points. These are either know price points which the consumers expects; can of beans, pint of milk, loaf of bread, or are more industry accepted price points which the consumer doesn’t always know. When at B&Q we had some 50,000 plus SKUs (stocked units), we discovered only a couple of hundred had consumer know price points and it was only these you often had to focus on in a price war.

Book publishing has always enjoyed price point freedom, where the RRP (Recommended Retail Price) is often anybody’s guess and some would suggest as fictitious as some of the content. It is also one of the few consumer products to still carry the RRP on the product itself. When being discounted this is a great indicator of value to the consumer. Although it has often been a bone of contention to retailers who feel it can limit their options.

Buying a physical book is often a process of selecting a title and then flipping it over to discover the price expected. Many titles sit spine out and negate the use of POS shelf stickers so demanding that each individual title is either stickered or pre-printed and discounted. It can often be like a lottery with prices often all over the place and all sitting alongside each other. The obvious exceptions are when the book is in a discounted section, dump bin, end of gondola, or is discount stickered. Although some publishers and formats did come close to establishing price points, they often find themselves sitting next to others that undermined the action.

Remember when music had little price points and the impact that iTunes and others had and now we find pricing is being established by market forces and discounting and also is very low compared to only a few years ago.

Today we live in the price comparison world where anyone can find the cheapest offer at a click of a button and even via their smartphone. This has had a significant impact on many sectors where pricing was a challenge. Insurance, big ticket items, travel and many other sectors are now down to a beauty contest where the winner is often the cheapest, or the cheapest known source.

So how much would you pay for an A, or B format paperback, hardback biography, softback reference work, academic monograph, etc? Does the RRP price reflect the cost of production plus margin, what the publisher thinks people will pay or some vague recognition of a market price and price sensitivity?

As discount wars exploded, some would suggest that many publishers merely raised their RRP to compensate for the heavy discounts given and those with a price point policy often found their hands tied by a policy that the consumer didn’t recognise. We had rendition format pricing with those big paperbacks at airports aimed at adding an extra return for larger paper. We have the hardback versus paperback price which is now confused further by the digital edition. All contain the same content merely held within a different container, or container priced.

Can effective RRP price points be established , or is it now one way discount traffic and down to the retailers to establish their own price points? Remember when Amazon introduced the $9.99 ebook concept and the ensuing responses and agency debacle?

Amazon’s latest Matchbox offer may be a success, or it may fail, but the one thing it will do is drive down the price of ebooks even further and faster. The bundling concept doesn’t drive up the price of the physical merely devalues the secondary sale and although some will state this is good and new revenues, there is a cautionary saying – beware of what you wish for.

Amazon’s marketplace is the new book price comparison destination for many and their mix of physical and digital offer is one few can even start to compete with. They may not be the discovery channel but they will be the price comparison one.

The other interesting aspect of the price pointing of books is how publishers will position themselves against their channels as they explore direct to consumer sales.

Finally, the digital ebook market has already thrown up some interesting insights on price points. Which of the following price points will attract the most activity, the next highest activity, next highest level from; free, 0.99, 1.99, 2.99, 2.99 plus? The challenge is to then understand the logic behind the attractiveness of the offers and their potential logic.

The industry has taken too long to establish and work with price points and it’s the market that will start to establish them and maybe not just for digital product.      

Pinning the Tail on the Donkey

Today book pricing can be often regarded on a par with pinning a tail on a donkey. It’s not an exact science, its often a stab in the dark and as long as its in the general vicinity who cares. We would challenge any book buyer to go to any bookstore and accurately price the majority of books on the shelves. These can come in different shapes, sizes, pagination, with or without graphics, pictures, whatever, the diversity is very visible both of works and prices.

The issue of pricing for digital works is often complex. Do publishers base the price on the overall cost and effectively cross subsidise the various renditions and manifestations, or let each stand on its own with just the core acquisition costs being spread across all? As the revenue and cost mix changes, then the cost of producing and servicing the physical could rise, whilst the cost of the digital content should fall. However, we are a long way from that making a significant impact to many today.

So we have a digital investment cycle where publishers have the cost of establishing the infrastructure and support of digital workflow, content, metadata and marketing materials, rights management, distribution etc. with relatively little return. On the other hand they still have the cost of the physical world. To make matters worse, many still only create the digital content as an after thought and maintain the physical editorial and production process as the primary development process. Its perfectly understandable, but this ‘digital afterthought’ can also perpetuate the duplication of effort in creating and managing bibliographic and marketing materials, which in a digital workflow should be fully integrated.

So we come back to the thorny issue of pricing digital content. Yesterday the Rand Corporation announced that the suggested retail pricing on all RAND e-books was to be $9.95 each. RAND is a nonprofit research organization with some 900 titles which are available for the Kindle, iPhone, Sony and other platforms such as Overdrive, Books 24x7, ebrary, Ingram Digital/ MyiLibrary, netLibrary, Questia etc.

"In the past, we based our e-book price on the retail price of the print edition," said John Warren, marketing director for RAND Publications. "It's clear, however, that the economics of e-book distribution are different than print, where the cost of printing, distribution and returns factor into the price paid by consumers. Colour charts and a greater number of pages, for example, drive up the cost of print-on-demand, but are not a factor in electronic books."

So we have the infamous Amazon $9.99 price point and now a $9.95 one from Rand. Rand may not be a significant publisher to many, but the move again raises the issue on how to price digital content. Some will choose to base it on a discount off the latest edition. We can all see the issue when the paperback replaces the hardback and the price drops. We can all see the discount wars and a physical 3 for 2, which today is hard to replicate in the digital world. There is also the question of why the digital copy should be aligned to a physical one given that some may say it has, in some cases, been falsely inflated to accommodate deep discounts.

Often, when the situation becomes muddled, the market dictates. Look at music and the somewhat naïve moves by the trade to maintain artificially high regional and CD pricing against clear consumer backlash. They won the battle with the monopoly board, but lost the war on the street. The problem in publishing is that there are thousands of publishers and a growing number of digital resellers and it may only take a few to brake the ranks and set the price perception for all.

So is $9.99 the eBook Price Point?

BooksOnBoard, the online eBook and Audio Book shop, has announced a massive discount on current New York Times Bestsellers, slashing prices from around $20-$30 to the price point of $9.99 and below. The price reduction is scheduled to last until Wednesday, May 27. So we see short term promotional price discounting similar to that done by Fictionwise, who some may say had one every weekend to celebrate everything and nothing. So what is the big deal?

Firstly $9.99 happens to be the price point chosen by Amazon for its ebooks and irrespective of whether they held it or not the perception sticks. So just like Apple did with the iTunes price point we now see others following with the $9.99 ebook price point.

Digital pricing may now no longer be established by the publisher or even the retailer but by the market. Once you have a recognised price point it is hard to drive consumers away from it. Look at the recent reaction when many raised concerns that they perceived Amazon was trying to raise the price from $9.99.

The question is not whether $9.99 is right or wrong but what is that impact on both the value chain and the author, publisher, aggregator, reseller etc? What is the knock on impact on the physical book model? Is the price point sustainable or merely a promotional price and how is that managed?

We have seen many readjustments in the ebook model such as the initial author rewards split being pegged back, with some advocating that they should now only receive a flat fee on digital.

Whenever we look at pricing there is that classic cause and effect implications that have to be thought through but in a market which has tens of thousands of authors, thousands of publishers, thousands of titles the point of aggregation often makes the decision and often based on their needs and their margins.