The internet has brought some heart-pumping buying experiences like EBay and online share management, but few things raise our emotions more than trying to find the best deals on airline tickets. The price of a seat rises and falls like a live share market controlled by mysterious forces that aim to squeeze the very last fraction of a penny from you, the humble traveller.*
Hopefully you have already bought your tickets for this summer’s holidays and can relax into the choice of books to pack. But what if the same seat-pricing model were to be applied to books? A model where the titles would have lower prices on Tuesdays and be more expensive on Fridays. Where the R.R.P. on the back cover becomes as dynamic as a company’s share price. Where we compete to buy books like we do in an EBay auction.
Ignoring the cultural rebellion that would rise up from the literary pages of the weekend broadsheets, could this be a way to generate new revenue streams, increase margins for authors and publishers, and what effect would it have on the already difficult process of publishing a book?
The hypothetical can be split into two parts: the effect on pricing, and the effect on the book as a product. Applying the airlines’ ‘yield management’ approach, the highest discount would be for pre-orders, and the further out the reader commits to purchase, the higher the discount. As the book gets closer to launch, so the price rises with the peak price being in the week of launch. After launch, the price changes to a demand-based model driven by interest in the author, the genre, the topic, and personalized to the reader’s own interests.
For example, as someone who is passionate about the art of photography, I would pay more for a title than someone who was buying it as a present for someone else. If the stock starts to run low in the warehouse, the price rises, all driven by a real-time pricing algorithm using data from sellers, warehouses, customer profiles and trend analysis. All these combine to maximize the margin on each individual sale of a book.
The effect on the book product itself is more of a creative challenge. How many tiers of product can be created out of a single book? Airlines are masters of creating multiple products based on the simplest of propositions: a seat going from A to B. From that seedling, we are upsold a forest of options: economy to first class, legroom, luggage extras, cancellation options. And that’s all before we get hit with insurance, car hire and so on. To see how this is relevant to books, it is worth looking a similarly productized media industry: music, and the example of Radiohead’s In Rainbows.
The band’s previous two albums had sold just under a million copies each. In Rainbows was released as a free download, and as a CD and as a premium “disc box” at £40. The album sold 3m copies, of which 1.75m were full price CDs, and 100,000 were disc boxes. In other words, the album sold almost double the previous two albums, having been given away and Torrented, and made “a material difference” to Warner Chappell’s bottom line.
Okay, so it was a success, but behind the scenes was a dynamic environment where the label and the band were “watching the average price daily with a view to potentially withdrawing it any moment should it drop too low.” In Rainbows was treated as an airplane with multiple tiered seats, limited offers and variable pricing controlled by a yield management system. And even having given away the thing in the first place, its commercial strategy was so successful that it became more of a talking point than the album itself.
If all this sounds impossible for an industry where prices are hard printed on the book, it is not. Flights used to have more static costs. So did albums and singles. Then they were shaken up by a combination of competition, consumer behaviour shifts and a mainstream internet. Book publishers already offer hardbacks, paperbacks and the occasional special editions, but these are variations on a theme, not a new theme. Perhaps the last true innovation in the book form was the paperback.
Last week, the credit agency Moody’s warned that the traditionally stable pay-TV and TV network business needed a “total overhaul” to respond to new entrants and consumer behaviour changes. It stated that they: “must end their linear distribution model, offer all programming on-demand with full stacking rights, implement robust search and recommendation interfaces, and implement real-time targeted ad placement focused on the viewer instead of the programme.”
In the travel industry, the margins that are made on each ticket are the key to making a profit. Their business model is close to what Moody’s is recommending that the television industry adopts. In this new world where products and business models are borrowed and adopted from the unlikeliest of industries (note that Red Bull makes more from its media business than from energy drinks) perhaps it is not to crazy to think that we might find books more expensive in the afternoons, multiple editions launched on the same day, and price points that vary by hundreds of pounds for what essentially is the same product.
* Travel Tip for buying flights online:
The guiding maxim is that the lowest prices are 6-12 weeks in advance for an international departure, and 4-8 weeks for a domestic flight. But behind that sits the yield management algorithm which is influenced by the quantity and type of booking (a block booking will push the seat prices up), what day of the week it is (Tuesday and Wednesday are best), what time of day it is, and there are also rumours that the price will rise in your browser the more you research it as they know you’re keen.