Elasticity • 23 October 2008 • The SnowBlog
Price elasticity of demand (PED), that is - the degree to which sales are affected by changes in price. As we go into recession, as shoppers become more and more reluctant to open their purses, I think that book pricing should be under renewed scrutiny. A senior booktrade figure says in The Bookseller today: "Books still represent great value for money so, in many cases, a small increase in price to cover production costs shouldn't have a negative impact on sales." The interesting thing is that it's impossible to know whether that is the case or not unless you try it. You can model PED based on historical data of similar titles, but you can only calculate it when you have some actual sales data to go on. My view, though, is that shoppers are more sensitive to price in the book market than we might think.
One of the reasons for this is the uniform way in which prices are set. A and B format paperbacks are, for the most part, 6.99 or 7.99. (I have a whole separate rant about hardbacks pricing.) All new titles are discounted, either in a BOGOHP or a 342. Backlist titles, most interestingly, are most often the same price as frontlist titles. Where other retail sectors make their margin on the 'backlist' non-promotional products (you don't think that a bag of screws really costs B&Q 2.25, do you? Products like these deliver a 65-80% margin), we have missed the opportunity to make high margins on titles that people are going to buy anyway regardless of price. People don't even notice if a specific book they have searched out is 8.99 rather than 7.99. Indeed, yesterday I paid 21 on Abebooks for a book I really wanted. So we have sent messages to the shopper that new titles are bargains and backlist are expensive. Thing is, when expensive means 7.99 for a 300-odd page paperback, there isn't much wriggle room downwards.
The book industry has managed pricing so strangely in recent years that I don't think we can hoike prices up without the message to shoppers being a negative one. Like Gordon Brown, we should have got our house in order whilst the going was good. Now that purse strings are tightening, we don't have the luxury of sending out messages of price rises. And if we do, I don't think shoppers will tolerate it.