Every trip to India, I bring back half a suitcase full of books. My wife is a voracious reader of fiction and she reads a lot of Indian fiction too. Also, we want our children to read Indian mythology and other Indian stories and it’s impossible to get Indian childrens’ books in the US (there’s eBay retail opportunity for someone out there).
Of all the reasons why I buy books in India, cost is not one of them (unlike for Hindi film music and DVDs where there is a cost arb opportunity). But I think I may have to reconsider. I had just bought The Argumentative Indian’ by Amartya Sen in the US before going to India. It was the hardcover edition and cost about $25. In India the same book was available in paperback for less than half that price.
I know what’s going on of course. A book is an information product (like music, magazines, software and cinema). All of them are digitizable and the medium that carries them is immaterial (more or less) to the enjoyment of the product. All information products have a similar business problem. The marginal cost of producing the next copy is minimal and so variable cost has no bearing on the pricing of the product. For instance, the cost of a blank CD disc is insignificant compared to the price of the CD. So how does one price such a product?
In the case of books, the cost is not insignificant but it is much less than the price of the book (20% of the cost of a hardcover). So how does one price a book? The main technique is what I will loosely call ‘windowing’, though this is a term more widely used in the movie business. Publishers first come out with hardcover editions for (in the US) a $20+ price. With this they cover the well informed, price insensitive crowd. After a year or so comes the paperback with a price of around $10 that caters to the more price sensitive crowd.
However, there is another problem that publishers must deal with. Readers in different countries have vastly different purchasing power. How do they preserve their pricing model in the developed world without losing readers in developing countries like India? In the past they would just delay the launch of the book in India. However, in today’s global village, the media buzz around the launch of a new book creates demand everywhere at the same time. Postponing the book launch in India could mean lost sales.
So the solution is to launch relevant books in India simultaneously (or closely after) with the US market, but go straight to paperback. The different covers in a way justifies the different prices. For me, this is great news. I hate buying hardcovers because I do most of my reading on long flights and that is just extra weight to lug around. But many times, I just can’t wait. Paperbacks in India are like having your cake and eating it too.
Pricing of information products is one of the most fascinating subjects in business. My own company sells an information product. Many an hour has already been spent on how to price it. I’m sure this is not the last time I’ll be talking about this subject on this blog.
The lack of a public library system is also responsible for this.If you are a voracious reader, you will end up building a library of your own and will have to buy all your books.In that case,one tends to buy hardcover editions of the really ‘must-haves’ and buy the paperbacks of the rest.Most would actually buy the pirated ones when you are looking forward to a ‘read and throw’ book.Of course nowadays the pirated ones are actually complete. Earlier, you would keep wondering why some new characters popped up during the climax of a story- you wouldn’t know them because those pages were missing from the book.
A public library system may not be there, but there sure are scores of lending libraries doing very good business. For an insignificant membership fee, you get to borrow any number of books, the price for reading being directly proportionate to the newness of the release. You must see the student crowds at these libraries which have an excellent stock of fiction.
More interesting is the availability of the paperbacks (true, they have all the pages these days!) on pushcarts. You can pick up the paperback Da Vinci Code for Rs.50 and you certainly don’t feel like bargaining. Almost all the popular books are on display here. Pricing info products? Just see that they are not pirated! Well, that’s an author’s point of view, of course!
Digital product pricing is an interesting topic. As you write, the incremental cost of production is negligible. The typical Price Vs Quantity curve for digital products is flatter as compared to a “U” shaped one for physical products. This is because prices increase after a particular quantity has been reached due to inefficiencies in supply chain.
The biggies (Microsoft, Google etc) can afford to have a curve that is “more” flat than smallish companies and hence they are gobbled up very fast.
15 years ago in engineering school in Delhi ..I remember how mercilessly foreign editions sucked our “beer” money dry.It’s very different today . Whether its Nai sarak in New delhi or Fort area in Mumbai , the indian editions ( usually paperbacks) are so inexpensive
My wife who is doing masters in biotech bought most of her books in india on vacation and also for her collegues !!
I think folks like those at Rupa Publications et al need to be congratulated for a job well done
I was surprised to know that Basab is so price conscious even after being a ceo of some american firm. I am happy about that.
Since it is practically difficult to reach the holy grail – selling to each customer at the price he is willing to pay, you will have to offer a product line and let users choose the version of the product most appropriate for them. Or do group pricing – as in student discounts.
Although the thread of Basab’s thought was correct the example of “Argumentative Inidan” was a little off mark. This is one book where the hardcover was first launched in India and the paper back subsequently unveiled couple of months later. I couldnt stop myself and bought the hardcover for 450 bucks whereas my frind later bought the paper back for 235 bucks. Guess the phenomena is spreading to India as well, though it is limited to non fiction.
Product pricing is indeed a very interesting concept. It is even more challenging to price an information product as compared to a paperback. Having been in the IT products business for many years, in my experience, pricing is largely a function of the propensity of the market to spend. A product selling at $ 100,000 in Nigeria may be perceived as rightly priced and the same product selling at $ 1,000,000 in U.K may be perceived to be cheap. One can sell the same functionality for the same usage levels at vastly different prices in different markets. The justification lies in the licensing terms – For e.g. – If it is a banking product, I may license on the basis of number of users in one continent and still sell the same functionality at a higher price – licensed on the basis of number of accounts.