February 04, 2010

For a New Book Publishing Model

Once upon a time, there was the hardcover.

Then there was the pocket (mass-market) paperback.

Then there was the high-quality "trade" paperback.

Then there was the audiobook.

Then there was the e-book.

Publishers looked for a way to deploy these different formats in order to maximize profits. Not unreasonable. In general, they believed that either paperback format would cannibalize the hardcover. So would e-books, if priced less than the hardcover. Audiobooks not as much of a problem as long as they were priced appropriately.

Also, they found that a paperback release about a year after the hardcover created a new marketing opportunity.

What they did not realize is that by postponing release of paperbacks, and in some cases e-books, they were squandering their best marketing opportunity. The one that comes when the book is new.

A consumer who hears or reads about a new title and gets excited, but is among the majority of readers who will not pay $25 for a book, is unlikely to remember that interest a year later, and unlikely to be reminded by a renewed marketing effort which in nearly all cases will have weaker results than the original campaign.

The most consumer-oriented and profitable approach in today's world of insta-demand is to publish every format simultaneously (including the decision on whether to even have a hardcover edition).

Kevin Smokler has a great piece in this week's Publishers Weekly on this subject. More than ever before, making consumers wait is a losing strategy.

February 03, 2010

Challenges of Selling to the Retail Channel

I started selling to retailers thirty years ago. Then, most retail segments were not controlled by national chains. You could have a successful product by selling to regional chains and independents. As such, even the national chains were not horribly demanding as long as your terms met industry standards.

As retail has become dominated by national chains, they have gained leverage over suppliers and demanding deeper discounts, longer payment terms, and instituted a variety of fees, fines and discounts they will simply deduct from your payment when they feel justified. As a supplier, it's very frustrating. There is little if any opportunity for a supplier to negotiate.

Some suppliers react by choosing not to accept these terms of business, and that's their prerogative. My suggestion is that they not do so emotionally, but rationally consider their choice.

In my experience I have always found that more distribution is better. You'll make more on some transactions than others. But unless the smaller margin transaction is literally taking away larger margin potential sales, I'll still go after it as long as the revenue justifies whatever sales effort I have to put into it. It may not be true for every product, but often, the more places a consumer can run into your product, the more you will sell.

While there are certainly cases where the pricing and other challenging policies demanded by a retailer makes selling to them less attractive, I have yet to find a situation where I lost money instead of making profit by increasing my retail distribution.

Although sometimes I scream at retailers in my head, I try not to let my annoyance at their demands cloud my judgment on whether I am better off making the sale or not. To the "small guy" it may seem predatory, but they're just trying to get the best deal they can, and in today's world they are in a position to do so.