Traditional bookselling and Online bookselling – Comparing a customer’s willingness-to-pay

Traditional book selling and Online book selling – Comparing a customer’s willingness-to-pay for books supplied in these two business models. (i.e. Do they expect to pay less online? Why? What else do they expect from each method?)


     The major differences between the customer’s willingness-to-pay in traditional book selling and its online version can be analyzed on the basic dimensions such as – price, brand name and time & effort. Out of these, price is essentially the major deciding factor and the rest of them are relevant in the order they are listed. In the following table, I shall try to compare and analyze both models based on these dimensions.

Online book selling Traditional Book Selling
Price – Analyzing Related Factors
Mode of transaction: Since customers complete their own transaction, they expect and are entitled to receive direct-from-warehouse price. Customer is willing to pay less and expects cheaper price. There is no base for such expectation. He expects to pay as is listed.
Retailer competition: Retailers compete among themselves offering great discounts and special offers. Being aware of this, the customer expects to pay less. Not much effect due to the shift towards online book stores.
Shipping and Handling: Shipping and handling leads to increased price. Customer is aware of this additional charge and expects and agrees to pay so much more while completing the transaction. There is no shipping and handling costs. Customer enjoys freedom of being able to realize the transaction at the point when it is made.
Defects Identification: This refers to ability of the user to actually see and agree that the book is in good shape as per his expectations. There is no way to do this and the customer expects to pay less since he is not able to satisfy this requirement. This mostly applies to used books. This has no effect as the user can take the decision from the book store. This saves unnecessary worries of repacking or reshipping. He expects peace of mind and reliability.
Direct selling by Publisher and “Drop-Shipping”: Many publishers have started opening online bookstores where they sell directly to customers. Also retailers (Amazon) tie up with wholesalers (Ingram) so that books are directly shipped to the customers from Ingram’s warehouse. Leads to slash of re-shipping and repacking cost from the retailer which further reduces the price of the book. In such cases, customer expects fast delivery and lesser price for such deals. There is no scope for such a deal.
Price related Factors – Net Effect on willingness-to-pay : Customer expects to pay less in the case of online bookstore, as per above analysis.
Brand Name and Time & Effort
Band Name: Retailer brand name in the market is one of the deciding factors that the customer uses to decide whether to pay more or less. An online customer who searches more is mostly looking at the brand name on which he is willing to pay more. He would probably not buy the cheaper one but is willing to pay more on a branded one which gives him sense of reliability and high value. Search, decision and transaction happens mostly at the same time. The decision to opt the brand name is already done before the user goes to retail shop and he expects to get value for the price he is willing to pay.
Time & Effort: Ease of access: Being able to access millions of titles without any physical effort of actually moving around in the store, is one of the advantages of online bookstores. Ability to review multiple titles at a time is another cool feature. Given these features and the excessive competition from online retail business, customer still expects to pay less.

Delivery time: Delivery time affects the customer’s willingness to pay according to his urgency of need. Normally he expects to pay less considering the delayed time of delivery.

Ease of access: Compared to online stores, ease of access is very less, still there is no scope of reduced price. Customer might, instead, expect to have a library environment, author interview events, cafe facility while reading through etc.

Delivery time: There is no delayed time of delivery and doesn’t affect customer’s willingness-to-pay. He expects the item to be served at the point of transaction.

Looking at current trends in online book selling and the intense competition, the customer can look forward to have more price cuts, decision power and get high valued service at low cost, time and effort.

References:

1. Bianco, A. (n.d). Virtual Book Stores start to get Real. Business Week. Retrieved on April 14, 2007 from http://www.businessweek.com/1997/43/b3550148.htm

2. MITSloan (Dec 6, 2004). Brand Still Matters Online. Retrieved on April 14, 2007 from http://mitsloan.mit.edu/newsroom/2004-internetshopping.php

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