15 February, 2012

It's The Service - A Tokidoki Story

Favola Bello, Ramblers Bowling, Famiglia Stellina
After a Twitter conversation with Dianne Farr I was thinking about branding. The Big Six have relied heavily on consumer loyalty to the concept of the publishing industry to carry them through a time of unprecedented change. Along the way they have discarded numerous opportunities to maximize their future. Pricing is an art. People don't care about your production cost, they care about an ephemeral thing called value. If the consumer perceives the value to surpass the cost, they will purchase. Your item cost being fifty cents or fifty dollars is irrelevant to what the market will pay. When the consumer does not perceive the value to justify the cost, they become very vocal about your (previously irrelevant) cost. As a seller, defending your price is the absolute wrong place to be.

The primary component of value is personal to each consumer. Where the business has an opportunity to create an increased perception of worth is in service or quality. Recently I had a service opportunity with tokidoki that I think illustrates where consumer perception affects the bottom line. The bags in the Fall 2011 collection had some serious quality control issues (double printed fabrics, lack of seam closures). After 3 exchanges I kept 2 bags that were still imperfect because of my perception of service from the company. When the Winter 2011 collection was released I ordered two new bags and planned for a third. (Yes, I have a handbag issue. I've heard you talk about shoes.) The bags which arrived were not the same bags pictured on the website. While the company eventually corrected their mixed up product descriptions, they did not reach out to customers who had placed orders during the errors. I believe that they wanted to make it right, and I believe that they care about consumer satisfaction, but the result was my returning both bags. I ended up making a single purchase from a seller I could speak with on the phone. When I buy directly from tokidoki they make a much larger profit than when I buy from a third party seller. A few careless mistakes after a legitimate concern created a long lasting erosion of consumer trust, and ultimately a smaller market share.

Publishing is no different. Avon was a very trusted imprint at one time, and they are working hard to regain consumer trust. Experimenting with pre-sale pricing of ebooks while looking to create a new avenues of ARC distribution, Avon appears eager to regain ground ceded in the early days of ebook adoption. On the other hand, Harlequin was quick to understand the challenges of the new marketplace. They offered a direct storefront to consumers with a DRM free publishing arm. As a result my perception of value has changed. Prior to Agency pricing I felt that Avon was a quality imprint with a few clunkers and Harlequin was a clunker imprint with a few quality books. The service of direct purchase and competitive pricing completely flipped my perception of the two imprints. Where I would previously have greeted a poorly edited (or written) Avon title as a surprising exception, I now viewed it as typical. Charting my reviews over the last few years of both imprints my hits and misses haven't shifted. It is only my perception of those hits and misses that changed, which is a purely emotional consideration. (Obviously this plays out to other imprints as well, I use them as an example.)

One of the concepts I had pitched to Ms Farr as a missed opportunity was a world where a customer could walk into a store, purchase a Valentine's Day card and have it loaded with an ebook to give their intended recipient. Another was reclaiming used book sales by offering consumers the chance to "resell" their digital files to others with a portion of the discounted price returning to the publisher. The adoption of DRM was (to my mind) the single biggest factor in allowing Amazon to dominate the ebook market. When a consumer is pushed into a closed system, the one who runs the system best wins. If publishers had offered loading stations, scannable ebook gift cards, personal imprint store fronts, discounted subscriptions, any number of dynamic pricing possibilities, they could have capitalized on the now squandered consumer loyalty. Piracy is an unwinnable war. A certain number of people enjoy stealing, that is a fact of life. Most consumers want to pay a fair price for goods and want the maker of the goods to benefit. Packaging the desire to be honest with direct revenue paths would have allowed publishing to reposition themselves in the new marketplace. Setting up an adversarial relationship with the consumer left the way clear for Amazon to dominate. In the end, everyone loses.

Watching the Big Six interact with consumers and libraries I wonder who will rise to challenge Amazon after the Big Six fall. Maybe it will be Starbucks. Pick up your Grande Half Soy Mocha and reload your girlfriend's book card.

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