Business Model Innovation Hub
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Book Printing, Pricing and Distribution Issues...
On Monday and Tuesday Alan Smith and I were in the Netherlands to visit the book printer, book binder, and cover printer together with Patrick Pijl. The whole visit was organized by Maarten Modderman who is specialized in printing special books.
I made a little video below that shows some images of the visit. Most interestingly, at 0:35 into the video Mike Silva of the book binding company explains the special technique they will use to bind and finish Business Model Generation. We chose that technique because it will allow the book to lie flat open on a table. Unfortunately, it is a relatively costly technique because it involves manual work. However, it makes the book more usable and also looks amazing. So for the first 5'000 prints we decided to go for that solution to offer you the best possible experience.
Our main challenge is now pricing and distribution. Given the high production costs, we had to go for a slightly higher price than initially planned: currently we are working with U.S. $35.- In retail a similar type of book (full color, designed, etc.) would retail at $50.- to $70.- That is unacceptable to us because we want to keep the book accessible.
The main difficulty lies in distributing through intermediaries like Amazon.com or wholesales, because they take over 45% to 55% of the sales price. That leaves us with 45% of the price (i.e. $15.75) to produce the books and ship them to intermediaries. It hardly generates a profit. That is one of the reasons why we will start with sales over www.businessmodelgeneration.com only, before starting to sell through intermediaries. The latter is of course necessary because of visibility and to a certain extent credibility (a book needs to be an Amazon.com).
Pre-sales are going nicely, by the way. We sold 420+ to date, which seems like a small number, but is quite a bit in the book world. Keep in mind that selling 7'000 books in the Netherlands qualifies it as a bestseller. We have 470 members on the Hub (you each get a free version) and we pre-sold 420. That already adds up to 900 books sold.
Any comments or experiences from your side are welcome...
In any case this is an exciting experience with lots of learning involved!
I made a little video below that shows some images of the visit. Most interestingly, at 0:35 into the video Mike Silva of the book binding company explains the special technique they will use to bind and finish Business Model Generation. We chose that technique because it will allow the book to lie flat open on a table. Unfortunately, it is a relatively costly technique because it involves manual work. However, it makes the book more usable and also looks amazing. So for the first 5'000 prints we decided to go for that solution to offer you the best possible experience.
Our main challenge is now pricing and distribution. Given the high production costs, we had to go for a slightly higher price than initially planned: currently we are working with U.S. $35.- In retail a similar type of book (full color, designed, etc.) would retail at $50.- to $70.- That is unacceptable to us because we want to keep the book accessible.
The main difficulty lies in distributing through intermediaries like Amazon.com or wholesales, because they take over 45% to 55% of the sales price. That leaves us with 45% of the price (i.e. $15.75) to produce the books and ship them to intermediaries. It hardly generates a profit. That is one of the reasons why we will start with sales over www.businessmodelgeneration.com only, before starting to sell through intermediaries. The latter is of course necessary because of visibility and to a certain extent credibility (a book needs to be an Amazon.com).
Pre-sales are going nicely, by the way. We sold 420+ to date, which seems like a small number, but is quite a bit in the book world. Keep in mind that selling 7'000 books in the Netherlands qualifies it as a bestseller. We have 470 members on the Hub (you each get a free version) and we pre-sold 420. That already adds up to 900 books sold.
Any comments or experiences from your side are welcome...
In any case this is an exciting experience with lots of learning involved!
Comment
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Comment by Karl Burrow on September 16, 2009 at 4:48am -
Another Distribution Channel possibility would be " viral marketing" through all HUB members own personal or business website with a link pointing to the HUB site for purchase. I may try this with my email newsletter for the English speaking community in Japan. Also will post it on my FACEBOOK account in my Business Groups.
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Comment by Alex Osterwalder on September 15, 2009 at 1:08pm -
Thanks Vishwanath! Very much appreciated!
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Comment by Vishwanath Edavayyanamath on September 15, 2009 at 1:03pm -
I already asked my firm and my University libraries to order a copy. They already have now. I think we ourselves can be a multiplier effect. This is working great. And I have sent communications to many of my friends to order their own copies or for their firms libraries.
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Comment by Alex Osterwalder on September 11, 2009 at 10:29am
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Thank you all for the excellent comments!
@Hylke: we want to keep the price low to make the book accessible - though many people would certainly be willing to pay more. Our goal is maximum reach.
@Remo: I totally agree on the Hub and its powerful potential as a word-of-mouth marketing channel.
@Harry: We are exploring the idea of personalized covers for companies. Seems like a promising one!
@David: Thanks for the link, David. We have the book website up and running at www.businessmodelgeneration.com. Later we will supply some more material for Hubbers who want to make a link on their website or blog (book cover image, etc.).
@Damien: Thanks for the links. Very helpful! We are looking into ebooks. Yet, for this particular book I'm hesitating, because it is a very tactile book. Wait until you have it in your hands ;-)
@Cheenu: Absolutely. We are looking forward to any help from the Hub!
@Michael: Your order is booked ;-)
@Oliver: Thanks for the links! Very useful. We are talking to resellers like www.managementboek.nl. They are slightly less "hungry" than Amazon when it comes to their margins.
@Richard: Looking forward to the noise :-) Thanks!
@Paul: Wonderful!
@John: Amazon has different programs. Print-on-demand through Booksurge or others like Lightning Source do have better margins, but they also "force" you to ask for a higher price. With a 280 page full-color book we would be priced out of this world ;-)
We are looking at Amazon Advantage and Amazon Logistics is potential solutions for distribution through their channel. For the former the margin they take is 55%.
@Chris: Thanks for the interesting suggestions! We are indeed thinking of network effects. That will be crucial given our "guerrilla strategy". Twitter & FB will be crucial.
@Michael: The price is indeed low to gain maximum reach. After the first print run it is likely that we will go for a two-product strategy with high-end book (expensive) and a slightly less sophisticated version (similar price to now). We realized what type of prints and finishing we could make when we were at the binding company.
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Comment by Michael N. Wilkens on September 9, 2009 at 10:38pm -
I am puzzled why you price point is so low, are you more focused on becomming a bestseller than being profitable? If you are worried about getting the snowball rolling you could communicate that the price will increase as the number of books sold increase - against the norm and providing a considerable up side - if you are interested in profits?
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Comment by Chris Hopf on September 9, 2009 at 8:29pm -
How many folks who are part of this hub are on Twitter and Facebook? Consider the network effect if you had each of us post the following and add buttons to the order process so that it is easy for those purchasing to share with their network.
Make it easy to post something like:
Reading great new book Business Model Generation. You should too! Get your copy here: (shortened url link to landing page)
. . . you can fine tune the above message, but you get the idea. This approach contributed significantly to Dropbox and their ability to hit 1 million users in months.
Make sure you get that landing page messaging and design right . . . communicate the value in terms that matter to those who can benefit from the books content. Include testimonials. Include sample pages. Create a community.
Quick thinking . . .
Book Price: 49.95 USA
E-Book Price: 14.95
First 1,000 purchases get both for 29.95 (with buttons above, this will get network effect rolling)
Also during purchase steps alllow them to opt-in to get email insight updates and to easily begin following on Twitter, FB, etc (this to promote events, workshops, etc.)
Don't start too low with your price, especially if you are going solo for distribution at launch . . . you can always adjust down according to strategic timing.
Contact me if you want to work this out more intentionally and strategically.
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Comment by John Smith on September 9, 2009 at 6:55pm -
This sounds like a business model problem!
Based on limited experience, Amazon will take a 30% margin: We just launched a book ("Digital Habitats: stewarding technology for communities" - http://technologyforcommunities.com) using a print on demand approach for a $29.95 black and white book. We used an Amazon partner named Lightning Source, which has printing plants in the US and UK. I set the wholesale discount at 30% even though I'd heard of the Amazon 45-55% margin. Based on the first month's sales, Amazon paid the full "wholesale" price. The wrinkle to bear in mind is that after about a week of sales they began to discount the price -- selling it for less than the publisher! Seems like Amazon can be a tricky -- though vital -- partner. Its value-add is the book reviews and visibility, which this community's network might just be able to match!
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Comment by Paul Ferguson on September 9, 2009 at 6:49pm -
Using Hubbers as another Distribution Channel is a possibility - I expect many of my MBA students would buy it, especially the 100 or so on my Advanced Strategic Thinking course at Lancaster.
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Comment by Richard Bell on September 9, 2009 at 6:07pm
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I have several thousand linkedin connections spread across around 40 business-relaed groups and will certainly be adding the link as a 'book I'm reading' along with full commentary and the link. Add to this perhaps a few select LinkedIn Q&A articles and some choice book 'name drops' on the mgt consulting blogs (McKinseys et al). If others do likewise then we should be able to collectively help make some noise.
I'm also considering business models as an adjunct strategy lecturer at some of the business schools I'm associated with - so perhaps a mandatory textbook to a few hundred students (per term) wouldn't go astray. Particularly If I can plug it as a book I 'co-authored' !
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Comment by Oliver Buecken on September 9, 2009 at 3:35pm -
Hi Alex,
the wholesales figures are very normal (keep in mind, that a stationary bookstore gets only 25-35% discount on buying from a wholesaler). The number of books already sold is fantastic. I would advise to negotiate with other strong wholesaler (LIBRI, KNOe) and other online bookstores (like buecher.de), which usually have better retail prices than amazon. Secondly I would recommend ciando.com, the biggest e-book retailer in Germany. And as soon as I hold it in my hands, I am going to comment on it in my blog on foerderland.de
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