The “Da Vinci Code” for Better Pricing

Dan Brown, author of The Da Vinci Code has a new book coming out in the fall.  The Lost Symbol is a follow-on story to the original book which sold 81 million copies and led to a blockbuster movie.  So, the expectation is that the new book will sell quite a few copies.  Now, here’s the rub, given the expected popularity of the book, book stores are saying that they are going to sell it at a discount of over 40%.  The Wall Street Journal is questioning the wisdom of that move—after all, why sell a book for little or no profit?

 

On the surface, it doesn’t sound like a smart move.  After all, for those 81+ million of us who read the first book, we’re going to want to buy the new book whatever the cost.  Therefore, we are price insensitive for the purchase of the book.  The bookstores appear to be leaving a lot of money on the table with a penetration pricing strategy.

 

But wait.  While we are price insensitive for the purchase of the book, we are price sensitive for where we purchase it.  The list price is $28.95.  But why pay that when I can buy it at Barnes and Noble for $15,63?  Actually, I’ll save the trip and buy it at Amazon.  They’ll ship it for free and still only charge $15.63 (notice how quickly they matched the Barnes and Noble price?).  So, for the bookstores that can afford to trade the volume for lower profits, the increased demand will probably lead to higher total profitability.

 

Further, consider that most people who go to Barnes and Nobel or Borders for the book are going to end up purchasing a bunch of other books at a higher profit margin.  The total benefit of getting people to come to their store for a book is actually quite large.  This is one case where the large bookstores will make lots of profits by selling one item at a lower price. 

 

The watchword of good pricing is: price for profits.  A little analysis shows that this is a good move for the big bookstores.  It gets them press coverage, and it gets them profits.  What about Dan Brown?  He smiles all the way to the bank.