Textbooks are Too Expensive. Do You Agree?

My colleague Lillian Cheng and her co-author Kent Monroe work on a case study and series of publications on the pricing of textbooks in the US.

Lillian, Kent and I feel that the textbook market will follow the music industry, and that fewer and fewer students will be willing to pay $200 and more for a textbook, especially if they want to use an e-book. 

Watch Lillian’s LinkedIn account – she will publish as series of posts on topics over the coming weeks on: (1) Do we need textbooks in today’s connected world? (2) What did publishers do to the text book ecosystem?  (3) Is this market ripe for disruption? A sneak preview of Lillian’s and Kent’s work is provided below; perhaps you agree too that this market should be disrupted. 

I personally try something new with the 8th edition of Services Marketing: People, Technology, Strategy, and I am curious whether this model will work.

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Excerpt from Case Study:

Innovative Pricing Disruption in the US Textbook Market

By Lillian L. Cheng, National University of Singapore, April 20, 2016

The rising prices of college textbooks in the US market are spiraling out of control. US Census Bureau statistics show that textbook prices increased more than 800% from 1978 to 2014, more than triple the cost of inflation and more than the rate of increase of college tuition.

Much like prescription pharmaceuticals, the person prescribing the use of the product does not incur the cost of usage and the person using the product is left with the only option of bearing the captive prices or not reaping the benefit of the product. Finding textbook prices prohibitive, students scour used textbooks, global editions, borrow from libraries, photocopy illegally. Publishers raise prices further, justifying the hike with declining sales and increasing costs.

This is essentially the vicious cycle of textbook pricing in the US market. “Publishers have priced textbooks out of the acceptable price range of students leading to alternative or non-consumption behaviors,” said Kent B. Monroe, Professor Emeritus of the University of Illinois at Urbana-Champaign, a pricing expert who coined the term “acceptable price range.”

Students worldwide comment that excessive textbook prices have spurred a whole illegal copying industry. Textbook retailers observe students reading in aisles of the bookstores prior to exams. There are textbook counterfeiting organizations that offer illegally printed textbooks for sale online for a fraction of the costs. Resourceful students are purchasing less expensive global editions of these textbooks.

Publishers have come up with every conceivable way to avoid arbitrage, from shrink-wrapping the textbooks to avoid student browsing, to stopping used-book second markets with frequent new editions replete with such incremental upgrade tactics as varied cases, re-arrangement of chapter sequences, to bundling with software or web-enabled “lab” access, to exercise booklets, etc. None of this has served to curb the decline of textbook sales in the US. Simply put, the prices are well over the absolute acceptable price range of the students. Required texts or not, they simply could not stomach the exorbitant prices.

Organizations from boundless.com to the Gates Foundation are working to offer open source, free textbook materials online, aiming to make textbook materials more accessible. Students question the need for a textbook if much of the required material is available online. Educators cringe at the thought of students basing their learning on unreliable sources and outdated ideas and theories. Yet these same educators are reluctant to adopt textbooks for fear of further burdening students with high costs.

This phenomenon begs the question of the purpose and value of a textbook. Is it meant to be reference material or is it meant to provide knowledge and guide learning? What is the value of having educational material from a trusted source organized and presented in a way that enhances knowledge acquisition? What is the value of having this learnt material readily accessible?

Pricing can shape consuming behavior. As textbook prices continue to rise, students either knowingly compromise their education and grades by reading parts of the assigned textbook where available or resort to grey markets.

Jochen Wirtz, coauthor of Service Marketing: People, Technology, Strategy, one of the most widely adopted textbook on the subject, is to be commended for championing a new pricing structure for his latest (8th) edition of the popular textbook. His previous editions had sold more than 700,000 copies worldwide. Not only is this new edition beautifully designed (it is now printed in full color) and updated, it has enhanced the content with expensive content such as Dilbert and Glasbergen cartoons, and Harvard Business School cases. The textbook will only have one global edition but will have different language editions.

Having one global edition with one global price effectively creates one global market for the textbook eliminating any incentives for arbitrage. Soon to be released in April 2016, World Scientific Publishing already listed this 800-page, full-color softcover textbook on Amazon.com at US$59.90. The textbook is also available as an e-book for $49.90, and for a six-month rental for $19.90. A hardcover version will be available for libraries at $118.

Pricing this new Service Marketing textbook at less than 25% of the current market rate for the softcover and e-book, and an even lower priced rental model, has the potential of a disruptive innovation that could reshape the landscape of the textbook market. This new pricing certainly qualifies as a disruptive pricing innovation that has the societal impact of allowing textbooks to serve their original purpose: to educate and disseminate knowledge.

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Lillian L. Cheng and Kent B. Monroe are co-authors of Relativity: the Science of Price Perception, being completed in 2016 and Effective Pricing Management, to be published by World Scientific Publishing in 2017.

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