I’ve signed up to do a No-Pay MBA in the next couple of years – a self-taught equivalent of a traditional business degree using massive open online courses (MOOCs). I was inspired by the founder of the No-Pay MBA network, Laurie Pickard, who has actually done it – here’s an article about her in the FT.
I’ve just started my first course, which is Introduction to Marketing from the Wharton business school of the University of Pennsylvania, and wanted to share something interesting.
The three bundles of customer choice
When customers are choosing a product, they have many criteria which can be grouped into three ‘bundles’ – firstly, anything that’s to do with the transaction, such as delivery, price, can you get it online or how soon can you have it. Secondly, they consider attributes of the product itself – style, quality, what features it has and so on. And lastly they consider whether it’s right for them, ie, is it to their taste and customised to their needs.
The bundles don’t always get equal consideration in the mind of the customer – they will place more importance on one of them and be satisfied with less on the other two. As a consumer of books, for example, I put the most value on whether it’s a story I would like – which fits into the third bundle. That’s my #1 criteria, and while I also care about being able to read it on my Kindle (a bundle 1 consideration), as well as the cover being nice (bundle 2), those things matter less.
So apparently when customers are choosing between multiple options, they will generally pick the product that performs best on the bundle of criteria that is most important to them, as well as provide fair value on the other two. This made immediate intuitive sense to me – that’s exactly what I do!
How does all this work with books?
The interesting question of course is, are all book-buyers like me, and what are the business implications of that? I think fiction buyers probably are a lot like me – they rank the match with their interests the highest. They make their buying choice mostly based on factors like genre, whether it’s a good length for them, whether the blurb appeals and whether they’ve liked books by the author before.
But I think there are probably quite a few who also value the quality bundle in a book. This could be a very literary reader who reads reviews to find out if a book is considered good by others, and think less about whether they would personally like it and more about the cultural reason for reading it. Academic readers, as well, would fall here. They might rate things like who the editor is or whether a book has covered all the important points.
What about the first bundle? Well, maybe – bargain hunters come to mind. Think about the people who buy dozens of ebooks for 99p just because they were cheap, and don’t actually come round to reading them all. Clearly price was the number 1 consideration there.
How should publishers use these insights?
Since we know that customers pick the book that performs best in their most important bundle of criteria (as well as provide fair value in the others) publishers should figure out which bundle is most valued by the largest number of customers, and then make sure they come up on top for that bundle.
As a thought experiment, take the books I work on. Business book readers, I think, would place the most importance on book quality, because they read to learn rather than for pleasure. So they would probably be looking for a book that had got lots of good reviews from reputable people, was already a top seller, had other markers of quality such as a credible publisher and was recommended by someone they trust. Sure, they also care that the price is right (but less so – as long as it’s not something outrageous they would probably pay it) and that it’s a topic that interests them, but I think these would be secondary to perceived quality.
The implications? I need to commission books that are likely to come on top for my customer – books that reviewers will be eager to read, are by authors with good links in the business community (for endorsements), etc, and make sure to put covers on them that signal ‘quality’. Easy as pie…
How shouldn’t publishers use these insights?
Trying to be number one for all three bundles of criteria is probably not going to work. It sounds foolproof – just please all of them and save on market research! – but that will probably lead to being merely fair-value in all three categories. In the end no one will pick your books, because they’re not top of the pile for anything.
Does this ring true for you? Which bundle do you rank the highest when buying books?