September, 2010

Three fledglings that really should fly

Sometimes you hear of an idea or a new business that seems so right-on-the-money that you wish you had invested in it and figure it is just a matter of time before it grows into something very powerful and important.

Here are three of those — all of which should be of interest to publishers  and which everybody who is interested in the content on this blog should know about — that are unrelated and similar only in one way. If they execute and deliver on their promise, which in the last of these three cases is really beyond question, they should have very bright futures.

One is a new business that was dreamed up without publishing as we know it in mind at all. It’s called Open Sky, and it enables any web site to sell any thing. Open Sky aggregates wholesale pricing arrangements from suppliers of anything at all and enables any website (or blog) to sell the goods at a profit. And they provide the web site with whatever technology or functionality they need plus a social commerce platform to enable harvesting and use of customer information.

So from the manufacturer’s perspective, they are the front end to a lot of distributed eyeballs and resellers. From the website or blogger’s perspective, they provide both the commercial relationship and the web tools necessary to “stock” and sell items relevant to the site’s audience. They’re brokering business arrangements that are useful on both ends and enabling sales that would simply not exist if they did not exist.

Former book editor and agent Mary Ann Naples saw the potential for Open Sky with clients of hers who were book authors and bloggers. Imagine being a blogger who writes about cooking and wants to tout and sell her favorite pots and pans. Mary Ann represented people like that and she’s been taking Open Sky into the book business.

From the perspective of a guy who has been telling publishers to use their content as bait to attract and aggregate eyeballs because they’re bound to have remunerative value, Open Sky provides an answer to the question I face the most when I lay out my thinking. (“Great, Mike, but how am I going to make money?”)

The second is a publishing business you’ve probably heard of (or should have) called Flat World Knowledge. Flat World creates college textbooks, doing the creation more-or less the old-fashioned way, although somewhat faster and cheaper than the big players. What’s different about Flat World is their commercial model. All their content is available free on the web in HTML, but you can buy it (printed or digitally-delivered) if you need to possess it or mark it up.

Wrapped into the Flat World model is the capability for professors to add other material, theirs or somebody else’s, to the Flat World text. That material becomes part of the offering to the student and soon Flat World will add the optional capability to make the material available to professors in other schools to offer to their students (with a royalty, of course). Flat World has had books in the marketplace for about 18 months; they’ve learned enough to know about how much the free HTML exposure drives profitable sales. And “how much” is apparently “enough.”

In a world where the price-and-margin pressure on the textbook model just gets increasingly difficult for publishers and students, Flat World’s new approach looks very likely to succeed. It is worth noting that Macmillan is now delivering the professor customization part of the Flat World model, but it is extremely difficult for an established publisher with a legacy cost structure to compete with their free-on-the-web commercial model. This will becoming a growing threat to the established players in the college textbook space.

The third initiative comes from two giants in the trade world: Macmillan and Ingram. (I always tell you when this is the case: Ingram is, at the moment, our client.) They have just signed a deal by which Ingram’s print-on-demand, warehouse space, and shipping capability becomes an extension of Macmillan’s own operation. Books can be seamlessly shifted from a pressrun model to POD (and back). Macmillan is alleviating warehouse space pressure, keeping books generating revenue past when they would otherwise have been out of print, and anticipating the inevitable future reduction of infrastructure that will be mandated by the shift from print to digital.

In a recent blogosphere conversation sparked by Evan Schnittman’s observation that the impact of the ebook shift could be an expansion of the market, Eoin Purcell wrote about the commercial impact of readers shifting from ebooks to print. Purcell fears that publishers might be forced to give up the print book revenues if printings were eroded too much by ebook uptake. What he sees is that as press runs go down, printing costs go up, and if that forces book prices up, it will exacerbate the decline of print and could diminish it to the extent that it just isn’t worth doing.

Certainly that’s a challenge publishers face, and they know it. The Sales Director of a Big Six house with a lot of bestsellers, anticipating that his ebook sales could pass 20% of the total for most of his books as soon as next year, said “I hope we’ll be smart enought to manage down our printings and distributions.” Hitching Ingram’s capabilities to the publisher in the way Macmillan just did helps ameliorate that problem and a myriad of others. It’s a way for publishers to reduce overheads and increase operational capabilities at the same time. I’d be surprised if we don’t see many, if not most, other publishers going for this solution in the months to come.


The unit of appreciation and the unit of sale

My professional background —  indeed, most of my life that isn’t family, friends, baseball, and politics — is trade publishing: the publishing that is intended for consumers and which got its name becaiuse it has been transacted primarily through “the trade”: bookstores.

But this past week I spent two full days with the Publisher Advisory Group for my client Copyright Clearance Center where trade is a small part of the total picture. In addition to the program, I had conversations there to prepare for a talk I’ve been asked to give at the IFRRO (International Federation of Reproduction Rights Organizations) meeting CCC is hosting at the end of October. So, while I always think about trade publishing, this week I’ve been doing it within the context of other publishing — indeed, in the context of the whole world of intellectual property, one that goes well beyond publishing and includes music and art and photography. These are businesses that don’t think about bookstores at all.

There was a point at the CCC meeting (at which people who work at The New York Times, the Chicago Tribune, and Associated Press were among the participants) where it was useful to offer my own articulation of why the problems caused by digital change for newspapers and magazines and record companies were so much more grave than they were for book publishers (so far.) It is simply stated.

For those businesses, the unit of appreciation does not match the unit of sale.

By that I mean that record companies sold us albums when what we wanted were songs. That’s what their economics were built on. The minute we could buy songs, it blew up their business model. Newspapers sell us the weather when what we want are the box scores, or the horoscopes when what we want are the comics. There are many books which will be read cover to cover. Newspapers and magazines are rarely read cover to cover. It was never thought of as wasteful or uneconomic that most people actually consumed a small percentage of every newspaper and magazine they bought. But it gets harder and harder to make that sale in a digital environment.

Of course, we have felt some impact of this effect in the book business. When you get beyond fiction and certain components of non-fiction (memoir, biography, some history and science), the books aren’t read cover to cover either. You usually use (what we now call) chunks of travel books, gardening books, cookbooks, computer books, crafts books. Even in the bookstore environment, sales of these books are suffering because a more granular offering is available online.

Grasping the significance of the “unit of appreciation, unit of sale” paradigm makes me believe that the “album” (do we still call it that?) of music, the newspaper, and the magazine are ultimately doomed as organizing principles. They were built to meet the requirements for content distribution in a world where physical practicalities had to be addressed. The Times couldn’t drop sports and economics on my doorstep and world affairs and theater reviews on yours. And The New Yorker couldn’t deliver Talk of the Town to me and the cartoons to you. The units of appreciation were far too granular to be delivered as units of sale.

It would be a reasonable guess that about half the units that bookstores sell are cover-to-cover reads, where the unit of sale equals the unit of appreciation.

Brainstorming with publishing colleagues about what I need to say at IFRRO gave me a new realization about what’s likely to happen with the half that’s not.

Exploring non-trade publishing — academic, professional, sci-tech, college texts, and schoolbook publishing — makes you realize everybody else is headed in the same direction. They’re anticipating that the “unit of appreciation” for their content will always be defined by the context of either (depending on the customer base) a “learning system” or a “workflow.” The content won’t be the point. Learning something or accomplishing something will be the point and content will be delivered within a framework designed to deliver on the objective.

Pretty much without exception, smart publishers in these non-trade areas see the day coming where controlling the platform is the key and the controller of the platform will be the gatekeeper for, if not the creator of, the content. Since that tracks pretty closely to my notions about “verticals”, it all seems very logical.

But if you think about it a little harder, peel back one more layer of the onion, you realize that much of the rest of our non cover-to-cover publishing — much of what we now call trade — will also be housed within platforms. There will be platforms providing workflow, and content in context, for chefs and knitters and gardeners. They too will be buying “solutions”, not “information”, and the material we now put in the books will be served up, as needed, inside the workflow. It won’t be so much about “units of appreciation” as “units of need” or “units of purpose” for the content because the entire system will be the unit of appreciation and the unit of sale.

That is: the instruction as to how to do a particular knitting stitch will pop up or be linked to the place in the “pattern” (or whatever digital delivery has made the pattern become). The explanation of how to broil or baste something will be linked to the direction to broil or baste something. It won’t be housed in a different physical volume; it won’t even be housed in a different program or file! The beginnings of this are already evident in some apps and enhanced ebooks.

The world in which we will be living this way and routinely getting content this way is not around the corner; it is a few years off. Not twenty, I don’t think; but maybe ten. We’ll be solidly in a cloud world by then with just about all the content we consume — music, movies, TV, and what we get from newspapers, magazines, and books — and all the software we use coming to our devices from remote servers rather than from a hard drive.

In that kind of a world, I think the idea of “owning” content will be nonsensical. Everything will be licensed. “Owning” is really a tangible object-based concept. We discover the reality of that whenever we try to apply the principles of first use — like lending and resale — to the digital things we “sell” today. And, when you think about it, purchasing access to whatever you want or need whenever you want or need it is the perfect matching of the unit of appreciation to the unit of sale.

If you’ll be at Frankfurt next week and you like talking about what I write about, please come by stand 8.0 L916 and if you can catch me when I’m not in a meeting (about half the time), please say hello. I am speaking twice at the Book Fair. On Wednesday, October 6 at 10:30 am, Mark Dressler will interview me about the 2011 Digital Book World Conference program.You’ll find us at the Sparks Stage, 8.0 P923. On Friday, October 8 at 12:30, I’ll be participating in a panel discussion on “The Ebook Business – Who’s in Control” which will take place in the “Entente” room in hall 4.C. I understand Victoria Barnsley of HarperCollins UK and Ronald Schild of the German ebook-selling consortium will be my partners for the conversation whose focus will apparently be on the big companies in the ebook space: Amazon, Apple, and Google. Maybe I’ll be a lonely voice saying “don’t forget that B&N and Kobo are very much here — which Google isn’t yet — that Blio and Copia are coming and that the collective power of yet-unaggregated sites and communities, which could be harnessed by yet another player, will be considerable.”


Building a new-fangled conference program the old-fashioned way

There is certainly more than one way to build a conference program. I have been putting them together since long before I learned about the concept of “crowd-sourcing”. I’m a bit of a plowhorse about some things so the Digital Book World conference program comes together pretty much the same way as the first digital book conference aimed at trade publishers I organized, Electronic Publishing & Rights, back in 1993. I put together a list of topics for panels or presentations and a roster of people who could either speak or lead me to speakers. Then I engender a lot of conversations between the conference-creation team and the potential speakers and audience to craft the topics, the framing, and the ultimate presentation.

Two other important conferences which appeal to an audience that overlaps Digital Book World, O’Reilly’s Tools of Change in February and SXSW in Austin in March — seem to take a different approach. As near as I can tell, they do crowd-source a lot of their programming. It appears to me that Tools of Change throws out suggested topics and requests that panels and speakers put themselves forward as components of the show. Then, presumably, the people in charge at O’Reilly (the heads of the conference are Andrew Savikas and Kat Meyer, and both of them are smart, knowledgeable, and discerning) choose what will comprise the show. At SXSW it appears that the candidates are selected by an online vote. It seems to me that you therefore guarantee that you’ll get the panels sponsored by the best campaigners, but not necessarily what would give your ultimate audience the best show. But I guess it works for them.

I should declare myself here. I am a fan of Tools of Change. I participated in a day-long brainstorming session several years ago which O’Reilly Media organized to plan the first conference. I missed that one, which was in California in the summer of 2007, but I’ve attended the three annual February conferences in New York, 2008-2010. It’s a great show and a great rendezvous for people thinking about technology and publishing. As this piece makes clear, we can’t handle every worthy subject in two full days of conference programming at Digital Book World; there’s room for lots of other conversation and TOC is a useful one. On the other hand, I have never attended SXSW. The program didn’t look like it had much relevance to commercial trade publishing (although it covered a lot of other things that neither TOC nor DBW does.) Plus it comes in the same month that has a chunk taken out of if for me by baseball spring training. There are things in life besides digital change…

As I think through what we do and how it all works, it is hard for me to see how we could produce nearly as good a show without the conversations. We are helped considerably in our work by a Conference Council of more than 30 top players in the industry from across houses large and small, agents, members of industry bodies like BISG, Association of Booksellers for Children, and the Frankfurt Book Fair, and some other consultants. We talk to literally dozens of other people as we put the show together, getting advice about whom to contact to speak and shaping and re-shaping our formulation of the panels and presentations.

This does, indeed, start in my head. I wrote a post in May outlining what I thought might be the major topics. We got comments on the blog and then we pushed the list out to the Conference Council in formation to get more input.

Once the Council was formed, we put the topic list up on Survey Monkey for them to give us feedback. What we were mainly looking for is “of what we postulated might be on the program, what’s essential and what’s a yawn?”, but we also got thoughts about things that could be combined or reframed. Then at the end of June, we had an exciting and rigorous 2-hour meeting with many of the Council and a number of our F+W colleagues at which we solicited even more ideas and honed our thinking further.

This process eliminated a number of topics that were on my initial list. Some of them were dropped because the group thought interest would be low (usually because they were too narrow or specialized); for others we couldn’t see who could speak to them effectively. But among those we knocked out were:

* Will non-US publishers start to establish a virtual sales presence in the US as ebook sales grow?

* How do publishers deal with image rights for old titles becoming new ebooks?

* What changes are on the horizon for publishers’ relationships with the library market?

* Are trade shows becoming an anachronism in the age of digital communication?

* How much of the solid print backlist is still locked up by rights issues?

* To what extent do publishers view single-title marketing as a practical endeavor?

All of these topics are “worthy” but, against very stiff competition, they didn’t make the cut.

The survey and Council conversation also helped us refine how we’ll approach a number of subjects.

Author royalties for ebooks will be handled as a survey and presentation, not, as first occurred to me, primarily through a panel of agents.

Our Council felt that how publishers make the business decisions to acquire content not necessarily intended for first use in a book was worthy of discussion. A subsequent conversation with potential speakers convinced us that “making books out of content that started another way” would be a relevant extension and should be in that same discussion.

Marketing and metadata were identified as topics that I should have included but hadn’t. As a result, we will have two metadata panels (one on core, one on enhanced) and we’re getting great help from BISG Executive Director Scott Lubeck (on the Conference Council, of course) putting these together. Although we have several panels that touch on marketing, I’m still thinking about the best way to tackle how single-title promotion has changed (which it has: profoundly).

What I had imagined as “The Tools Every Publisher Must Have in 2011” morphed into a conversation about “industry solutions” — such things as Edelweiss and NetGalley and Filedby. A further refinement from our first idea is that we’ll have a panel of publisher-users discuss these, rather than go with my initial idea of inviting the companies themselves to present their solutions.

We knew we needed to discuss the future of bookstores. Our Conference Council meeting yielded the suggestion that we have analysts who follow industry stocks discuss that topic (and a hat tip to Michael Cader for that idea.) We’ve recruited Marianne Wolk, a market analyst who follows Amazon and Google, to speak, and she’s helping us look for other analysts or investors to join that discussion. And we’re also putting together a panel of independent bookstores; we’ve already talked to more than half-a-dozen and will talk to several more to pick the three or four that can deliver the freshest, most relevant, and most articulate content for our conference. (I would hate to leave this to self-selection.)

A panel I’d thought we needed on “ebook first” was dismissed as old news and too narrow.

We lean heavily on expertise that we know and trust.

Apparently, sometimes our technique gives us the same result as our counterparts’ crowd-sourcing. Liza Daly is the most compelling thinker I’ve encountered on ebooks. Last year we had her do 20 minutes on “ebook basics” which was one of the most-praised components of our program. I knew we had to have her back and a fast conversation with Liza quickly yielded the subject. She’s going to talk about “cost-effective development of enhanced content: how to display on multiple platforms without multiple headaches.” I’ll bet many attendees will find this the most useful 20 minutes at the show. I see that O’Reilly has her on their Frankfurt TOC program. That’s a good decision no matter how they arrived at it. (And I’d advise SXSW to make sure the ballot box is properly stuffed for Liza if she’s a candidate for their event next March.)

We had outlined three different research projects we wanted to present. Two are follow-ons from last year. Verso Media has a panel of “book” consumers and Bowker, working with BISG, has a panel of “ebook” consumers. This year, Digital Book World is sponsoring a follow-up effort with Verso and so the reports from both of those groups of consumers will be updated. (The BISG-Bowker effort was already ongoing.)

But then we discovered a new data-gathering opportunity with a company called iModerate, which does both surveys and online qualitative research, and we put them on an assignment of studying in depth a particular subset of ebook readers: those that read on multi-function devices like iPads and smartphones. Michael Cader suggested some ways to help the audience get maximum value from the data. As a result, we put those presentations together on the program, will distribute some data to the audience in advance, and have the presenters join in a panel after they say their own pieces. We thought that was a great idea; we’re doing it.

Maria Campbell, the veteran scout who has been on the foreign rights scene for decades, knows the players trading international rights better than anybody. So we drafted her to help us find the right person to lead a discussion of how the growth of ebooks will affect territorial rights. That right person is Cullen Stanley of the Janklow and Nesbit Agency, with whom we’re now working to craft the right combination of agents and publishers, American and foreign, to make this a balanced and informed discussion. The inclusion of agents is a key point of differentiation between Digital Book World and just about every discussion about the digital future I’m aware of. There are many aspects of the conversation about the digital future that simply can’t be sensibly conducted without the involvement of agents.

Lorraine Shanley, a member of our Council, is not only a consultant but also one of the leading executive recruiters in publishing. We wanted to examine how skill sets are changing in publishing. I thought I’d put together a panel of recruiters. Lorraine suggested that it made more sense to create a panel of executives who came to publishing from other industries. We liked her idea better and we now have Charlie Redmayne of HarperCollins as the first of the executives who will join Lorraine for that conversation.

I don’t mean to suggest we’re unique in doing things the way we do. Mark Dressler, who puts together programs for BookExpo America and for the Frankfurt Book Fair (and who will interview me about the Digital Book World program at a Halle 8 stage on Frankfurt Wednesday), is also a micro-programmer and very highly consultative and interactive in his program creation. I am sure some of what you see at TOC and SXSW resulted from interaction, too. I just can’t help thinking when I hear “calls” for programming how much the conversations we have inform and improve what we offer. Although I’m the proud Conference Chair who gets credit for putting together the Digital Book World program, it’s consultation with the most knowledgeable players in town that makes it what it is. Perhaps it is “crowd-sourcing” of a different kind.


More about direct response basics: testing, testing, testing

This is the second post based on our recent conversation with Neal Goff, a longtime publishing executive with extensive experience with direct response who is now consulting to publishers through his firm, Egremont Associates. Because we believe that trade publishers have to become B2C marketers like they have never been before, we think it is important to take on board the fundamentals of managing contact with consumers. Neal is explaining them to us, and we’re trying to pass that understanding along.

In the first post, we wrote about the importance of name gathering, the data that should be captured (recency, frequency, monetization, and affinity) and the challenges publishers might expect to face putting their marketing database together. In this one we’re going to say more about what seems to be Neal’s favorite subject: testing.

By the simple device of changing one element of an emailing effort, one can learn which choice of that element produces a better result. But you must change one element, not more than one. If you change more than one, you wouldn’t know to which element to attribute any noticeable change.

There are three major components of any mailing that can be tested: the list, the “creative”, and the “offer.”

The list is the names you choose to mail to, which is comprised of the group you selected from (recent purchasers, or recent purchasers of a particular book, or people who said “send me material about this author”) and the selection criteria you used to pull the names from that list (males, or people in urban zip codes, or people who had spent more than $100 in the past year.)

The “creative” is the emailing itself. In the old days, that would include the envelope (windowed or solid, red or blue); in the email world it certainly includes the “subject line” of the email. Of course, it also includes the wording of the email and its presentation: headlines, graphics, etc. It includes the “from line”: does the email come from a person or the company? (Neal says it’s generally more effective if the email is signed by a person at the bottom, but that’s not necessarily what you want to show to get the email opened.) You can test a short email against a long one. And you can test the impact of HTML email against plain text.

The “offer” is what you are putting forward to the customer for an action. Historically, the action being sought was a purchase, and the offer might include a sweetener — a discount, for example. In an online context, it might be something else, like suggesting that the recipient come back with a request for a free chapter, or that the recipient offer their testimonial for the author or the book, or that the recipient register at a web site to stay in touch with the author or the publisher or the subject.

Neal argued strenuously that there should be a testing component to every mailing. He gave us a history lesson that dramatically underscored the advantages of the new email world. When direct response mailings were packages in envelopes, there was, of course, a significant cost for each piece dropped. Mailings would cost often 35 to 75 cents each — or, in marketing parlance, $350 to $750 per thousand pieces mailed — including the unavoidable cost of postage. For reasons that direct marketers could only hypothesize about but were borne out by experience, mailings tended to be most effective in January and July, with less activity occurring in between. And because the cost of mailing was so high, lists were rigorously “tested” before being “rolled out.”

But the process of mailing, getting response, and analyzing response was quite time-consuming. It took a minimum of weeks; sometimes it took months. Incorporating the results of the testing —  to change the list, creative, or offer — would then occur six or 12 months later.

Emailings deliver results within days, if not hours. Reflecting what is learned from a mailing in a new mailing takes days, not weeks or months. That’s why Neal believes that the testing regime should be continuous.

Neal also taught us an old direct mail principle: TIOLI. That’s “take it or leave it” and it refers to the belief that there should always be a simple offer with one choice: usually buy or not. Now, this violated one of Shatzkin’s First Laws of sales, which is “always give the customer a choice of answers, one of which is not ‘no'”. “Red or green?” “One dozen or two dozen?” Of course, this law was formulated for a face-to-face selling situation (the kind I’m more familiar with). Neal saw the logic of that and agreed that direct response in the email world might enable a back-and-forth that would have been impossible in the snail mail world. His response was predictable.

“It’s testable,” he said.

Neal also wanted to make the point that just because emailing doesn’t cost any cash, that doesn’t mean that mailings are “free.” They’re not, because every emailing will result in some number of your names “unsubscribing”, or revoking the permission they had granted for you to mail to them. (We see this at The Shatzkin Files. Most of our posts result in some “unsubscribes” from our mailing list, although there are always more new subscribers than unsubscribes.) As Neal pointed out, all your names have a “lifetime value”: the average number of dollars you’d expect to get out of them in the fullness of time. If you mail to 100,000 names and 2% unsubscribe, you’ve lost their lifetime value. If they each had a lifetime value of $25, you’re losing 2% of that, or 50 cents per person on your list. That’s a “cost” of $500 per 1000 mailed!

In other words, don’t casually spam your lists! And rigorously measure the cost of your unsubscribes.

These two posts are really surface-scratchers, but they spell out the basics every publisher should take on board today. If a publisher isn’t already pulling together the names it has into a marketing database, creating a way to capture responses and sales information and tie them to the names, building their list of names creatively and aggressively every way they can, and beginning a program of rigorously-monitored communication with those names, they’re behind where they should be. They need a dedicated and focused effort monitored by top management.

These posts have not touched on many complex subjects publishers will face once they start this effort. As one of the comments on the first post has already said, Amazon has more consumer names, and more information about the books they want, than anybody. All of the other online booksellers will have theirs too. Authors are aware that they should own names and many big authors already have a lot of them. There are complex negotiations in everybody’s future about how those names can be used and shared to everybody’s advantage. A publisher will only be a factor in that conversation if it has its own well-structured and robust marketing database.

Bookstore shelfspace will continue to reduce. Publishers can’t stop that. Amazon will continue to dominate the business of selling books online to consumers and publishers can’t stop that. But publishers can stop the sheer waste of customer contact and outreach, which includes placing into many hands printed books that could carry URLs and mailing list solicitations and offers on them. It is past time to start building equity with what has always been thrown away.


Learning what every publisher needs to know these days about direct response

Until his knee gave out a couple of years ago, I used to run regularly with a Big Six C-level executive. In about 2007 I told him I thought all the big publishers needed, but lacked, a complete and thought-through email list compilation and marketing strategy and policy. I suggested we could help his company by looking into that and designing one. (Consultants dream up ideas like this that require both outside expertise and extra hands and feet because that’s how we get work.)

My pitch got me nowhere.

In the intervening years I have become increasingly convinced that collecting names and using them right is now mission-critical for all publishers and most critical, and most difficult, for general trade publishers. And from what I can see, it isn’t getting the attention it should from anybody. (I’ll be delighted to get comments telling me I’m wrong, but I’ll bet they come only from very small publishers or thoroughly vertical ones.)

This is not my field. I know a lot about the traditional book supply chain, with first-hand experience dealing with every part of it. But my knowledge of direct response principles, starting with list-building and maintenance, is mid-level amateur. So I did what I would have done if my running buddy had responded positively to my suggestion that we help: I engaged a very smart person I know is a real expert on direct response to help me learn and think through what publishers need to learn and do. This post and at least one more will share that knowledge.

The smart person is Neal Goff, owner of Egremont Associates, most recently the CEO of My Weekly Reader Publishing. Neal has been applying direct marketing expertise in executive positions at Book-of-the-Month Club, Time-Life Books, Prentice Hall Direct, and Scholastic Library (formerly Grolier) Publishing for large chunks of the past three decades.

I started out with Neal declaring my assumption that publishers can make use of names they gather in at least three ways:

1. They can sell books to them.

2. They can use them for marketing, to spread the word about a book.

3. They can enlist them to be part of a community, interacting with you and others you gather, for the collective value (informational, monetary, curative, content-generating) the community can provide.

For openers, I asked Neal: if we want to help a publisher, where would we start?

Before he would tackle that question, Neal wanted me to understand a couple of very basic things about what is needed in a marketing database.

Obviously, we want to build a database that has all the consumers (millions, so the database has to be able to handle lots of them) we’ll be tracking and all the information about them by which we will ultimately want to “select” their names in the future. Neal emphasized that the most valuable information about them will be derived from their “actions” (when they click or buy or request information), much more than from our own (when we mail or post or offer.) And what we most want to know about those actions is summarized as “RFM” — recency, frequency, and monetary value — plus affinity, which is the similarity between what we’re selling and what they’ve bought before.

Recency refers to “the last time they did something.”

Frequency refers to “how often they’ve done something” (particularly when they do something positive, like buy a book from us).

Monetary value refers to “how much they’ve spent with us.”

Tracking affinity may require some work. Our fulfillment system knows exactly what they’ve bought from us title by title, but this information won’t be terribly useful if, every time we do a promotion, we have to go into our database and select the names of our book-buyers, one title at a time. That information has great value, though, if we aggregate our customers into meaningful groups, like those who bought a photography book or a military history title or a romance novel.

This means that transactiondata is critical. Neal explained that most publishers, particularly trade publishers, don’t necessarily have easy ways to capture individual customer transaction data in a marketing database. That may require a bridge of some sort to be built between your fulfillment systems, which capture the data necessary to complete transactions, and your marketing database, in which you want to aggregate fulfillment data in order to make it more useful selecting names for future outreach. That includes the affinity grouping described above and also such information as how much a customer has spent with you in the last six months.

Knowing that, one is equipped to start thinking about gathering names.The first step is to round up all the names you already have and put them together in one database, capturing the data you have about them in a consistent way. The next step is to establish procedures for collecting more names. All of this should be done with future selection criteria in mind which requires you to start thinking immediately about what the meaningful segments within your customer base are likely to be.

Every publisher already has a lot of names. People who have purchased from the publisher previously will have provided contact information, for confirmation purposes at least. People will have contacted the publisher for customer service, inquiries, or to sign up for newsletters or alerts.

But, often, the publisher will not have requested the necessary “permission” from the consumer to use their name for email marketing contact. (Seth Godin has been making this point for a very long time. He invented the term “permission marketing.”) The task of collecting and collating the names that are already in the house’s possession will provide a painful lesson in how much good customer information has been wasted because permission to contact was not secured when the name was collected. That lesson needs to be applied to the publisher’s future efforts.

Neal explained that you want to set yourself up to get permission from people as early as possible. On all purchase and customer service forms, when you collect email addresses, you have to include the option for people to choose to stay connected to you. You invite your contacts to check a box saying “keep me informed of other books you publish ‘on this subject’ or ‘by this author’ or ‘which will be of interest to me.'” You want to word your permission statement so that it doesn’t scare your customers into thinking you’ll be spamming them all the time, while at the same time keeping the wording broad enough that you don’t unwittingly cut yourself off from future marketing opportunities.

He also pointed out a paradox. The higher you set the permission hurdle, the fewer people you’ll get to give you permission but the higher the quality of that group will be. So if you make people “uncheck” a box to prevent permission, you’ll get more permissions. But if you make people “check” a box to grant permission, you’ll probably be more successful engaging the ones who grant it.

This took me back to a belief I held even before Neal started explaining the basics. Most publishers’ efforts to harvest email addresses have been weak and underthought (which isn’t surprising if there is no active plan to use the names). Can publishers create better reasons for the book’s consumer to engage the publisher? Can the publisher offer free additional content, for example, or notifications of updates (most likely to apply to non-fiction, of course), or a web site that offers additional value at which registration might be captured? Capturing the name and email address of somebody inquiring about a book or even one purchasing a book is all well and good, but wouldn’t those who signed up after already owning the book be that much more likely to be candidates for future engagement?

So where a publisher has to begin is to gather the names they already have, which are buried in nooks and silos around the company, tag them for where they came from and by the kind of “permission” to use them that exists, and work out how to add the additional contacts made with those people, especially including all transaction data, to the database.

In the next post based on Neal Goff’s direct response knowledge, we’ll talk about using the names, including how to act on Neal’s point that many things are “testable”, and that every customer outreach presents a valuable opportunity to test something. And we’ll explain why even though sending email is “free”, mailing to your free list too often or with bad execution can actually cost you money.

Here’s an unrelated postscript. We’re putting together a database of enhanced ebooks because we think the world needs one (at least temporarily.) Our newest teammate, Chesalon Piccione, has been doing the work on this and has posted on the E2BU blog about her efforts and what she’s learning by looking at the aggregation. It will take us a little while to wrestle the database itself into something postable, but we’re working on it. In the meantime, if you’ve got an enhanced ebook project, send Chess an email ([email protected]) and let her know so she can include it. A list of the data points we need is in the linked post.


Publishers, brands, and the change to b2c

I’ve been in the book business for a long time, more than 48 years since my first job on the sales floor of Brentano’s bookstore. For over 37 years it has been my fulltime occupation. My father started his career in books just before I was born, so I have been meeting publishing people more or less since I was in the cradle. And it isn’t that big a business. So, over the years, I’ve gotten to know many people in the industry.

But I hadn’t met Markus Dohle, the relatively new CEO of Random House, until we had lunch last month. He proved to be a very sharp, informal, and relaxed companion, very open with his opinions and observations and very straightforward. And since his prior experience was outside trade publishing (the reason I’d never previously met him), he brings a completely fresh personal perspective to the business.

One thing Markus said really struck me because I agree with it so wholeheartedly and because I hadn’t ever heard it said so explicitly by any of his counterparts. “We have to change from being a b2b company to b2c over the coming years,” he said. He expanded on this when I asked him whether I could attribute the quote for this piece. (I don’t want to disappoint my readers, but I make a living as a consultant, not a blogger, and my career would be crippled if I couldn’t have a conversation with an executive without a looming fear that whatever s/he said would end up in print. If some readers wonder why the sources of some comments remain anonymous, that’s your answer.)

Markus replied that he was fine being quoted because he was “convinced that publishers have to become more reader oriented in a marketing and trend finding/setting way rather than in a direct to consumer selling way.” I welcome the clarification and believe it is right in its emphasis on marketing over sales even though I think that sales, inevitably, becomes part of what a publisher has to do too. And direct contact with and tracking of individual consumers both seem absolutely essential.

(The politics of this are worth a digression to spell out. For several more years at least, big trade publishers will continue to depend primarily on a retail network to reach readers. Despite the fact that all the big retailers, in their way, compete with publishers to control content at its source, they are universally resentful if publishers compete with them to serve consumers. On the other hand, it is increasingly apparent that the retail network is reducing its size and scope and, unless publishers develop alternate channels to consumers, they’ll be reduced in size and scope as well.)

Although Markus was the first CEO whom I ever heard say explicitly that the shift to b2c was in any way a priority, there is evidence in other houses that the importance of direct consumer contact is on the radar. A senior digital officer at another large house is directing a wide-scale effort to organize their consumer contact names — which he found, as he would have in every other house — to be scattered, unorganized, and largely unusable. Pulling names together is one of a number of “first steps” the big publishers must take to act on Markus’s insight.

But there are other “first steps” that are just as important as rationalizing the contact database for consumers. Two of them are related. One is being committing to owning specific groups (or, in the current parlance: communities) of interest. This is what I refer to as “verticalization” and I have written and spoken about it exhaustively. But the commitment to verticalization, in order to be captured and turned into real equity going forward, must be expressed in branding.

The names of publishing houses and the imprints they create are their brands today. (Authors are brands for consumer marketing purposes, but publishers don’t own those brands: the authors do.) What publishers own really do work in a b2b context. Bookstore buyers, book review editors, and collection developers at libraries can discern meaning from company names and imprints. They work the way brands are supposed to work: as shortcuts to establish expectations. Brand tells an informed buyer to expect high-quality writing in a Knopf book and high-quality reproductions in an Abrams book. Brands will also signal them, before they see a finished package, whether a book is likely to feel overpriced or underpriced, and whether the publisher’s claims for promotion and media are likely to be fulfilled.

But most of these brands mean nothing to consumers. And mere knowledge of a brand doesn’t necessarily tell you what to expect if you buy it. Nor would knowledge necessarily provide you with a motivation to get “closer” to it.

The one consumer brand in publishing that means the most and provides the most equity to its owner is Harlequin. Consumers recognize it and have understandings about quality and price based on it. But because they also know that the Harlequin name means the “romance” genre, and because many romance readers buy and consume dozens, even hundreds, of titles in the genre every year, they have logical reasons to visit Harlequin’s web site repeatedly and to request and open email reminders of new publications from them.

In fact, Harlequin’s brand is so clear and so powerful that they can get people to subscribe to their books. When you think about alternative revenue sources, that might be the Holy Grail. It will certainly help publishers stay on the right track if they focus on creating brands and clusters of books around them that could conceivably deliver customers for a subscription proposition.

The Penguin brand is perhaps equally well-known, but it isn’t nearly as well defined. Penguin Classics certainly have a collective meaning, but many books are published under the Penguin imprint that aren’t classics. And while it is likely that sometimes the purchasing choice between one edition of Robinson Crusoe or Hamlet and another might be influenced by familiarity with the imprint, it is not clear that the “quality” signal is important there (because, after all, the words were set down long before Penguin or its competitors existed) as it is for a new romance novel. And it certainly would be harder for Penguin to attract regular web traffic with its brand or to make sales through an email list of brand adherents.

A brand that is in between these two is “Dummies.” It definitely creates a meaningful shortcut for a consumer; they recognize it and it tells them “this book explains the basics on the subject in a way that requires you to bring almost no knowledge to it for it to be useful.” But because Dummies covers many subjects under the sun, it would be difficult to make use of it for audience-gathering or direct marketing the way Harlequin is employed.

You wouldn’t “subscribe” to new offerings, sight unseen, from either Penguin or Dummies. That means that, in at least one very important way, those brands aren’t as useful as Harlequin. Why? They’re too broad. General Motors wouldn’t ever have sold nearly as many cars if they called all the cars “GMs” to create a megabrand and had lost the distinction between Chevrolet and Cadillac. Trying to create “one big brand” if it captures unrelated content or unrelated audiences could be “one big mistake.”

My own theory is that publishers have to completely re-think their imprints in light of the need to move from b2b to b2c. Imprints at big houses are almost always silos with no discernible b2c meaning. In fact, the names of smaller houses, because smaller houses tend to focus on subject areas, can more readily have meaning to consumers.

In fact, Random House just faced a branding question of exactly this nature and got it right. They had acquired a smaller, subject-dedicated company, Watson Guptill, a couple of years ago and had some overlap between what WG published and what Random House already did within their Clarkson Potter imprint. RH executives engineered a solution by which they preserved the venerable Watson Guptill name for “hardworking” instructional books on art and photography —  WG’s strongest historical categories — and made made Potter Crafts a subimprint of WG. They invested in building the crafts list to triple the previous output of WG. The two thirds to three quarters of the WG list that is not crafts will still be WG imprint books. By making Potter Crafts, which they owned before, a part of Watson Guptill (joining Amphoto, the well-known photo line, and WG’s other subimprints), they might get the best of all branding worlds.

And it is further worth noting that tripling down on title output to become a serious player in a niche is probably a move very few Big Six companies would be making these days, but it is necessary to think that way if you’re serious about making substantial b2c marketing efforts. Building a subscription business would almost certainly imply a growth in title output in any vertical.

Random House’s clarity on how publishers should structure brands to have content-specific meaning is still unusual. (There are other examples: Hachette’s invention of “Springboard”, a brand to do books for baby boomers, is a nod in the same direction.) Publishing Perspectives, the thoughtful online publication operated by the Frankfurt Book Fair, offered a piece on the subject six months ago that was locked into what is still publishing’s more normal b2b way of thinking. The catalyst for the post you are now reading, actually, was their editor Ed Nowatka’s piece with the provocative headline asking “Does a Publisher’s Brand Equity Translate to the Digital Age?” which (with all due respect, of which I have plenty, to Ed) I thought really didn’t address the question. But at least he asked it. I don’t recall ever reading a single piece on the subject of this one: how do what have always been b2b publishers create b2c brands?

In fact, Random House just faced a branding question of exactly this nature and got it exactly right. They had acquired a smaller, subject-dedicated company, Watson Guptill, a couple of years ago and had some overlap between what WG published and what Random House already did within their Clarkson Potter imprint. RH executives engineered a solution by which they preserved the venerable Watson Guptill name for “hardworking” instructional books on art and photography —  WG’s strongest historical categories — and made made Potter Crafts a subimprint of WG. They invested in building the crafts list to triple the previous output of WG. The two thirds to three quarters of the WG list that is not crafts will be WG imprint books. By making Potter Crafts, which they owned before, a part of Watson Guptill (joining Amphoto, the well-known photo line, and WG’s other subimprints), they are making an attempt to get the best of all branding worlds.
Random House’s clarity on how publishers should structure brands to have content-specific meaning is still unusual. (There are other examples: Hachette’s invention of “Springboard”, a brand to do books for baby boomers, is a nod in the same direction.) Publishing Perspectives, the thoughtful online publication operated by the Frankfurt Book Fair, offered a piece on the subject six months ago that was locked into what is still publishing’s more normal b2b way of thinking. The catalyst for the post you are now reading, actually, was their editor Ed Nowatka’s piece with the provocative headline asking “Does a Publisher’s Brand Equity Translate to the Digital Age?” which (with all due respect, of which I have plenty, to Ed) I thought really didn’t address the question.

This is a subject that has been on my mind for a long time. I wrote a post 18 months ago about an imprint started at another house that I considered to be, similarly, the product of the same b2b thinking that characterizes the Publishing Perspectives piece. And about a year ago, I stressed the importance for publishers of building b2c brands going forward.

I believe Markus’s insight is the necessary first step that others haven’t yet taken and, whether or not it started with Markus, the awareness of the need for consumer focus certainly helped Random House make sensible decisions to exploit the brand equity in the WG name they had acquired. Once publishers accept that being consumer-focused is essential to their long-term survival, it follows logically (although not automatically or instantaneously) that they need to think about discrete audiences on more than a book-by-book basis; that they need to gather those audiences on web sites and in mailing lists; that they need to publish books that satisfy them repeatedly, not occasionally; and that all these efforts will make more sense if each separate audience has a brand facing them with real meaning. We’re seeing that from the big publishers right now in genres; they are trying to build science fiction and romance communities and branding them. Random House built a vertical in travel earlier in the decade, developing business models out of a critical mass of content that went beyond simply selling books. That, and the efforts at Random and other big houses to build communities around genres, is a start. But a lot more development of this kind is going to be needed to replace the marketing clout being lost as the old channels to consumers wither in the months and years to come.