June 19, 2007
News & Opinion: TOC - Business Models that Guarantee Profitability in Publishing
Bob Pritchett, CEO of Logos Bible Software, is talking about their direct to customer business model. They have 500,000 users and about 20% of those are returning customers. Their business involves developing electronic versions of religious texts from both acquiring rights for existing publishers and developing original content.
They have a five part process for launching one of their electronic products:
- Launch Products
- Take Orders
- Cover Costs
- Start Production
- Ship and Charge
They put all of their products up on their website and gauge interest before they put them into production. And interest is a customer giving Logos a credit card number. Using this system, they don't put a title into production until they have guaranteed to cover their production costs. Customers who enter early is the process get a good discount (30%) and the discount drops as more people commit to the project. Each project is a guaranteed success and any additional sale is hugely profitable.
They have also tried "community pricing" as well. Their customers are allowed to bid on potential projects. Their bid represents how much they would be willing to pay for the proposed project. Each project has again has a project breakeven and once the "auction" shows the project can be done, users are offered the lowest price which allows the project to make money and the product is priced at the highest revenue generating point based on the data. I think it is very clever and there is much better information at their site.