The economics of regional book pricing

It's been reported this week that Waterstones is considering different book prices for different regions. This is nothing new in this in retailing, and in bookselling it's not unlike the difference in price between hardbacks and paperbacks.

It is, of course, all about selling more books, but it's not just about that.

It's also about finding each individual's price point and eliminating what's known as the 'consumer surplus'.

Essentially, we all have an upper limit on the price we'd be willing to pay for everything we buy. Every time we buy something for less than that price, we effectively get something for nothing - a bit of a discount if you like. That's the consumer surplus.

Retailers would love to be able to charge us according to our individual price points. But it's not that easy. Most don't have the option of sizing us up and switching their price labels as we enter the store.

So they opt for the next best thing. It's possible to work out profiles for people living in different areas, which then allow you to make educated guesses: the individual price point for book X for people living in area Y is likely to be around £Z.

The trouble is that once someone knows they're being asked to pay a higher price just because someone's worked out that they'd be prepared to, the willingness to pay that higher price is in danger of evaporating.

Manufacturers can get over the problem by repackaging essentially the same product and giving it a different brand - two very similar cars, made by the same company, can attract very different price points thanks to the badge on the front.

But if the consumer knows that their local shop is charging more for exactly the same product than is being charged in another area, you have to wonder what this will do for customer loyalty.

So perhaps a different approach is required for the publishing world. Now that the ebook revolution is gathering momentum, there's already talk of doing something a little different with printed books - of making them more beautiful - more a luxury item. And the answer in terms of differential pricing may be to take the hardback/paperback distinction a little further and to push the more beautifully packaged books in some areas, while offering cheaper, more basic, products in others.