Will Bury’s Price Elasticity Scenario
Will Bury, an enterprising inventor, is convinced that soon everyone will be reading or listening to everything digitally, including books that have been mostly available in hard copy. He knows that there are books on CD, but these are relatively expensive and have been recorded using human readers. He also knows that there is technology that can transform the printed word into audio, but the sound is somewhat inhuman. Will plans on speeding up the transformation with a proprietary technology he has developed and patented. This technology takes the printed word for text materials and creates a file with the option of reading it digitally or listening to it with a realistic synthetic voice. Will knows that he has free access to books no longer under copyright protection, and he figures he can pay a royalty fee of $5 per title for copyrighted books that will greatly expand his catalog. So far, he has limited himself to English-language books but is working on a language translation option as well.
To date, Will’s technical skills outpace his business acumen. He is struggling with some basic decisions. He has been working on his invention as a garage operation for the last few years and has missed many of his daughter’s soccer games while working at High Tech Digital Industries to keep his family comfortable on his $200,000 annual salary and benefits package. Will may eventually have to decide whether to devote most of his time to his invention. Moreover, he is not sure how to determine all the applications for his technology, who would want it, how it would be delivered to customers, how many books would be bought at what price, and so forth. Even after he has secured the rights to copyrighted material, he needs some help acquiring the books he wants to digitally transform and scanning them into his digitizer. It is not difficult to train others to do this, but the process takes about an hour per 500 pages to complete. To make sure the process works well, Will has been doing this himself, but he realizes this is neither a good use of his time nor will it get many books digitized. Fortunately, the digitizer Will uses is inexpensive to reproduce for others to use, and Will is certain that the security he has encoded into it will prevent others from unauthorized replication of the device. Where are the people Will can hire to do the work, and how much should he pay them? If it is easy to train workers in the United States to do this, could Will pay $10 an hour for someone with the skills of a high school graduate? If this is the skill level, could he pay a worker overseas $2 an hour for the same service?
To address some of these issues, Will has been doing some research. First, he checked online to discover that a 500-page book on CD costs approximately $20. This is a good substitute for his audio files, and further research suggests that he could apply his digitizing process to more recent copyright-protected books for a royalty fee of $5 per book. He would still incur the labor charge of scanning the book. Will continues to wonder whether people want to read digitally or listen to audio books, or whether they still prefer a physical book to read. Will found an article from a reputable source that suggests customers of digital and audio books are relatively affluent, their household incomes are above average, and acceptance of digital reading for pleasure is lagging behind acceptance of digital reading for business. The article found that digital listening is attracting the same audience who download music to digital devices.
Further research has suggested that price is an important feature driving the appeal of digital book files. Will is trying to apply some earlier experiences in movie distribution to his digital book project. When movies were first released for general consumer distribution as videotapes, they were expensive—about $80 per title. When the price was lowered to $20 per title, evidence suggests that volume sales typically went up 600%. Of course, not everything stayed the same. In recent years, movie titles have been released more quickly following their showing in theaters, there have been more extra features on the DVDs because of greater storage capacity, and the format changed from videotape to disk. Some have hinted that although there are fewer blockbuster hits now, there are more titles appealing to a broader audience. Will is trying to find more evidence of the effect of price on volume demand, but this is all he has discovered so far.
Nevertheless, Will must determine a launch price for when he first introduces his digital titles to the market. He set up a website offering his small catalog of books. He set the price at $10 for a title on which copyright has lapsed and $15 for a title that includes a royalty fee. He is a little disappointed in his sales in the first 6 months of operation, having sold only 1,000 of the older books with a lapsed copyright and 2,000 of the newer books. Moreover, he is confused as to why he sold twice as many of the more expensive books. He wonders whether he should lower or raise prices to increase his revenues. What might he expect to happen to his volume sales if he does change prices? If he decides to increase or decrease prices, is it better to make a small change and observe the effects on quantity, or will customers more likely react to a change in price of at least $1 per title? If he changes his prices, will this have any effect on the prices charged by big-volume sellers for conventional hard-copy books?
While Will is pondering his pricing strategy, he visits a friend, Elsa Budley, who has had experience selling online. Elsa started an online business selling her artwork. Although her initial sales were a bit disappointing, she offered some shocking advice. She discovered that she sold more artwork when she raised her prices at the same time that she expanded her online advertising budget. Elsa thinks Will’s key to success is to raise prices and sell more books!
Will senses that he is on the brink of great success with a proprietary technology that transforms the way people access books and other materials currently offered only in print. He is also on the verge of making some fundamental business mistakes, however, that could rob him of his success. He may be more successful if he observes some basic concepts included in the early part of this course.
Due date and time? Number refs required? Is there additional information to complete?
Its due on wed by 6pm
It's a minimum of two references... I included the scenario to help you.
are you still there?
Yes, I'm still here.
the only source needed for this assignment is the scenario
thank you I thought I lost you!
can it be done?
Yes, I can be done. No problem.
when can I have it by?
and does this service allow me to tip you?
Either tonight or tomorrow? Yes, the tips are bonsuses.
ok if I can have it as soon as possible it would be great so I can review it.
I will tip you for your help
will I have to rewrite it?
No, not unless you feel that's necessary. After you read through it you can make that decision. All work is created originally.
the work will not show up anywhere online? I don't want to get into trouble...
No. The work will appear here in this message board through a link. Once you have retrieved the information, I will disable the link. When you turn the work in then it goes through plag checker and becomes part of the online database. That's how I understand it.'
Ok thank you. Is there anything else that you need from me?
Not at the moment, however, if anything comes up I'll contact you ASPA. Also, if you have any additional ideas you'd like to include in the paper please contact me.
Ok thank you. Now all I have to to do is click accept or not yet?
You can accept now or when you recieve the work.
ok when can I add the tip?
Now or when you recieve the work.
ok awesome I will click accept now and add your tip when I get the work. please keep me updated
I will and thank you for allowing me to assist you.
one last thing is needs to be in APA format....
and thank you you're saving me from going insane.....
APA, understood. You're welcome. It's a New Year no one need be stressed out. :^)
Yes its a new year! Happy New Year! Have a great day!
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