Navigating the Downturn: Is Pricing Pressure
Driving Supplemental Sales?
By Nelson Heller, President, EdNET, April 16, 2010\
You’ve all heard anecdotes about K-12 buyers struggling with budget and staff cuts. Some industry observers are concluding that schools are making more buying decisions on price; more willing to assume equivalence among products. I decided to test whether this is a general trend or just the perception of a few. Over the past few weeks I’ve connected with about 25 publishers, distributors, and industry experts. My conclusion: For many, but not all, the game has indeed changed and pricing pressure is at the center of it. This article lays out the evidence both for and against increased price competition. Read on and then draw your own conclusions. [Next month’s Heller Report shows how firms are still getting traction when schools are spending less.]
Yes – It’s Now More About Pricing and Less About Individual Features
Pricing is “now more important than ever” for sales, according to Wendy Zachrisen, Educational Marketing Manager for Learning Resources, whose products are largely manipulatives and hands-on instructional materials. This can make pricing for their higher quality brand a challenge. Scott Bowker, Senior Vice President, Houghton Mifflin Harcourt Specialized Curriculum, sees definite price sensitivity on the part of school buyers in his arena too, which he ascribes to the economy forcing school staff and budget cuts. What’s more, Zachrisen says, sales are less “political” than they used to be—with limited resources, school spending is becoming more transparent and accountable. According to Rachelle Cracchiolo, President of Teacher Created Materials, this means that reps that used to “be able to sell anything to their school buddies” can’t do it anymore without providing evidence of value to the buyer.
Dropping prices is not the right solution for companies that earn the majority of their sales through the dealer channel. Resellers want to keep their average order value high, and lowering prices would defeat that purpose.
More evidence of market stress is that for some publishers, formerly regular reorders are no longer automatic. According to Karen Coe, President of Key Curriculum Press, annual reorders for their “Key To…” basic skills consumable workbooks series (e.g., Key to Algebra, etc.), published at about $3.75 per book since 1971 with virtually no change in the product, have been in many school PO systems for years. They used to come regularly; now they come at bigger time intervals from school buyers who are looking for price incentives too.
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