Library Acquisitions: Practice & Theory, Vol. 12, pp. 201-202, 1988 0364-6408/88 $3.00 + .OO Printed in the USA. All rights reserved. Copyright 0 1988 Pergamon Press plc

CHARLESTON CONFERENCE 1987

COST-PLUS PRICING: AN OLD NAG WITH A SECOND WIND?

RICHARD ABEL

Timber Press

9999 Southwest Wilshire

Portland, OR 97225

I would like to trot a previously rejected horse into the auction ring to let the bidders have another look. It might just be that the old nag could develop a second wind.

The animal I offer is what was called cost-plus pricing the first time into the ring about 15 years ago.

The idea is the essence of simplicity. The library vendor prices each book sold on the for- mula of delivered cost from the publisher plus a percentage of that cost. The added percentage is simply that vendor’s cost of doing business plus profit.

Having nodded in the direction of the title of this session to reassure the organizers of the conference that I understand the topic and plan to address it, I beg your indulgence to allow me to take another trip around Robinson’s barn.

I think that picking up the stick of the anatomy and physiology of the relationships between the three key players at the pricing/discounting end is a case of getting the cart before the horse. I suggest that quality of service is the first standard which should be set. Yes, I know that developing the evidence for making judgments based on service is much more difficult than the simple calculations required to make judgments about price. But service remains the key both in the satisfactory functioning of an acquisitions department and in vendors’ pric- ing formulas based on publishers’ discounts.

To illustrate my point let me tell you two stories. Many years ago I started to call on one of the major academic libraries in this country, trying to sell our services. The acquisitions department was run by a truly formidable person-not two minutes into an interview, you knew she had eaten nails for breakfast so could chew you up and spit out the pieces in an instant. She was adamant that we could provide no service which her then vendor was not. After two or three calls I came to view any further calls as an exercise in futility. But I had to go back- the library was simply too important to bypass. So I went back prepared to slink out with my tail between my legs yet another time. It was my good fortune that while in her office an assistant came in with a fairly thick deck of 3” x 5” cards which she placed on the desk and advised that they were all O.P. and should be passed to the search staff. I glanced

201

202 R. ABEL

at the top card and noted it was a publication from a learned society which offered no dis- count, but which I also knew darn well was in print, for we’d recently handled the book. So I made an offer: send us all orders reported O.P. by your present vendor to let us see what we could do. Ever tolerant of callow youth, she agreed to such a naive proposal. In due time we received a staggeringly large order. We eventually succeeded in filling something slightly in excess of 50% of it-that percentage being in fact in print. Tough-minded person that she was, we were thereafter on the vendor list.

The other example turns on libraries in a state which some years ago used a statewide bid system based on discount only. Having lost the bid, we first suggested to the libraries that they send all reported 0.P.s to us. Then when the low bidder treated rush orders in an ordi- nary manner, we solicited the rush orders as well. The volume of business done was not to be sneezed at and the statewide bid system was shortly thereafter discarded. In short, any ven- dor can offer very attractive discounts if allowed to pick and choose the orders which will be filled and to treat all orders in a completely mechanical way. From the library’s point of view any significant vendor departure from honest full-service will wipe out a goodly number of discount points in increased overheads and loss of patron goodwill.

As a publisher, I can add that the phone calls from libraries inquiring if a book is truly O.P. quickly become stale. In the week before I left to come here we received three such inquiries checking on false reports furnished by two vendors, representatives of whom are attending this conference. For our part we’d like to sell our books and not be bothered deny- ing false reports.

And now to return to the topic designated for this session-if a library is satisfied that ser- vice in all of its dimensions (not just accurate reporting and the treatment of rush orders, examples of which I have offered only to illustrate my point) is honestly being provided, then the question of pricing/discounts can finally be addressed.

I submit that cost-plus pricing formulas, as between two vendors providing roughly equiv- alent services, is the most transparent and equitable system yet devised. Discount-from-list price systems have, in my opinion, been a rogue’s paradise for as long as I have had any expe- rience of the library trade.

And the obverse side of this coin is that rogue librarians have manipulated the discount- from-list pricing system to make their mark.

Unlike the discount-from-list system, the cost-plus system is so transparent that the ques- tionable ethics and gallimaufry of pricing studies which have been developed on both sides of the table will be, if not eliminated, then very significantly reduced. And with the hocus- pocus out of the way, the larger and more critical questions-some of which I have endeav- ored to lay out earlier in this conference-can more honestly and realistically be attacked.