Demand for university textbooks is generally inelastic. How do I know? I am a student. There is no substitute for the content in textbooks that are required for some university courses. That partly explains why university textbooks can be priced so high. Also, research has shown that “The publishing industry is dominated by five companies that dominate upwards of 85 percent of the market.” This is an example of oligopolistic competition. The publishing industry colludes in keeping the price of textbooks high in order to maximize profits (profit orientation). However, there are different kinds of substitutes emerging.

Many textbooks now come in bundles that include CD’s, study guides, and other content. Bundling saves costs for the company as well as the customer. This could be considered consumer oriented pricing as it maximizes the value for the consumer. However, there is another substitution for textbooks that further maximizes value for consumers- eBooks. Through purchasing eBooks, consumers get the same content of textbooks but at a much more affordable price. Ebooks are imperfect substitutes since some consumers prefer having a hard copy to highlight. However, the same core benefits of a regular textbook are still provided.

Currently, eBooks are still in the infancy stage. Demand for eBooks may not be high since it can be considered an innovation. Physical books have been around for centuries, so the idea of an electronic book may need some time for consumers to get used to. But as more and more people realize the convenience of eBooks, more and more people will adopt this program. Especially in this technology savvy generation, hardcopy textbooks may become obsolete in the future.

Links:

http://www.nbcnews.com/business/required-reading-textbook-prices-soar-students-try-cope-8C11140099

Many companies have started developing their brands in order to appeal to more target segments to capture more market share. Aeroplan’s loyalty program is a good example of this; their rewards now include tuition.

In the past, Aeroplan loyalty points were only used to pay for flights. Nowadays, points can pay for necklaces, song downloads, as well as tuition. In an attempt at extending their product life cycle, Aeroplan is constantly trying to find new users and reasons for consumers to continue using their program. By including tuition in their package, Aeroplan is able to effectively target students. Students are at a young age where brand loyalty is still developing. Aeroplan has taken this into consideration, but also saw that none of their competitors were targeting this consumer segment.

Market development is a good way of testing potential target segments without much risk. Aeroplan has identified a consumer need; students nowadays are having trouble paying for their high tuition rates. Although Aeroplan points may not pay for a student’s full tuition, students feel that “every little bit helps.” A study showed that 90% of Canadians were enrolled at least one loyalty program. By targeting consumers at an earlier age, Aeroplan is able to develop brand loyalty and attract new potential advocates to strengthen their future brand presence.

Currently, Aeroplan’s biggest challenge is in finding corporate partners as well as universities that will endorse this program. However, Aeroplan’s value-based marketing will certainly attract potential partners. Universities care about their students. That’s why they provide financial aid and scholarships. Aeroplan’s loyalty program can be seen as a type of financial aid that will make a student’s life much easier. As a student that shops for his own groceries, I feel like this program would definitely benefit me.

http://www.theglobeandmail.com/report-on-business/industry-news/marketing/aeroplan-expands-rewards-to-include-tuition/article15198035/