Combating the Higher-Ed Used Book Market
The higher education textbook market is currently experiencing a period of landscape-altering challenges, which are being met with deep innovation. Developments such as adaptive learning technologies are underway that will truly shape the future of education. However, a major lull in this progress is the revenue lost to publishers and learning companies due to the used textbook market.
Roughly $5.5 billion of the over $8 billion higher education textbook market is caught in the secondary market. This is lost revenue that would otherwise be invested into the development of valuable new learning technologies. Students remain price incentivized to seek used textbooks while the digital adoption rate remains frustratingly low. A lack of digital adoption hinders progress toward the heightened level of engagement between the students and educational content providers that ultimately improves educational outcomes through new product offerings.
There are three primary industry efforts in place to combat the used book market and increase engagement with students through digital products. My company, Packback, spent twelve months working with Chicago-based market research firm, Shapiro & Associates. Together we rigorously observed student learning behaviors as they relate to engagement with educational content. The goal was to uncover precisely why digital adoption has lagged in higher education and thus develop a new solution.
Following is a summary of the three leading industry strategies currently in place to transition students from used books to digital formats, along with the barriers these strategies face in reaching widespread adoption.
1. Top down, "built into tuition" model
In this model, students receive significant discounts on required materials by automatically purchasing content through fees embedded into the tuition for a given course. These prices are negotiated at the institutional level. From a pure cost perspective, this model presents a strong value proposition for both students and learning companies. Learning companies are able to provide steep discounts on course materials given that 100% sell-through rate is guaranteed in the course. When properly implemented, the students win because they are benefitting from low prices on content in a course where the professor is presumably heavily reliant upon that content. Learning companies also win because they are eliminating the used book market threat while gaining revenue, and far more importantly, engagement, from 100% of the students.
Barrier: The above model requires a lengthy administrative sales effort. Once administrators sign on for this type of program, professors must still opt in and students must then enroll in the course, accepting the automatic fees. This results in a forcibly unnatural digital adoption and slow scaling process.
2. Digital textbook sales through traditional retailers
Any content provider has a natural inclination to "be where the eyeballs are." This is no different in higher education publishing, although the nature of what those eyeballs seek presents a serious challenge. The used book market has been established as the de facto choice for students seeking the cheapest options to acquire textbooks. Students rush to sites such as Chegg.com and Amazon.com with a clearly defined mission of finding one thing: the lowest price for their book. The logic of following the eyeballs makes a case that these destinations are where strong sales of all products are to be made, given that such a high volume of prospective customers visit them.
Barrier: Students today hold a strong preference for physical formats and a desire for the cheapest price. Digital alternatives present a mental switching effort for a student who has become accustomed to studying with physical materials. Therefore, a format shift to digital requires strong incentivizing. Herein lies the problem with online used book retailers as it relates to digital adoption: when the price of an e-textbook is presented in an online catalogue, it is directly (and often drastically) undercut on price. The student customers are thus strongly price incentivized to stick with the physical format they are accustomed to.
3. Educate professors for course redesign
Major learning companies are swiftly evolving their core value proposition towards educational software, in many cases referred to as courseware. The most highly touted aspect of this innovation lies in adaptive learning technology, which presents the potential for real improvements to overall education as students are empowered to learn at a personalized pace. Being non-transferable software products, they also present an economic salvation for learning companies from the secondary market. Implementing these new software-enhanced learning behaviors requires heavy professor adoption. To accomplish this, "course redesign" is necessary -- a process by which professors are taught how to implement new products for use in class.
Barrier: Effectuating widespread professor adoption through course redesign is no small (or quick) task. These are developments that in theory should fundamentally change the way in which educators approach classroom learning. However, students are not organically migrating towards these products on their own accord. In a course redesign, a professor can take up to a few years to fully grasp the new technologies, while simultaneously recruiting co-workers to join in. This is because for many of the available solutions, the most effective implementation involves group buy-in and standardization of the teaching methods.
All of the above take significant time and tedious effort. In the meantime, students remain content with the used book market and revenue is lost. Upon observing these barriers, Packback developed an additional solution by creating a 24-hour digital textbook rental for $3-5 per day. The intent is to provide an affordable alternative to the used book option, thus decreasing the immediate student rush towards the secondary market during the first few weeks of the semester. Students are incented, by both price and convenience, to hold off purchasing a used textbook, and instead rent digitally as they encounter their first assignments. This allows adequate time to analyze each professor's teaching style and decide how often a textbook is used in a course. If the student needs the book regularly, she has the ability to convert money spent on daily rentals towards an extended semester or yearlong rental at the standard publisher-listed digital price.
In a pilot launch at Illinois State University, working most notably with McGraw-Hill Higher Education, Taylor & Francis Group, and SAGE Publications, we surveyed 681 students across 21 Packback-eligible courses to decipher the precise revenue implications of the 24-hour digital rental model. The end result was a 58% increase in revenue for our publishing partners, and a tenfold increase in student digital adoption. The reason for this boost was that 82% of our users declared that they would have otherwise bought a used textbook, and 12% declared that they would not have purchased any books if not for the 24-hour rental option. The used book market share in this sample reduced from 75% to 55% of students. Building off of these results, Packback's 24-hour digital rental service will launch nationwide in Fall 2014.
Aside from the drastic loss of revenue to the used book market, the core issue here is not about physical vs. digital or even new vs. used. Those are simply mediums. The core issue is around student engagement. Improvements on the industry, professor, and student fronts all rely on enhancing the direct engagement between learning companies, professors, and students. Digital format just so happens to provide the ideal medium for this engagement. Therefore, the more we can lower the barriers to digital adoption, the better position the industry will be in, both financially and academically, to shape the future of learning.
Mike Shannon is co-founder of Packback. Packback is a student-centric ecommerce company which partners with major learning companies to combat the used book market through digital engagement.