[Editor’s note:This is the edited text of a presentation that Joe delivered at the 2012 SilverChair Colloquium on Friday the 13th in Charlottesville, VA. He wishes to thank the management of SilverChair for inviting him to participate in the conference and notes that, on that fateful day, a black cat did indeed cross his path.]

The topic here is publishing that is centered on the end-user. I wanted to name this presentation “From Me to You,” after the Beatles song, but I have used that title before for a blog post.So we are stuck with an ugly term like “user-centric.” But the term does convey an important meaning. By “user-centric,” we mean developing products and services with the end-user experience in mind, especially if part of that experience is the actual purchase of published materials. This is different from another direct-to-consumer (D2C) model where users are aggregated in order to package them as an audience and sell that audience to advertisers.

In our user-centric model, we look to the user for whom content is valuable in its own right and not merely to  serve the needs of advertisers.

For many publishers of academic and professional literature, focusing on the end-user is something of a dislocating thought process. A good part of the sales of professional publishers tend to be through intermediaries. For example, some portion, in some cases the largest portion, of professional publishing is sold to libraries. It’s hard to be user-focused when the library stands between you and the user. In other instances, you might reach the end-user through channel selling. For example, a book publisher might ship books to Baker & Taylor and not know where those books ultimately end up, whether in a library or in the office of an anesthesiologist. The common theme of all these methods of marketing publishing materials is that little is known about the people who actually read the works.

It wasn’t always this way. We can wax nostalgic for the glory days of society publishing when the principal market for journals and many books was the society’s own membership. This was a form of direct marketing, with access to materials being linked to membership benefits. While such relationships continue to this day, few societies fail to look beyond their own membership for paying customers. The astonishing growth of the research libraries in the years since Sputnik is a big part of this. Now, direct marketing shares the stage with various kinds of indirect marketing, and often direct marketing plays the smaller role.

The principal attribute of indirect or channel selling is that your customer is not your consumer. Your customer may be a library or a wholesaler or perhaps Amazon. Like good marketers everywhere, you know you have to satisfy that customer. So you put a lot of attention into things that these intermediaries like. For example, intermediaries have requirements for metadata that may differ from what you might create for end-users (and two intermediaries may have very different ideas about that metadata); intermediaries may insist that you include features that help them run their own operations even if those features are of no interest to end-users.  Bar codes are an example of this, as is the library requirement of making  publications measurable by the COUNTER standard. And while you are doing this, an end-user may stand up and ask:  Is “metadata” a singular or a plural?

It’s worth analyzing how much money a publisher spends satisfying the needs of intermediaries. That money has to come from somewhere, and in some instances it is taken from explorations into how to make the work more important to the end-user. Intermediaries also downplay publishers’ brands, which is intolerable. If you want to develop a direct relationship with an end-user, your brand is essential. It’s who you are; it’s how the user knows to come back to you for other publications. So in some cases, satisfying intermediaries can work against your interest in satisfying the end-user.

When you review the number of problems with indirect selling, you might begin to wonder why anyone does it at all.  Indirect selling continues to play a very large role in the publishing industry for the simple reason that intermediaries reduce transaction costs considerably, and the virtue of those reduced costs typically outweighs all the limitations (from the publisher’s point of view). A journal publisher seeks to sell products to libraries because it costs less than trying to market those products to the individual members of a university one at a time. A book publisher sells books through Amazon because whatever cut of the proceeds that Amazon takes (a cut that is getting larger and larger day by day), that amount is far less than what it would cost a publisher to attract all those customers, build an online orderiing system, and ship (or upload) books quickly and securely. That’s the trade-off: intermediaries provide a low cost of sale (reaching many end-users with a single sales call) at the price of asserting their own agenda and demanding to be compensated for the benefits they provide.

Sometimes, though, a disintermediation strategy is forced upon a publisher. Take the case of a publisher whose journal was just cancelled by a library. What are the publishers’ options? One is to do nothing. Another is to resort to selling individual articles on demand. While libraries like on-demand purchasing, for a publisher the fall-off in revenue from a subscription is very great. If all articles were sold on an on-demand basis, there would be no journals industry.

Such a publisher might seek to develop new ways to get access to the prospective users at that institution (all the while trying to get the library to reinstate its subscription). For example, the publisher might step up its campaign to enlarge its membership, thus providing the journal directly to individuals as a membership benefit. Or the publisher might seek to repackage the material in some way and to launch a direct-marketing program. A rental program (think of Udini or DeepDyve; I serve the latter as an advisor) is also a possibility, as it invites individuals to part with their own money to get access to the content they require. Some publishers will take an even bigger leap and flip their model entirely to author-pays open access.  Indeed, open access is the ultimate library bypass strategy. It remains a wonder to me that so many librarians support it.

Not all forms of D2C marketing involve disintermediation, however. You can only pursue disintermediation when there already is an intermediary in place. Some marketing practices begin with direct marketing, so no disintermediation is necessary. The publisher of such a work may later decide to work with institutional markets, but that is a reverse process from starting with institutions and then trying to add direct sales.

Whether a publisher is looking into a D2C model as an instance of disintermediation or as “pure” direct marketing, the reasons tend to be the same:

• Margin Improvement. Some publishers simply do not like sharing a slice of revenue with distributors and other intermediaries. Get rid of the intermediary, the thinking goes, and you make more money. I am myself skeptical about margin-enhancement in this context, as the cost of direct-marketing can easily outstrip the share given to the intermediary, but I have found over the years that when a publisher gets the idea into his or her head that stripping out the intermediary will lead to higher margins, there is no talking the publisher out of this.
• Control of marketing messages. Publishers collectively grind their teeth when they see how some third-parties represent their publications. I encourage everyone to read the user-submitted reviews on Amazon for a book that they have recently read. It’s not a question of whether the reviews are favorable or not; it’s often a problem of the reviewer having completely misunderstood the thesis of the book in question. A publisher that is a direct-marketer has greater control over the marketing of the work and the information that comprises it.
• Assertion of the brand. All intermediaries play down the publishers’ imprimaturs to some extent. This removes a critical signal of quality from the marketplace. For the publisher, it also makes it harder to introduce new products to that user base, as there is no track record to which to call the user’s attention.
• Collection of user data. The value of this is growing now that publishers are learning from companies like Google and Facebook how powerful the management of user data can be. User data can play a role in the crafting of new marketing plans and in the development of new products. In my view, this is the most important reason to pursue any kind of D2C strategy. If there is gold in direct marketing, you will find it in the data.
• It just feels right. When I have talked to publishers over the years, I have become aware that often the goal of direct marketing has an emotional appeal that does not easily translate into specific benefits. Some publishers simply don’t like the fact that someone has come between them and their users. These publishers want a more intimate relationship.  It’s easy to dismiss this — after all, we are all supposed to be rational economic agents — but in marketing, the irrational often makes a great deal of sense.

Whatever the reason a publisher seeks to become a D2C player, it’s a steep hill to climb. There is a great expense in calling attention to the product, which translates into a high cost of customer acquisition. That figure — the cost of bringing a new customer to the publisher’s service — is critical; it will become the key management metric. D2C publishers also have to deal with a set of customer expectations forged by user familiarity with bona fide consumer marketing services such as Amazon. Can you provide a technical platform as good as Amazon’s, comparable customer service, and outstanding fulfillment, whether for “p” or for “e”? This does not mean that a publisher should not attempt this; it means that resources have to be devoted to these programs and that there must be organizational patience until the right formula is discovered.

It should be noted as well that D2C strategies for academic and professional publishers require scale. The software platform requires considerable sophistication; policy issues are complicated (where do I stand on DRM?); and customer service can cost more than is received from a sale. Only the largest companies can provide all these things effectively, which means that many publishers will be seeking outside vendors. The challenges to implementation are not small, but many publishers will see it as worth the effort. After all, why should all the benefits of working with the Internet fall to those who stand between publishers and the people who actually read their material?