A Framework for Pricing Services in the OCLC Cooperative

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A Framework for Pricing Services in the OCLC
Cooperative

• Phyllis B. Spies
• Vice President, Worldwide Library Services
• OCLC Members Council Meeting - February 2003

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Objectives of Presentation

• Explain the framework for OCLC pricing
• Describe longstanding practices
• Identify emerging issues that will require
  changes in OCLC pricing practices

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OCLC Pricing Philosophy Should Reflect the
Principles of Membership of the OCLC
Collaborative

• Work together to achieve mutually beneficial
  goals and to optimize efficiencies
• Share collections, metadata, best practices, and
  expertise without expectations of parity
• Provide feedback to OCLC on products and services
  in order to improve their quality, reliability,
  usability, and cost benefit

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A new vision

• to be the leading global library cooperative,
  helping libraries serve people by providing
  economical access to knowledge through innovation
  and collaboration
• Requires new approaches to pricing

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Pricing is the mechanism for sharing the costs
of the cooperative
Value of the OCLC Cooperative
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Factors that Affect OCLC Pricing Strategies
Total Costs of the OCLC Cooperative
Inflation Rate

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Alternative Service Providers

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OCLC Price Structure and Levels
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Incentives to Contribute to the Cooperative
OCLC Corporate Metrics


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OCLC Mission Not-For-Profit Cooperative
Currency Exchange Rates
Library Budgets
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Common Pricing Philosophies in the Market

• Cost-plus - cost recovery/small contribution
  to equity
• Value-based - value/benefit-based
• Commodity - Alternative Service Provider (ASP)
  determined
• Monopolistic - what the market will bear

Overall OCLC pricing philosophy

• Cost-Plus total revenue covers all costs plus a
  2-4 contribution. The margin for each service
  varies significantly and some services operate at
  a loss.

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Pricing Realities as the Cooperative Grows

• Cost-plus pricing works great for
• Established products in stable library markets
  where costs do not vary significantly
• Products with limited or very defined
  alternatives
• Cost-plus pricing is limited for
• New Products and Services
• New Market Segments and Regions
• Library budget thresholds vary greatly
• Value is inconsistent across markets
• Multiple Alternative Service Providers
• Membership value is not clear

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Differential Pricing
Needed when purchasing power of library is weak
Value to Library
Membership benefits
Distribution Cost
Organization Costs
Price Range Below Total Cost
Library Budget
Product/Service Cost

• Membership costs
• Credits
• Research

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Market Penetration Pricing
Desired when you want to rapidly extend the reach
of the cooperative in new service areas
Library Budget
Value to Library
Membership benefits
Price Range Framed by ASP prices
ASP Price
ASP Price
Distribution Cost
ASP Price
Organization Costs
Product/Service Cost

• Membership costs
• Credits
• Research

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OCLC Pricing and Practice

• Longstanding practices
• Usage-based pricing for Cataloging and ILL
• Subscription-based pricing for Reference Services
• Consortia discounts for selected services
• Member discounts
• A mix of sale for resale end-user price
  model

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OCLC Pricing and Practice

• Emerging Practices/Issues
• Consistent application of member
  discounts/benefits
• Multi-service packages
• Subscription-based
• Segment differential pricing
• Library type
• Country
• Program

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Future OCLC Group Service Packages
Unlimited use for a flat annual fee with
multi-year contract option
Cataloging
netLibrary
Interlibrary loan
Group Catalog (Custom View of WorldCat)
QuestionPoint (24x7 reference)
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Questions Answers