Exxxxxactly. Since I was often referred to as the "Dealer/Pusher" of books, think of the 4.99 book as the gateway drug! It's whole point is to entice you to buy not only the first, and then the most recent book in a series, but also everything in between AND the author's OTHER books/series. Sure, for a few months these PBs are being sold at a slight loss or break-even - this happens in several industries all over. But how much more will you make if you get the loyalty factor involved? I myself have a whole stack of books that were released at the 2.99-4.99 price at home - and I bought these using my 33% waldens discount (or 40% if it was the right time of year). Every dollar I same myself is a dollar I can use to buy another book later. That's the bookstore-sales mentality.
Now, with regards to covers = sales...heck yeah they help!!!! Cover artists get Hugo Awards too!!! Why? Because a great cover contributes directly to sales. Whether it's the consistancy of art across a series, or the shear quality of the art. How do you think Elantris sold copies? Apart from cool guys who had book stores like me (hehehe), that beautiful cover drew tons of people. People in general (i know, a blanket statement - there are alwayse exceptions) always have judged books by the cover. Thats why there are good artisits (see Brandon'd HB books), and thats why there are cover quotes (see Naomi Novik). I made a point of asking people what interested them in the book they were buying. Now, assuming I hadnt pimped a bok to them, it was almost always because the cover grabbed them FIRST, and then the premise sounded good. Bookstores take books with great covers and face them out so browsers pick them up. They do studies on this. They run tests on these things.
Dont get me wrong, recommendations go a LONG way. But, something has to grab people to start that chain of recommendations moving.
As for B&N's card - someone spent $25 to get you that card. Until you've spent $250 on books, youve lost money on that deal. Thats why Borders/Waldens did away with the card.
As for books being sold better at different locations, a large majority of people go to CostCo/Sams/EvilMart first to get a deal. Loyal buyers go to and actual book store. Once again, a dollar saved is a dollar to spend on another book later. Also, unless a seller at a bookstore makes a good relationship with a customer, that customer usually has zero problems pulling up their anchor and going somewhere else. For example, many of my customers stopped shopping at my store after I left.
Lastly, people buy more books in bookstores when they are on sale, or have a coupon. Full-price sucks. Even a 10-15% discount will often convince a person to buy a more expensive book, or more books.
Ok, Im done for now.