The Great E-book Pricing Question Marketing Publishing

soulsaleThere’s more guff written about pricing than almost anything else, resulting in an extremely confusing situation for new self-publishers. I often see them pricing too low or too high, and the decision is rarely made the right way, i.e. ascertaining their goals and pricing accordingly.

Price/value confusion

Before we get to the nuts-and-bolts, it’s time to slay a zombie meme. Much of the noise on this issue springs from conflating two concepts, namely price and value.

Authors often say something like, “My book is worth more than a coffee.” Or publishers might say, “A movie costs $10 and provides two hours of entertainment. Novels provide several times that and should cost more than $9.99.”

Price and value are two different things. From Wikipedia:

Economic value is not the same as market price. If a consumer is willing to buy a good, it implies that the customer places a higher value on the good than the market price.

The price is something we, as self-publishers, attach to the product. The value is the worth the consumer places on it (not the author or publisher). In simple terms, unless your price is lower than the value a reader places on your book, they won’t purchase.

Marketing isn’t simply about reaching consumers but also about convincing them to place a value on the product higher than the price-tag. The higher the price, the harder that job will be.

In other words, it’s a lot easier to sell a book at $2.99 than $9.99.

Doesn’t price influence value?

Do bargain basement prices indicate low quality? Will a 99c price tag actually reduce the value a reader places on a book? That’s a harder question to answer. I think this is true in some cases for some readers, but I also think it’s massively overstated.

It’s hard to sell a book at any price if you have a crappy cover, insipid blurb, wonky formatting, a flaccid sample and tons of terrible reviews (which are all cues to the reader about the value of the product).

But if you have a striking, professional cover, an enticing blurb, clean formatting, a sample which grabs readers right away and lots of great reviews, then you can avoid any negative association with a lower price. Or, at least, the number of readers you will gain through lower prices will greatly exceed any you might lose through such negative associations.

Goal-based pricing: maximizing income

It’s incredibly important to remove emotion from pricing and I hope looking at the issue through the prism of price and value helps. Once you have dodged the price = value myth, the next step is to determine your goals.

If your aim is to maximize income, you should set a price which aims to do that. And you will only discover what the appropriate price point is through experimentation (it varies from book-to-book and genre-to-genre). For example, romance tends to have lower prices than historical fiction.

Most self-publishers tend to price full-length work at $2.99 or above, because this is the floor at which Amazon pays 70% royalties. Below that, Amazon only pays 35%. Self-publishers also like to price at $4.99 or below, with many feeling that keeping the price below $5 keeps the purchase in impulse buy territory for many readers. The data from Smashwords indicates that pricing between $2.99 and $4.99 is a good rule-of-thumb for maximizing income.

Some advocate higher prices again but I haven’t seen much data to support this view. I know one self-publisher selling huge amounts at $9.99 a pop, but he’s notable because this is quite rare (and he writes in a very specific niche). You will need to try out a few different price points to find your own sweet spot. Personally, I’ve found $4.99 best for full-length books. I’ve tried everything from 99c to $7.99, and $4.99 seems to maximize income.

I like this price point for a bunch of reasons. I make almost $3.50 per sale but it’s still below the $5 threshold for readers. And it leaves me plenty of room for discounting when I run a promotion.

But maximizing income is just one potential goal.

Goal-based pricing: building audience

You might make more money at $3.99 or $4.99, but you will sell fewer copies than at 99c. If your goal is to build audience, then lower prices make much more sense. But when is it a good time to build audience instead of maximizing income?

Successful self-publishers often price the first book of a series at 99c to increase the numbers of readers trying that first book. They make less on Book #1 but easily make that up when the reader goes on to Book #2 and Book #3. And the longer the series is, the greater the upside on a strategy like this.

In fact, this strategy is so successful that many series writers make the first book free. While you will lose all income on that title, it tends to massively increase the number of readers going on to purchase the rest of the series. This approach also benefits from being one of the few ways to gain traction on Barnes & Noble, Apple and Kobo.

It doesn’t work for everyone though and, as with pricing in general, you should experiment to see which brings best results. If you do experiment with free in this way, don’t judge it after a week. Give it a couple of months and make sure to get some ads pointing at that freebie – that’s when you can really see the effectiveness.

Now I’ll deal with some objections…

Shouldn’t e-books be priced more like print books?

No. You don’t own them, you only license them. And you can’t resell or donate them. Aside from that, it’s a digital product! There’s no paper, printing, typesetting, binding, shipping, storing, or returns. Yes, ebooks cost money to produce, but once you have covered your costs you can sell a billion more copies without incurring additional cost.

Print has all sorts of ongoing costs. When a book fails to sell as expected, publishers have to deal with returns. Even when a book is a runaway smash, publishers must go back to the printers and shell out for another round of printing, shipping and storing.

Ebooks are cheap to make. Readers shouldn’t be forced to pay for the inefficiencies of publishers, or subsidize print editions.

Doesn’t all this cheap pricing devalue books?

Well, no. Price and value are two different things. If you aren’t convinced by the foregoing, consider this: libraries have been providing cheap or free access to books for generations. Second-hand bookstores have been in existence for as long as regular bookstores. And all of the classics are available either as free e-books or extremely cheap paperbacks.

None of these long-standing phenomena have done anything to devalue books in readers’ minds. If anything it has done the opposite. And besides, shouldn’t we be in favor of making reading cheap? Don’t we want more people reading books?

But… but…  what about the industry? Aren’t we training readers to only demand lower prices?

Screw the industry! If publishers can’t compete at our price points, that’s their problem. And anyway, rather than inspiring a “race to the bottom” and “destroying the industry” author Ed Robertson argues convincingly that self-publishers are saving it with cheaper pricing – pricing he discovered is perfectly in line with paperback pricing from the 1930s to the 1970s until the industry began consolidating into today’s mega-sized publishers.

This book took three years to write and it’s worth more than… [snip]

Okay. Maybe looking at it through the prism of price/value isn’t helping. Let me try something else. Instead of focusing on the price you’re selling at, focus on the income the book generates. How much do you make each month at $9.99 versus $2.99, $3.99, or $4.99?

Decide your goals. Experiment with different prices. Run the numbers.

* * *

I’m thinking about this topic today as I work on the 2nd edition of Let’s Get Digital, which I’m aiming to have out in a couple of months. I’m working on a way to make it free to all original purchasers – still some logistics with the retailers to sort out.

Before Digital 2, I’ll publish a new novel called Mercenary. It’s another historical adventure, this time set in 1900s New Orleans and Honduras and I’m shooting for a May release. More details on both soon but if you want to get an automatic email when either is released, sign up to my mailing list here.

Happy Monday! (It’s Monday, right?)