What is the best price for an ebook today? Will the answer be different tomorrow?
Guest blogger Elle Lothlorien and Joe Konrath discuss pricing strategies:
[Elle starts things off]
THE FROG PRINCE went live on Amazon in August 2010. I priced it at $2.99, not so much because I understood the nuances of the various pricing arguments bouncing around the indie-pub blogosphere at the time, but because I sincerely doubted that anyone would pay anything more. In fact, I was doubtful anyone would even pay $2.99.
That particular misgiving seemed spot-on; for the entire month of August, THE FROG PRINCE sold exactly 18 copies. The story was essentially the same for September when I sold 70 copies.
And then two things happened at about the same time.
The first revelation took place at the beginning of October. While skimming various Kindle reader forums, I ran across a thread on the topic of pricing. One reader wrote that she never bought a book that was $2.99 or less because it was sure to be self-published “indie crap” riddled with typos.
The second occurred on October 10th of last year when a reader posted a five-star review for THE FROG PRINCE, writing: “The book description was a little strange, inbred insanity and impotency and all but for $2.99 I figured I’d give it a try given the high ratings by the others. In the end I would have paid full price for this [emphasis mine].” Of course, the mercenary portion of my little author brain perked right up at those eleven words.
These two things got me to thinking a bit more about what my pricing was saying to potential readers of my novel. I thought I was conveying the message “Give this book a shot! At $2.99 what do you have to lose?” Instead, I think I had inadvertently turned my Amazon page into the equivalent of a dubious used-car lot, with blinking neon lights screaming “SALE, SALE SALE! EVERYTHING MUST GO!”
This got me to thinking about coffee. No, seriously.
Consider what Starbuck’s has done for coffee. I am not a coffee connoisseur, and I could probably count the number of times I’ve been in a Starbuck’s on one hand (let’s face it, I’m never going to say with any measure of confidence: “Yeah, I’d like an antibacterial ricin-berry latte with a squirt of methadone and a splash of yak milk.”).
But you don’t have to know coffee to understand how Starbuck’s took full advantage of the economic concept of “imputed value.” Strictly defined, imputed value is “the worth or value of a given asset that is not recorded or documented in existing historical records, although that value is considered to be inherent in the asset.”
. . . .
People may grumble about parting with their six dollars, but they’re unlikely to grumble about the coffee. Why? Because at six dollars, customers assume they’re getting one high-class cup o’ joe. At six dollars, they want it to taste good. And if it doesn’t? Well, they’re more likely to convince themselves that it does. After all, who spends six dollars on something that tastes like crap? Throw in the peer pressure of “everyone else seems to like their six dollar cup of crappy coffee just fine,” and you have an impressive marketing strategy on your hands.
Starbuck’s entire business model is built on the concept of imputed value. Should indie authors be doing the same?
Consider this: In mid-October I raised the price of THE FROG PRINCE to $3.99. I immediately saw a jump in sales. And when I say immediate, I mean overnight. Within a few days the book had leap-frogged for the first time onto two Amazon Top 100 lists. And even though half of the month had already passed, I sold 158 copies for the month of October.
. . . .
In June I was feeling confident enough to experiment with pricing a little more. Halfway through the month I lowered the price to $2.99 and then to $0.99. Did I sell more books? Yes, I did. My June total was 1,024 books sold. However–and this is an important “however”–I lost money. As you may be aware, Amazon royalties are 70% for the author at books priced $2.99 and up. Anything priced less than $2.99 and the author receives only 35%.
Now, you could argue that more books sold will create a larger pool for the “word of mouth” that you hope will spread the news of your great read. And for authors with a large back list–those who are able to put out many titles simultaneously–that strategy is certainly one worth taking a look at because they have the advantage of volume. For authors with only one book (and who are also balancing the dreaded Day Job), pricing at $0.99 may be giving the impression that your work has no value.
Something else intriguing that I noticed when I lowered the price on FROG PRINCE to $0.99 was the way it affected the reviews and refunds. Up until that point, about two percent of customers who purchased THE FROG PRINCE returned the book for a refund. One, two, or three-star reviews were very uncommon. When I dropped the price, the refund rate went to almost zero, and the number of negative reviews (between one and three stars) went up.
. . . .
[Joe's comments]
Pricing is driving me a little crazy, for several reasons.
I’ve also come to the conclusion, based on my own research and that of my peers’, that ebooks can make more money at $3.99 or $4.99 than at $2.99. So at the beginning of this month, I raised prices on Kindle six of my titles, going as high as $4.49.
But I ran into a snag. Because the prices had not gone into effect on Smashwords, Amazon didn’t raise my prices. They simply stated my new price then discounted them back to the original price. I don’t know which price I’m earning royalties on, the higher one or the discount, but I’m guessing it is the discount.
Then contrast that with STIRRED. Last Sunday, Stirred was the Kindle Daily Deal, and the price was lowered to 99 cents and hit #1. STIRRED sold more ebooks in one day than TIMECASTER (published by Berkely) has sold in both ebook and paperback since June.
So what’s more important, units sold or money in the bank?
I’d say money.
If I sold 10,000 copies of an ebook at 99 cents and a 35% royalty rate, that earns me $3500.
But I can sell 3000 copies of an ebook at $2.99 and a 70% royalty rate, and earn $6000.
Or I can sell 2500 copies at $3.99 and 70%, and earn $7000.
It really seems like higher prices is the way to go.
“But Joe,” you’re probably saying, “if I raise my prices then my sales rank will get higher due to fewer sales, and I may drop off bestseller lists, making me harder to find.”
I dunno. Maybe you won’t drop off the bestseller lists. Maybe, like Elle, it will help you get on some bestseller lists.
. . . .
I say: Experiment with raising your prices. Unless you’ve got a runaway bestseller at 99 cents (or even if you do), chances are you’ll make more money at a higher price. I’m not saying gouge the reader and charge $12.99, but $3.99 or $4.99 seems reasonable.
Link to the rest at A Newbie’s Guide to Publishing
There’s a lot more from Elle about pricing and sales plus some interesting comments.
Some of you who have followed Joe for awhile will recognize an evolution in his ebook pricing theory.
Passive Guy suggests that the market is becoming more complex because it’s made up of a larger group of people who have owned Kindles for a long time.
Many newbie Kindle owners tend to go crazy over 99 cent books, buy a bunch, and discover, while some may be good, a lot are really terrible. This makes price into an imperfect signal of product quality.
This is a new idea for the new Kindle owner because it doesn’t happen in most physical bookstores most of the time. The only example PG can think of is clearance tables, which send a well-recognized signal that you’ll have to do some hunting to find something that’s much good.
The discussion and comments suggest that $2.99 may also send a quality signal because that’s the minimum price for 70% royalties with Amazon.
The pricing signals are about to become all mixed-up again because a bazillion people will receive lower-priced Kindles, Kindle Fires and Nooks this Christmas, so part of the market will be going through the Yippee-99-cent-books! phase beginning on December 25.
One more thing to consider is the audience for your books. Teen-age boys may require different pricing than fortyish women.
Indie authors will have to surf the pricing waves as they roll by because this isn’t going to settle down for awhile. A pricing strategy that seemed to be perfect in April, 2011, doesn’t work so well in November, 2011.
PG will keep his eye open for good pricing essays and, as always, appreciates tips on stories that visitors to The Passive Voice will like.
The problem with most pricing strategies is that they take their signal from big retail, which uses the commodities model. But in retail, the commodity isn’t the item being sold, but rather the shelf/floor space it takes.
But books are not commodities — not each identical with very similar appeal — but rather artisanal goods. (I did a post on that a while back http://daringnovelist.blogspot.com/2011/01/books-are-not-commodities-theyre.html )
I think the picture will continue to be complicated, because the audience is complicated. Books have always been available at multiple prices: new hard back, new paper, used hard back, used paper, discount, library, dollar a bag rummage sales, free….
Those different prices hit different audiences. And the high price of new paper books is supported by the after market. But ebooks don’t have an after market so then what?
Well, I suspect variable pricing will be the future. It would be nice if Amazon would enable KDP publishers to set a firm “list” price, and then offer discounts. But even as it is, I suspect that everybody will be offering a book at a higher price, and then doing short term sales at lower prices. OR… some will use “windowing” where they release a book at a premium price, and then drop the price when it because backlist.
Me, I’m experimenting with various prices. My 99 cent sale did very little for me, so tomorrow I’ll be offering my mystery novels at the price closer to what I see on commercial mysteries, 6.99. (That price is already up on B&N, and I’ve seen a tiny spike in sales.)
There will be a massive influx of brand new ebook readers in the next few years and they may still think in terms of how “big” a book is.
Ebook listings don’t show a page count because it varies from one ereader to the next. File size will be little more than greek to the average consumer. The only way left for a consumer to gauge the value for their money (in their minds) will be word count.
I could easily see retailers adopting word count into the ebook details as a convenience to the consumer. This hasn’t had to be done yet. But if enough consumers complain about being ripped off by a $5.99 price for 30,000 words vs. 100,000 words for the same price, the retailers will do it…or something like it.
Smashwords lists approximate word-count on each book (or short story)’s web page. I think it’s more useful than Amazon’s “this is how many K of data” entry.
I like the size/pricing argument, myself. I sell my short stories for .99 cents, and I put the word count (and approximate page count) right there in the product description.
So far, that’s working — one of my short stories has been on Amazon’s Historical Romance bestseller list for a couple weeks.
I am *just* launching my first self-pubbed novel, this week. (yikes!) I’ve planned for a while to price it at $3.99, which ‘feels’ right to me. My husband, however, suggested I put it at .99 cents for the first week, to see if that will help the book catch hold, with a clear notice on the product description that the price will go up to ‘normal’ on Dec. 19th.
The book went live on Amazon yesterday, and is still loading up at B&N and the Smashwords channels, so I have no data at this point – (ok, one sale on Amazon so far). BUT I’ll gladly report back later as to whether this was a successful strategy or not.
I don’t notice that the 99 cent price point is an attractive incentive that boost sales. The lower the price the worse the reviews and the higher the returns is my experience of it. It’s too bargain basement and it taints perceived value of the work.
I do have a book for free right now which will not stay free. The other is a novella that I hope Amazon gets around to pricing at $0 and I’m fine with that always being free as a loss-leader to books in the same family.
I think Elle is really onto something when she says that at $5.99 people really want to like whatever they bought.
Long time Kindle user here, and even longer time reader. I am 56 and have been buying books since my sole income was the allowance I got from my parents. (I can still remember that revolving rack in a dark corner of our local pharmacy.)
About six months ago I accepted the idea that the ebook is replacing the mass market version of books, intellectually if not emotionally. Until three years ago, I bought most books in MM versions. There was a handful (less than five) of writers where I would buy hardcover or trade. For others, I would place a hold at the library, then buy MM when it came out a year later.
Dean Wesley writes that publishers have a produce market approach to selling books: if it isn’t bought immediately it will go bad. As a long time book buyer, I still have that mental model. (There was a four book series published in the early nineties where I missed book 3 when they were originally published. I hunted book 3 for years, and finally found it at the 1999 World SF Con in Melbourne, Australia on a used book dealer’s table, half a world away from where I live. I held it for five minutes before I believed it was in my hand.) To me, Amazon meant never missing out on a book I wanted to read again.
I’ve recently realized that I don’t have to buy until I am ready to read. In addition to my forthcoming books spreadsheet, I now have a list of e-books to be read eventually as well as writers to check out. As far as prices go, I am happy to buy when the book is less than the MM price, resigned when it equals the MM price, and unlikely to buy at more than MM price. I think novellas should be priced at $3, and novels should be $5 to $6. I am occasionally cranky when I buy a novel and notice the bar on the kindle index doesn’t go as far across the screen as the novel below it. I am unlikely to buy new-to-me authors for MM price unless I have read the first couple of chapters and really, really like the chapters.
Barbara:
I’ve noticed that FREE works very well if you choose the right book. Any book gets a little boost for itself from it. And some books will do good for a series.
However, I discovered something interesting when I started collecting the data out of the “Prior Six Weeks Royalties” and keeping them. One of my books, no matter how well or poorly it was selling itself, helps all of my other books slightly when it is free. You can’t see the correlation unless you look at long term _weekly_ stats.
I don’t have good data to be sure if this is so at other vendors than Amazon, though.
Unfortunately, I can’t seem to get Amazon to make it free again.
Back in July, Zoe Winters wrote, and DWS linked to, a great piece about why $.99 is a bad price for ebooks. I can’t find it on her site anymore. Not sure if she took it down or what. She made a few great points, but I thought she missed one important thing, so I decided to opine myself ( http://michaelkingswood.com/2011/07/27/the-real-problem-with-99-ebooks/ ). Not to blow my own horn or anything, but maybe you guys will find it interesting.
Here’s the link to Dean’s post about Zoe’s post. She explained some of her thinking in the comments. And of course, Dean always has good things to say.
http://www.deanwesleysmith.com/?p=5002
Let’s put the pricing strategy in this perspective. An indie author, just like any business has two choices: gain market share or maximize profit. One of the easiest ways to gain market share is to compete on price, lowest possible price. Amazon does this. In case of low price, not many people will complain about the quality of the product (quality of writing.) Maximize the profit, means increase the price, and indirectly it will affect the volume of units sold, they will go down. However, the quality of the product (writing) will play a very large role. Customers will not mind paying a higher price if the quality is there, but if it is not, they will not hesitate to return the product (book) and give it a bad review.
So, market share -> low price, and perhaps the risk of being categorized as low quality. Profit -> higher price, but the quality better be there, or there will be literary “hell” to pay.
Theory aside, for my Kindle edition of “Arboregal, the Lorn Tree” I took the approach of higher price, except in the spirit of the holiday I lowered the price to $0.99. Come January 1, I’ll raise the price back to $3.99. The color enhanced edition of the same book (higher quality) I left the price at $4.99 even during the holidays.
That’s assuming that a lower price actually does gain market share for an indie author.
If you want to use it as a part of of a larger plan, yes, it can work, but that can make it the _hardest_ way to gain market share, because it generally only works properly when it piggy backs on the really hardest part of the marketing slog.
But I think the big thing is, right now, that the more people use a particular method to get attention, the less it works.
I don’t know. I read Joe’s blog and then checked the Top 100. It seemed there were more .99 than not, esp #20 and up.
I’m sticking w it for now. I don’t really market, so it’s been good to me so far. It’s those newbies at Christmas…I remember when I got mine, I scooped up as many books as I could afford-most for .99.
We’ll see after the holidays, I guess.
The most recurrent comment I see in positive reviews of 99 cent novels is “not bad for 99 cents.”
I don’t want that as my epitaph, but I suspect it’s a pretty good strategy for building a following, if you’ve got other stuff to show off too.
My thoughts on pricing are here: http://davidgaughran.wordpress.com/pricing/
I take the view that there is no such thing as a right or wrong price per se, it all depends on what you are trying to achieve. For example, if your goals are to maximize revenue, you may want to employ a different pricing strategy than someone who is trying to maximize readership.
[...] those of you who want more information about ebook pricing, I can recommend What is the Best Price for E-Books? on The Passive Voice. I learn something from every post on this excellent and entertaining blog; [...]