Writing in the Digital Age: Value, Worth, and the Price of a Cuppa Joe

This week I’ve been listening to the debate on pricing our ebooks. I still don’t have any firm conclusions (I’m not sure a firm conclusion is possible when it comes to digital issues). It was a hot topic at the Digital Book World conference in NYC, judging by some of the Tweets.

Price is one more thing that the digital age turned on its head in publishing. Used to be that the price was printed right there on the cover, or inside flap, nice and big alongside the ISBN number and bar code. Bar code? Ah, who knew that was a harbinger of the digitalization to come. Not me. I ignored it, unless I happened to have a job that required me to scan it in. Who knew that in a decade or so we’d be buying digital items for instant delivery right from our computers (count for me last month was 15 books and two pieces of software…it could be argued that it has become too easy, I suppose).

I took a business course last year. Twelve weeks of intensive information and presentations by people who had successfully started and grown small businesses, and those who support them like banks, and accountants, and price experts. Yes. There really are price experts, and they come with charts that make your head spin if you’re not a numbers person.

Our price expert speaker was an economics professor who has an office where he actually helps everyone from farmers to high tech firms set a price for their product or service. Other than the ubiquitous advice that ending on a $X.99 price (just shy of that penny that ticks up the dollar column) is a good thing for most products, his advice was not one size-fits all. It was one size fits one product. And then he started pulling out the charts and graphs and equations. I took some aspirin and tried hard to listen. I may have had a donut hole or two along with my coffee to help my understanding along, as well.

First, because of the nature of the business make up in our class, he dispensed with product pricing. If you have a widget, your bottom price is easier to determine. You can’t go lower than what it costs you to make it, store it, and distribute it, or you lose money. The question for widget makers becomes: “How much over cost can I charge to improve my profit margin?” If you guessed there was a chart for that, you win a prize. The prize is I’m not going to show you that chart (it looks like a triangle, though, for the curious).

Because ebooks aren’t products, they’re a service. And services are priced differently. Ask anyone who ever babysat in high school. If you charged more than the babysitter down the street, you’d get called *after* she turned down a job. Unless she showed up with a purple mohawk…then you’d get a call asking you to do the job for less than your requested fee. If you refused, you’d get the job, once or twice, until the family found a new babysitter that charged less…or stopped being afraid of purple mohawks.

Pricing services is much harder than pricing widgets. And that’s what the digital age has done to publishing. A paper book still has a price printed on it. An ebook can change price once or twice a day (which is not a good idea, as that practice is sure to annoy readers).

I’m not going to discuss non-fiction or textbook pricing, because they have a usefulness factor that popular literature (i.e. novels) does not. Readers do not pick up the latest John Grisham to learn something, or to make themselves better. They pick up a Grisham in order to step away from the grind of real life and enjoy themselves for a couple of hours. Entertainment.

This is why you often hear people  who are trying to set a price for an ebook discuss what a movie costs in relation to their price. The argument tends to go: “But if people are willing to plunk down $10 to spend two hours at the latest movie, they shouldn’t object to spending that for several hours of enjoyment with my characters.” And who can argue? Turns out, lots of people can and do. If you wants charts and graphs, Evil Genius did a good job here. He argues what the pricing expert in my classes argue: that there is a sweet spot of pricing where you sell more and your profit is greater than if you price higher and sell fewer ebooks.

Writers like Joe Konrath have talked about the sweet spot of $2.99 for about quite a while. I used that information to price my backlist titles at $2.99 when I first began to upload them as ebooks. Indie author phenomenon John Locke actually touted the .99 cents price point as the way he became a member of the Kindle Million Seller Club, but at 35% royalty rate versus 70% royalty rate for books priced $2.99 – $9.99 at Amazon, it was clear where Amazon fell on the sweet spot range. Since Amazon is a data hound, I thought it was a good bet to go with them for my bottom price (although I have no problem using 99 cents as a promotional price, I do think my novel is worth more).

Which brings us back to the difference between value, worth, and price. Price is what you charge (duh). Value is what you believe is the monetary equivalent of what you as a writer provide. Worth is what the reader is willing to pay for it. To set the price, you need to find the sweet spot between what you think your value as a writer is, and what the reader thinks your books are worth. This isn’t easy (and worse, thanks to the growing adoption of ereaders, there are many more readers who are looking for a deal on writers they aren’t familiar with). The traditional publishers are pricing as if they are still selling widgets (refusing to believe that readers weight value higher for widgets–actual paper books–than for services–ebooks). Because of that, they link the price of many ebooks to a hardcover. I’m sure this works fairly well for the latest Hot Author. But from what I’m seeing, it does not work well for Mid List Millie. Those authors who are bringing out their own backlists, or original fiction, are pricing somewhere around $2.99-$5.99.

Which leads to an unease for authors who are asking if the novel they slaved over is really worth less than a venti Caramel Macchiatto from Starbucks. To which I reply:

Pricing Sweet Spot = Worth/Value

To put that in words for the math challenged like me? When you find the right price for your book (based on awards, reviews, genre, storytelling skill, etc. and excluding limited promotional pricing), you will reap the full value of your work in the long tail sales numbers. While one size does not fit all, that Sweet Spot Price is likely to fall somewhere between $2.99 – $9.99 (based on the smoke signals Amazon is sending out). For now.

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Writing in the Digital Age: Value, Worth, and the Price of a Cuppa Joe — 9 Comments

  1. There’s a whole education component that ebook writers have to keep on trotting up for the readers. After all, there are no paper and shipping costs, so the ebook should be just about FREE, right? Throw a quarter at the author and you’re done!
    We have to keep on mentioning the costs of copyediting, proofing, cover and page design, and the titanic labor of preparing a document for the various e formats. These expenses are also incurred for a paper book, of course, but they are obscured by the cost of paper and shipping.

  2. Good point, Brenda. Services have underlying costs to them, too. But they don’t work the same as goods (for a good you incur the cost for each widget – for services you incur underlying costs for providing the service that can be spread out over the lifetime of the service). It can be confusing for everyone, but only the writer really needs to understand when setting the price.

  3. The whole point, though, is that editing and cover art and blah-blah-blah are sunk costs for an e-book; once you publish, they’re spent and gone. From publication on your only consideration should be making as much money as possible, and if that means moving more units at a lower price then that’s what it means. If too many e-book readers don’t get that editing and cover art and such still have to be paid for with an e-book, too many NY publishers (and writers used to that system) don’t get that there’s ZERO incremental cost for each unit of an e-book produced. Pricing your books as though you absolutely have to make up all your production costs in the first thousand sales just might ensure that you never make more than a thousand sales, and might not even hit that thousand.

    In my POV, and plenty of othres’ as well, even $9.99 is a ridiculously high price for a basic text e-book. I won’t pay it, period, ever. Unfortunately, not only do most of the NY publishers not get this, but some of the small presses are raising their prices that high; they think that calling themselves “boutique” presses will convince readers to pay ten bucks for what’s basically a text file. Some will, but these publishers (and the authors who’ve been caught up in their hype) are leaving a lot of money on the table. You can’t explain that to them, though. :/

    BTW, people who’ve been self-pubbing for a while, long enough to have learned how to do the formatting and have a system, report that the titanic labor of formatting a novel for the various file formats takes two or three hours, max. One writer I know says he has it down to about an hour. As with most other skills, you get faster with practice.

    Angie

  4. But how do you determine what was the cost of producing a widget? There’s the price of the materials, but then there’s the cost of the factory, the utilities, the wage bill — some of which will vary according to the number of widgets, but not in a simple matter, and some of which are fixed. that’s why lowering the price can sometimes increase your profits, if you sell enough to cover the fixed overhead.

  5. Well, the short answer is, “There’s an app for that.” But really, it is a bit of a black art, using a lot of math, a big dash of experience, some luck and some watching to see what your customers do.
    But you always have to remember that you can’t sell below your cost (whatever and however you calculate it) and that the customer will only pay for the perceived value, which is why advertising works to boost both prices and sales.

  6. I am one of those customers out there. I’ve been purchasing and reading sci-fi paperbacks since I was in jr high in the ’60s. I spend a great deal of my spare time reading and I used to purchase one or two books a week. I have several thousands of books on shelves and in boxes. There was always dozens of books in my car.
    Then I got interested in eBooks. This started when I converted all my CDs to MP3s and got an iPod. I then applied this paradigm to my movie collection and my book collection. I turned all my DVDs into MP4s and now I’m turning all my books into PDFs. I’m getting rid of all the bulk in my house/life. Its amazing that the 5,000 books that fill my house will fit into a chip the size of my thumbnail and still leave room for my entire music collection. Sorry, I’m not one of those romatics that has to have paper pages. Its the content that creates the images and universes in my mind.
    My favorite new toy is a B&N Nook Color, although it now runs full Android OS instead of the crippled B&N OS.
    So I am now in the market for eBooks and it pains me to have to pay big money to replace books I already own. I absolutely refuse to pay $8.99 to $14.99 to replace a paperback that cost me $1.50 in 1970 or $4.99 in 1990. I’d rather spend a week scanning/OCRing it into my Mac. But I was delighted to find Book View Cafe, with a pile of books by several of my favorite authors. And while I won’t pay $9-$15 for an eBook, I WILL pay $2-$6.
    P.S. Sherwood Smith/Dave Trowbridge: I await on pins and needles for the next three volumes of Exordium to appear in Book View Cafe!!!! I’ve already purchased the first two.