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.