Let’s Talk Pricing

So over on FB a fellow author was essentially calling out trade publishers for how they price ebooks. And they’re not the only person who has ever done that. It happens on a fairly frequent basis that someone questions why trade publishers price ebooks so high.

Usually, the argument that’s made is that it doesn’t cost all that much to put out an ebook. There’s no paper or ink or printing process that needs to happen. So the marginal cost of an ebook is negligible.

But what those arguments all fail to account for is that people are willing to pay that much for those books. Lots of people. Right now The Midnight Line by Lee Child is $14.99 in ebook. It’s ranked number 2 in the Kindle US store. That means somewhere around six or seven thousand people were willing to pay that for that book today. And it’s a book that’ll be in the top of the charts for a while so that many people are going to be paying that much for that book each day for weeks.

What benefit is there to the publisher to drop that price? It won’t improve the book’s rank on Amazon. It’s already #2. Where else can it go?

Well, the argument goes, they’ll get more readers if they drop the price. Okay. True.

But they won’t make more money. And ultimately they may capture all of those readers. The problem with a lot of the “price lower” arguments are that they fail to account for long-term pricing strategies like price-pulsing

Let’s walk through some numbers to show you what I’m talking about.

First, we need a set of assumptions. For our fictitious book let’s assume that there are 12,250 people willing to buy this book. 5000 of those people will only buy the book if it’s available at 99 cents. 2500 will buy it for $2.99 or less. 1000 will buy it for $3.99 or less. Another 1000 will buy it for $4.99 or less. 750 each will buy it at $5.99 or $6.99 or less. 1,250 will buy it for $7.99 or less. 750 will pay $8.99 or less. 250 will pay $9.99 or less.

(I did this in Excel. It’s the chart on the left below. That third column is the cumulative number of customers who’d be willing to pay that price. So everyone would pay 99 cents, but only 250 would pay $9.99.)

Pricing Scenario

Let’s start with the ideal world scenario where we somehow manage to sell our book to every buyer at the maximum price they’re willing to pay. We capture the 99 centers at their price, but also get the $9.99 buyers at their price.

In that scenario, we sell 12,250 copies of the book and we gross $42,127.50. But you have to account for the Amazon cut, so we net $27,756.75.

That’s the ideal scenario. It doesn’t happen, because we have to list our book for sale at one price and even if we change prices over time (as we’ll discuss in a minute) there’s no way to ensure that the customers who are willing to spend $9.99 only see our book when it’s at that price. So in reality we’ll end up with a customer who would’ve paid $9.99 paying $4.99 or even 99 cents depending on when they see the book.

Now, a lot of times the argument is made that you should maximum your sales by pricing low. So 99 cents. That captures the most possible customers. You get all 12,250 customers at that price, no doubts about it. So what do you earn with that approach? You gross $12,127.50, but you net $4,244.63. Same number of sales. But because you priced for the lowest-paying customer, you earn $23,500 less than the ideal scenario.

Of course, as we mentioned, the ideal scenario isn’t likely anyway. So let’s compare the 99 cent approach to another alternative, pricing at $4.99. That captures anyone willing to pay $4.99 to $9.99 but loses anyone who would only pay less than $4.99.  Instead of 12,250 sales you only get 3,750. But those 3,750 gross you $18,712.50 and net you $13,098.75. So you lose 70% of your potential customers but you make three times as much.

Now, what about the final option? Price-pulsing. You list at $4.99, so you’re giving away some potential income there, and then, after you’ve captured those buyers, you drop the price to 99 cents to capture the bargain hunters. Under this approach you sell all 12,250 copies. You do worse than the ideal scenario (because your highest price paid is $4.99) but better than the other two scenarios (because you’re capturing some of the higher-paying market by initially pricing at $4.99 as well as the lower-paying market by dropping the price to 99 cents). In this approach, you gross $27,127.50 and you net $16,044.

So, really, price pulsing is the best approach if you’re willing to be patient about when you capture your buyers.

And for trade publishers with established authors who aren’t struggling for visibility, pricing really high initially and then slowly lowering prices over time is the most profit-maximizing decision. That’s the approach that’s most likely to allow them to stay in business long-term and pay all those salaries and overhead costs and find new undiscovered authors who aren’t established and cant command those prices.

Does that mean self-publishers should price that high? No. There are other factors at play when you’re not Lee Child. Key among those Amazon’s algos that reward early success and seem to have a support level that means that ranking high early means better long-term performance. But it does mean that if you’ve chosen to always price at 99 cents that you’re leaving a lot of money on the table.

 

AMS and Also a Vellum Shoutout

First, let’s talk Vellum real quick. I switched all my files over to Vellum this summer. Me being me I just sort of stumbled my way through how to use it and had to learn a lot on my own through trial and error that wasn’t covered in any of the FAQs. (I was doing a lot of non-fiction formatting.)

But turns out there’s now a pretty good guide to the basics of Vellum available. (You know where? Can you guess? You got it. In the NaNo StoryBundle. After that’s gone if you stumble across this post and want it, look for The Author’s Guide to Vellum by Chuck Heintzelman.)

The guides includes a few of the workarounds I had figured out, like how to have my Also By listing before my title page, and using Vellum Styles before you import from Word. So if you’re new to Vellum or shaky on using it, check it out. It’s a good resource.

(On a side note: After I did it, I honestly wasn’t entirely sure it was worth it for me to have moved all my files over to Vellum. It took a lot of time, I didn’t see any drastic change in sales, and it added an extra step every time I wanted to make a change to a file. But moving to Vellum did make all of my non-fiction titles eligible for Overdrive, which has brought me money, and it also made it incredibly easy for me to participate in the StoryBundle. So for those reasons alone it ended up being worth it. But on a list of things to do, buy Vellum and make all your files pretty probably isn’t where I’d recommend you start.)

Now. On to AMS.

I am not happy with Amazon at the moment.

The other day, I noticed something a little odd when I went to look up one of my romance titles. The first entry I saw in my search results was a Sponsored Product ad for the book followed by the normal, organic search result for the same book.

I almost clicked on the ad and I know better.

So here’s Amazon, taking anyone who comes looking for my book in particular, and charging me money for it by having them click on my ad instead of returning an organic search result first. How tacky is that?

Here’s another example that’s even worse. I have a book under the name Cassie Leigh that is called Puppy Parenting in an Apartment. It’s not a big seller, but I can run AMS on it and generate a few sales here or there. This is what I see when I go to Amazon and search for it:

AMS sponsored ad

The ONLY result is my ad. My actual book with that actual title isn’t shown at all. And, because someone asked, I don’t have the book’s title in my keywords for that ad. So Amazon knows damned well what they’re doing and could actually display my book in their search results, but they’re not.

They’re trying to suck every last penny they can out of their authors instead.

Does this mean abandon AMS?

No. No more than any of the crap they pull means stop selling on Amazon. They’re too damned big and dominate the market too much for it to be feasible for most people to not sell their books on Amazon. (Which is why they can pull things like this…)

Fact is, AMS have become too much of a driver of traffic on Amazon US to ignore without likely taking a hit to your income.

What this tells me is that Amazon is slowly tightening the noose and that authors are going to have to spend even more money to get every single sale on their platform.

I’m grateful to AMS. They let me move from low three figures a month to low four figures a month. But I’m not putting all my eggs in that basket and neither should you.  I have some list-based promos I’m running this month as well as a Kobo promo and I’m playing with FB and Google CPC ads, too.

AMS should just be one part of getting attention for your books. It can’t be everything. Amazon is too prone to pulling the rug out from under authors to rely on them that heavily.

Time to NaNo

And I have to say that Patricia C. Wrede’s post for the day, Looking for Perfection, is a must-read for any writer really, but especially anyone doing NaNo who isn’t quite sure of the ground under their feet.

Remember, with writing, there are no wasted words or bad directions, there’s just learning what works and what doesn’t and constantly improving one little step at a time.

(And, since it is the start of NaNo and you just knew I had to do it, a little reminder that the NaNoWriMo StoryBundle is still available and full of lots of wonderful writerly advice, some that will work for you and some that might not, but all of it worth considering.)