Ebook Pricing: Think Like a Consumer

I have said this before, but it bears repeating: free markets benefit consumers, not businesses. Free markets force businesses to compete, to offer the deal that best meets the consumer’s needs out of all the choices offered.  The needs include the desire for the product, the trade off between quality and cost of the product, the ease of use or ease of purchase, and probably many more considerations.

Let’s apply this to the book market.  People want good stories to read. Some are willing to sacrifice quality (less attractive cover, more typos, story problems) for a lower price and buy self-published work. Others are not. Some are willing to wait three days or drive 20 minutes out of their way to find a bookstore in order to get a print copy. Others are not. The ebook market is an open system and a perfect example of a free market in action. Anyone can upload a book and sell it in the digital marketplace, and they can mark it at any price.

Readers now have more choices than just what the old model of publishers and distributors put before them. They also have a greater variance of pricing. The trend of readers foregoing expensive publisher books in favor of cheaper self-published books is forcing the price of ebooks in general down. Thus the competition of the free market benefits consumers, because they have more choices and lower prices.

Authors (one level of business) are forced to compete for readers—they have to produce consistently good products that continue to satisfy their readers and/or diversify product lines to bring in new customers. An author who begins to sell work that is not up to their previous standard will lose readers to the author who continues to perform consistently, or to the new authors who come into the marketplace.

The digital distributors are fighting for both authors to use their services to sell works and readers to use their services to buy works.  If they are sufficiently hard to use (either hard for authors to put work up or hard-to-use storefront for readers), overly regulatory (too many rules about what authors can post or what readers can do with the digital copies they purchase), overpriced (due to up front fees to authors, or mininum price controls or added transaction fees for readers) then people will bypass using that service and go to a different one.  (For example, if I, as a reader, think Amazon is overpriced or has a lousy interface, I can go buy the correct file type from Smashwords or use a converter to hack the file into the proper format for my Kindle if I buy it in another format from somewhere else.)

Authors can sell direct to customers, or nearly so; having only one middle man (Amazon/Smashwords/etc.) to pay off means writers can sell their writing at a lower price point than they could through publishers, because there are no longer five other people along the chain of supply who have to get paid.

Thus the ebook market benefits both producers and consumers.  Producers get more money for making fewer sales, and consumers get a wider selection and a lower cost for the goods they want to buy.  The people who get hurt?  The middle men who had been propagating a system that benefited them at the expense of the writers and the readers.

So how, then, as a writer in this new market, do you go about figuring out how to price your ebooks?

Easy–think like a consumer. Figure out what your ebook would be worth to you, as a reader, and charge that.

There are a couple angles to look at. First, what is the quality of your work? Is it truly on par with what publishers produce? I am not suggesting that self-published work which is on par with publisher’s books should charge the same price, by the way–but you have to be able to evaluate if your work is of that quality to even consider charging a higher price than, say, the $.99 “next to nothing” amount.

Let’s assume your work is that quality. No typos, no formatting issues, no inconsistencies in the story, and the words are comprehensible. Honestly, that’s about the level of work I consider a traditional publisher guarantees. So you have that. Next you should look at whether you have an audience, whether anyone has heard of you.  As a reader I am always much more willing to try new authors in collections of novellas–the cost to me both in time and money for each piece in the collection is smaller than the cost of time and money for a single, longer, work like a novel.  I would not buy an ebook for the price of a paperback if it was from an author I had never heard of. I probably wouldn’t buy one for $5 unless the author had gotten some rave reviews from sources I trusted, and the book sounded like it would hit my target reading zone. But $.99? $1.99? $2.99, if it was a novel? Yeah. Maybe even $3.99. That’s your range.

Then you look at the perceived value of your work. You write a novel and sell it for $.99, people are going to think you are apologizing for something with that price, like, “I have a lot of typos, so have $2 off.”  Because, how long did it take you to write that novel? A month (NaNoWriMo style)? A year? A hundred hours? A thousand? And it’s only worth $.99 to you?  It’s only worth $.99 for the 3-6 hours it will take the reader to read it? That looks like you, the creator, doesn’t value the product. (Short stories and novellas are different–charge  the same as a novel, and people will be mad because it was a short piece.) 

So there’s a crossfade between what is too low for you to be taken seriously and what is too high for readers to risk buying from an unknown author. I think the $2.99-3.99 is a good range for a first-time author. If you have an established following, then I think $4.99 to $5.99 is a good range, maybe go with the higher or lower based on length (after all, a work of 60,000 words and 120,000 are both “novels” but one took a helluva lot longer to write and will be a much longer read).

Why not just price everything as low as you can? Because consumers don’t want to throw money at something they think isn’t valuable; they want to feel like they got a good deal. $.99 for a crappy novel isn’t a good deal; $3.99 for a great one is.

Also, I think most readers don’t want to starve out the people whose work brings them pleasure. Despite all the predictions of the digital market moving toward everything being free, with ads, I just do not see that happening. Because of my mentality as a consumer. I would rather pay more to not have ads interupting my entertainment experience. I would rather pay more in order to keep the entertainers I love able to make a living entertaining so that they keep doing it, because the value to me of their product/service is equal to or greater than the cost in hard money terms.  I honestly think that most people are not really interested in pirating work or getting everything free; I think the average consumer is happy to support an artist whose work they like, especially if the cost is what they think the art is worth. 

Which brings me to an intriguing idea for ebook pricing:

The first adapter pricing model. 

Let’s talk about another way consumer demand can drive price–the truth that people who most want a product are willing to pay more for it to have it first. The price will slowly drop from its initial peak until it reaches a low point at which even casually interested buyers can be tempted to pick it up.  This is true of technology (think of the cost arc of Blu-ray players) and of books:  think of a hardcover book that starts out at $26.99 on release day and is then put in the 30% off bin and is then offered as a paperback at $8.99 or $14.99 (mass-market or trade paperback dependent), and then eventually hardcover drops onto the $3 publisher remnants pile on the Barnes and  Noble clearance rack or a Half-Price Books table.  The people who want the book the most, that author’s established and impatient fans, will pay the $26.99 because that is what the book and the story it contains is worth to them.  The rest of us might wait six months for that first discount, or a year for the paperback version, or two years to find the hardcover on the clearance shelf at a price even cheaper than the paperback.  Those who want it most are willing to pay more for it; those who do not want it that much have a variety of price points to choose from for when their interest in the book matches the offered price.  It is the old graph from algebra at which they two slopes—one descending and one ascending—meet, and that meeting is the maximized profit for all parties involved. 

You could easily apply this pricing model to ebooks.  Want to release your new novel at $9.99?  Do it–but be clear you are going to drop the price later (otherwise people will feel cheated if they see if offered at a big price break later).  The fans you have established who love your work and can’t wait to read the new book will pay that $9.99 and be happy to do it.  The ones who won’t happily pay that can wait the three months for you to drop the price to $7.99, or the six months for you to drop the price to $4.99.  Then after a year, when you can comfortably assume that everyone who had known your work when this book came out has bought it, you can go down to the $2.99 price that might attract new readers who have heard of you but been unwilling to take a chance on someone they don’t know for $5 or $10. 

Why grade the price this way? Because it allows your readers to pay what they think the book is worth to them.  Almost all readers will list “read and like previous book by author” as one of their primary reasons for buying a new book.  There is an intense brand loyalty, because people want to trust that what they’re about to invest money and time into reading will satisfy them. If your work is good, if it was what that reader was looking for, then s/he will come back.  Maybe not at that $9.99 price, but perhaps at the $4.99.  But if you impress them enough times, perhaps they will start to consider that $9.99 price a fair cost for a book they know they will love.

So that’s my big idea. I don’t really know how this would work in the real world; I don’t know if it would offend loyal readers or if it would appeal to them. I know, for me, I would be happy with this model. There are some writers I would buy right away, that I would be thrilled to pay $10 for, and others I would wait to buy later, at one of the lower prices. I do think the most imortant thing would be an honest acknowledgement that the price will drop. Then if I choose to buy at the higher price point it’s an informed decision, a choice I made to satisfy my need for immediate gratification rather than a decision made out of ignorance. 

But what about the rest of you readers out there? Would this kind of pricing model appeal to you, or would it just make you feel exploited?

This is the fourth in a series of articles about the digital revolution in publishing.  I welcome any comments, links, dissension, and, of course, if you liked the perspective please check back for future installments!  I plan to blog about this at least once a week for the next couple months.  Thanks for stopping by! ~Lily 

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