A little over a year ago, I wrote an article on pricing for maximized profits at a group blog with a group of other writers. That post is still relevant, if a bit out of the current conversation. Read it now:

I’m kind of a late comer to the party of the ‘e-book pricing debate’ but it’s really getting out of hand. One side literally is racing for the bottom. Make it as cheap as possible; more people buy it that way. The other thinks that the price each individual buys a book for somehow denotes its worth. Both groups are dead wrong!

The race for the bottom group thinks pure numbers are the key to worth. They think every person who buys into their book boosts them up some imaginary totem pole of writing. Good for them. Unfortunately, numbers don’t denote value in the world of art, and generally the wider the appeal, the lower the literary merit.

The ‘price for its value’ crowd isn’t likely to live off their writing either, though. If you think your book is worth 20 dollars, ask for that, and the numbers fall where they may. But don’t tell me that you priced it based on its value. You, as the author, don’t get to make that claim.

So, if it’s not the ‘ask for its worth’ and not ‘how low can you go?’ where is the real price we, as artists and craftsmen, should be asking for?

The obvious answer is ‘that depends.’ I don’t like that answer, but it’s the truth. But it doesn’t depend as much as you think!

There’s a concept called elasticity of demand. It’s a basic measure of how many fewer customers you’ll reach by increasing the price a certain percentage. It’s a useful tool for clipping in to an equation to find your ‘one true price.’

The problem? That value is always an estimate. You can’t guarantee the elasticity of demand on any product, but you can do your research and ball park it. So in the e-book market, which factors should you be considering before settling on your price?

Competition

Look at your genre. What are other authors putting out, and at what prices? Don’t look at the bottom: look at the range, look at how well they’re selling (Especially if you have competitors like J.A. Konrath who so kindly shares his sales numbers), look at the standard deviation of the group.

These numbers are all important. They tell you what the market is allowing people to price at.

Uniqueness

All right, serious discussion here: Anything they can get from you, they can get from another author. Except for you. So how much of a brand are you? Do you know you have 10,000 people willing to buy what you wrote? 100,000? Only 1000? These are all things to consider when you start thinking price.

Not sure what I mean by becoming a brand? Check out Kristen Lamb’s blog on social media for writers.

Royalties

Money, folks, it makes the world go round. And royalty rates can run a very interesting scale. Especially if you’re an indie publishing using Amazon’s kindle Direct Publishing. The basic idea here is you need to compare your potential reader base with how much profit you can make from them.

That’s right, folks, profit motive. It’s the greatest thing we have in this new digital age. Our books are as valuable to us as we can make monetarily in putting them into the world. So be smart, do your research, and run a few calculations. You’d be surprised some times.

Just because I know someone out there is going to ask me to put my price out there, based on some baseline assumptions (Straight line loss of readers as price increases, floors at approximately 10% of readership somewhere around the 10+ dollar range.) the optimal price in a vacuum is approximately $3.99. Of course, that’s my baseline, there’s room for movement both ways in the scale.

Now for something interesting. I made the guess that $3.99 would become an ‘optimal’ price point over the entire body of e-books. Smashwords recently released a few graphs showing the number of sales per price point, and the profit of each price point. The two highest price points based on yield? $5.99 followed by $3.99. Isn’t that interesting? I’d check out that blog post, though, more interesting information included.

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