The Great E-book Pricing Question

soulsaleThere’s more guff written about pricing than almost anything else, resulting in an extremely confusing situation for new self-publishers. I often see them pricing too low or too high, and the decision is rarely made the right way, i.e. ascertaining their goals and pricing accordingly.

Price/value confusion

Before we get to the nuts-and-bolts, it’s time to slay a zombie meme. Much of the noise on this issue springs from conflating two concepts, namely price and value.

Authors often say something like, “My book is worth more than a coffee.” Or publishers might say, “A movie costs $10 and provides two hours of entertainment. Novels provide several times that and should cost more than $9.99.”

Price and value are two different things. From Wikipedia:

Economic value is not the same as market price. If a consumer is willing to buy a good, it implies that the customer places a higher value on the good than the market price.

The price is something we, as self-publishers, attach to the product. The value is the worth the consumer places on it (not the author or publisher). In simple terms, unless your price is lower than the value a reader places on your book, they won’t purchase.

Marketing isn’t simply about reaching consumers but also about convincing them to place a value on the product higher than the price-tag. The higher the price, the harder that job will be.

In other words, it’s a lot easier to sell a book at $2.99 than $9.99.

Doesn’t price influence value?

Do bargain basement prices indicate low quality? Will a 99c price tag actually reduce the value a reader places on a book? That’s a harder question to answer. I think this is true in some cases for some readers, but I also think it’s massively overstated.

It’s hard to sell a book at any price if you have a crappy cover, insipid blurb, wonky formatting, a flaccid sample and tons of terrible reviews (which are all cues to the reader about the value of the product).

But if you have a striking, professional cover, an enticing blurb, clean formatting, a sample which grabs readers right away and lots of great reviews, then you can avoid any negative association with a lower price. Or, at least, the number of readers you will gain through lower prices will greatly exceed any you might lose through such negative associations.

Goal-based pricing: maximizing income

It’s incredibly important to remove emotion from pricing and I hope looking at the issue through the prism of price and value helps. Once you have dodged the price = value myth, the next step is to determine your goals.

If your aim is to maximize income, you should set a price which aims to do that. And you will only discover what the appropriate price point is through experimentation (it varies from book-to-book and genre-to-genre). For example, romance tends to have lower prices than historical fiction.

Most self-publishers tend to price full-length work at $2.99 or above, because this is the floor at which Amazon pays 70% royalties. Below that, Amazon only pays 35%. Self-publishers also like to price at $4.99 or below, with many feeling that keeping the price below $5 keeps the purchase in impulse buy territory for many readers. The data from Smashwords indicates that pricing between $2.99 and $4.99 is a good rule-of-thumb for maximizing income.

Some advocate higher prices again but I haven’t seen much data to support this view. I know one self-publisher selling huge amounts at $9.99 a pop, but he’s notable because this is quite rare (and he writes in a very specific niche). You will need to try out a few different price points to find your own sweet spot. Personally, I’ve found $4.99 best for full-length books. I’ve tried everything from 99c to $7.99, and $4.99 seems to maximize income.

I like this price point for a bunch of reasons. I make almost $3.50 per sale but it’s still below the $5 threshold for readers. And it leaves me plenty of room for discounting when I run a promotion.

But maximizing income is just one potential goal.

Goal-based pricing: building audience

You might make more money at $3.99 or $4.99, but you will sell fewer copies than at 99c. If your goal is to build audience, then lower prices make much more sense. But when is it a good time to build audience instead of maximizing income?

Successful self-publishers often price the first book of a series at 99c to increase the numbers of readers trying that first book. They make less on Book #1 but easily make that up when the reader goes on to Book #2 and Book #3. And the longer the series is, the greater the upside on a strategy like this.

In fact, this strategy is so successful that many series writers make the first book free. While you will lose all income on that title, it tends to massively increase the number of readers going on to purchase the rest of the series. This approach also benefits from being one of the few ways to gain traction on Barnes & Noble, Apple and Kobo.

It doesn’t work for everyone though and, as with pricing in general, you should experiment to see which brings best results. If you do experiment with free in this way, don’t judge it after a week. Give it a couple of months and make sure to get some ads pointing at that freebie – that’s when you can really see the effectiveness.

Now I’ll deal with some objections…

Shouldn’t e-books be priced more like print books?

No. You don’t own them, you only license them. And you can’t resell or donate them. Aside from that, it’s a digital product! There’s no paper, printing, typesetting, binding, shipping, storing, or returns. Yes, ebooks cost money to produce, but once you have covered your costs you can sell a billion more copies without incurring additional cost.

Print has all sorts of ongoing costs. When a book fails to sell as expected, publishers have to deal with returns. Even when a book is a runaway smash, publishers must go back to the printers and shell out for another round of printing, shipping and storing.

Ebooks are cheap to make. Readers shouldn’t be forced to pay for the inefficiencies of publishers, or subsidize print editions.

Doesn’t all this cheap pricing devalue books?

Well, no. Price and value are two different things. If you aren’t convinced by the foregoing, consider this: libraries have been providing cheap or free access to books for generations. Second-hand bookstores have been in existence for as long as regular bookstores. And all of the classics are available either as free e-books or extremely cheap paperbacks.

None of these long-standing phenomena have done anything to devalue books in readers’ minds. If anything it has done the opposite. And besides, shouldn’t we be in favor of making reading cheap? Don’t we want more people reading books?

But… but…  what about the industry? Aren’t we training readers to only demand lower prices?

Screw the industry! If publishers can’t compete at our price points, that’s their problem. And anyway, rather than inspiring a “race to the bottom” and “destroying the industry” author Ed Robertson argues convincingly that self-publishers are saving it with cheaper pricing – pricing he discovered is perfectly in line with paperback pricing from the 1930s to the 1970s until the industry began consolidating into today’s mega-sized publishers.

This book took three years to write and it’s worth more than… [snip]

Okay. Maybe looking at it through the prism of price/value isn’t helping. Let me try something else. Instead of focusing on the price you’re selling at, focus on the income the book generates. How much do you make each month at $9.99 versus $2.99, $3.99, or $4.99?

Decide your goals. Experiment with different prices. Run the numbers.

* * *

I’m thinking about this topic today as I work on the 2nd edition of Let’s Get Digital, which I’m aiming to have out in a couple of months. I’m working on a way to make it free to all original purchasers – still some logistics with the retailers to sort out.

Before Digital 2, I’ll publish a new novel called Mercenary. It’s another historical adventure, this time set in 1900s New Orleans and Honduras and I’m shooting for a May release. More details on both soon but if you want to get an automatic email when either is released, sign up to my mailing list here.

Happy Monday! (It’s Monday, right?)

About David Gaughran

David Gaughran is Irish, living in Prague, and the author of Mercenary, A Storm Hits Valparaiso, Let's Get Digital, Let's Get Visible, and this here blog.
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113 Responses to The Great E-book Pricing Question

  1. I like your idea of focusing on total income generated by the work rather than piece price – and also the idea to experiment with price levels to find the best income attainable. I think some markets will allow higher prices, some not. It’s just like selling a house – you want top dollar for your property but your must take into account what a local market bears, otherwise NO sale.

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  2. mattwaldram says:

    A useful and informative post, David. I’m very mindful about this as I edge (eeeeeeeever so slowly) closer towards completion on my first novel. Ta.

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  3. jjtoner says:

    Thought-provoking and well argued as usual, Dave. In my case I now have 2 WW2 spy thrillers selling at $3.99 (give or take a few cents – Amazon are continually playing around with the price). The books are selling quite well, and I would be afraid to tinker with the price for fear of upsetting the applecart. If I increase the price I am sure sales will plummet; if I decrease the price and income doesn’t improve, it could be difficult to raise the price again without losing potential readers.

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    • JJ, if it ain’t broke… Others may disagree, but I’m loathe to play around with stuff too much when something is going well. But if sales take a dip, and you have less at stake, that might be a good time to experiment.

      BTW – I’m about a third of the way through The Black Orchestra – really enjoying it too. If I remember right, that book has become quite sticky in the charts. I wouldn’t touch anything in a situation like that. When you have more out in that genre, you can look at making one of them free or cheap to lure in another tranche of readers – perhaps if you have one at that point which is underperforming. Not as much point doing it when things are going well and you have just 2 titles to play with in that genre.

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  4. geraldhornsby says:

    Hi David! Great, straightforward, logical thinking here. One thing you didn’t touch on – bundles. We’ve just seen a 12-book, multi-author bundle being sold for $0.99 make it to the *real* bestseller lists (including the NYT). The sole intention was to get it on the list (as admitted by the publisher / organiser), which allows the authors to then call themselves a “NYT Bestselling Author”. Is this right? Does it devalue the bestseller lists?
    The logical extension of this would be to include greater and greater numbers of books in a bundle, but Amazon have a download limit for that price point. And, apparently, even getting these 12 books inside that limit took some careful formatting.
    I’d be interested in your thoughts.

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    • Hey, I’ll have a post about box sets very soon. I’ll be in one myself that’s launching shortly and will go into all the details: pricing, goals, how you put one together, and so forth.

      Re your question, I see zero problem with these authors describing themselves as NYT Bestsellers. The NYT has very specific rules about what qualifies, and this box-set does. I have no issue at all with this box set hitting the list. None at all.

      It’s an interesting question to ponder, but what’s the problem? The price? Should we only count sales at… what? $2.99 or more? $4.99 or more? This is a problematic approach because it’s a bestseller list, not a highest-income list. And if the problem is the 12 authors, where do you draw the line there? Do we ban all collaborations? Anthologies? Writing partnerships? Honestly, I think fixing the “problem” will create a bigger mess. And I don’t really see what the problem is anyway.

      As for devaluing lists, I think most bestseller lists are a sham to be honest. The NYT will ignore books that only sell at one retailer – cutting out many self-published and Amazon-published books – and there are all sorts of quirks to how they put together the list (and persistent rumors of related shenanigans). The situation is worse again with other bestseller lists where publishers can openly purchase a spot (I’m particularly thinking of book chains and their “bestseller” lists).

      But there is some value to the reading public (and in a professional sense) to appearing on those lists, so aiming for it is a valid and understandable goal.

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      • geraldhornsby says:

        Thanks for your comments, David. I’m still trying to work out what “the problem” is, to be honest. Would I like to be on that list in some form or other myself? Of course I would.
        I suppose it’s a personal thing, and thinking that, somehow, it’s ‘cheating’ to become a “NYT Bestselling Author” by this method. I would want to be on the list for a single book or collection written by me and me alone.
        I understand and accept that it’s no more cheating than buying reviews, or using sock puppets to promote your books – both methods probably employed by traditional publishing as well as self-publishers. And, as you say, we have the purchasing of positions on lists and in bricks-and-mortar stores by trad publishers. I suppose it all comes under the umbrella of “clever marketing”, of which there are numerous examples, I’m sure.
        Good luck with the forthcoming collection, and I’ll be eagerly awaiting your blog post about box sets.

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      • I don’t think it’s cheating at all. It’s nothing like buying reviews or using sock-puppets. The NYT places no restriction on length, price, number of authors, or on box sets at all. It’s not gaming the system in any sense, it’s 100% playing by the rules. I can’t even see where there is an ethical question mark.

        Being a “NYT Bestselling Author” doesn’t mean anything more than you sold a lot of a particular title in one week. How you sold it, what you sold, it doesn’t matter. It’s not a literary prize. It doesn’t confer some kind of special status. It’s a badge that says you sold a lot in one week. It’s an achievement, for sure, but it’s hardly some sacrosanct institution that’s being defiled by grubby commerce. It was always about selling books.

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  5. The price/value problem is easier to solve when looked at from the different perspectives of producer v. consumer. Circling back to focus on the goal is solid advice.

    The point that consumers value more what they pay more for is valid. A few years ago, colleges and universities in the US determined that the value of an education at their institution was perceived as greater when the price was higher. Tuition raced up, competition for admission was intense. Then came the Great Recession — new grads can’t get jobs with their impressive, highly valued credentials and are straddled with so much debt they can barely breathe. At the time, the goal was admission to a prestigious school. Now the goal is get a job.

    By experimenting with pricing, an e-book publisher can also refine his goal which may not always be clear.

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  6. David Penny says:

    Great post, David.

    Writing is a business – whether you are doing it for a big publisher or as an Indie. Those taking part in this wonderful enterprise have to remember that, otherwise the result will be certain disappointment.

    I see the “It took me 3/4/9 years to write…” comment everywhere, and the people that make it are never going to be convinced their work is only worth 4.99 or less however much logic dictates they are wrong.

    Your point about value is spot on – we buy things we judge to be of good value. This also goes as far as NOT buying something at 99c (which I admit to doing) because we consider even at that price point it is unlikely to offer the value we seek. I find myself doing this when loading my Kindle with holiday reading. I look at books 3.99 and above, in the expectation they will have been edited, proofed and formatted professionally.

    You’re also right on maximising revenue over sales – and writer’s have to think hard about where they want to place themselves in the curve of sales vs. income before deciding on their price.

    On a final note – with the long tail of availability for eBooks a writer can afford to invest in a professional product without the need to recover the costs over a scant few months, as the traditional marketplace tends to do. Our books will be selling many years after publication and continue to generate an income.

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  7. Great post, David! I have a permafree book that leads into my Karma series (a WOOL tie-in) and brings me a regular stream of buyers. The full-length collection at 85,000 words is now $4.99. A BookBub ad and pricing the whole novel at 99¢ for a weekend lifted the collection into the top 100… briefly. But I got the screenshot! I think your price/value thinking is spot on. It gets easier to remove the emotion the more books you have out. It’s a business, as well as an art.

    Thanks, as usual, for your support and wise advice to the Indie world.

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  8. Hi David. Thanks once again for another thought-provoking article. There is another consideration to take into account when pricing. There are several countries that are still charged the extra $2 Whispernet charge by Amazon. This makes my $2.99 books $4.99 for my friends and relatives. With today’s exchange rate it is not a cheap purchase, although still much lower than a paperback, but I’m reluctant to promote the books to them unless they are on a Countdown or a Freebie. Interestingly, they are not charged the extra $2 when I do a Countdown from $2.99 to 99c.

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  9. Reblogged this on Author Unpublished and commented:
    Some interesting food for thought on pricing in today’s digital book market.

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  10. Catana says:

    i was glad to see you mention early paperbacks because I’ve been thinking that this whole issue has been fought before, without any noticeable harm to publishers.

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    • The parallels between the paperback era and the ebook era are fascinating – teased out in Ed’s post above. Paperbacks were looked down on. Only trashy genre writers published that way. They weren’t “real” books. Etc. etc.

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  11. The market price vs consumer perceived value is a correct point but it is marketing that also drives what consumer will feel as the “right price” for the value of a good.

    Amazon has created an ebook market domination based on the $0.99 and then pushed even further with the *free* price point influencing a title overall visibility with readers. After a while, Amazon marketing must have found that it wasn’t anymore a good ROI for Amazon so *free* doesn’t do much today toward climbing the ranking.

    The ‘right’ price doesn’t exist, it is indeed a perception. $0.99 is Amazon created perception as entry point for unknown authors, or no-risk impulse purchasing. It could have been $1.99 or $2.99, anything Amazon wanted to but it would have not dominated the market in a few years, and competitors would have not have a hard time with a $2.99 as minimum price. The only reason behind that choice is to maximize the Amazon platform dominance.

    As far as I remember, reading an old market report, up to a certain volume of transactions, Amazon was losing money at $0.99 but could sustain that for more years than the competitors. The break-even price point was indicated as $1.36 .

    Now it is profitable even at $0.99, tomorrow might be even more with a %50 royalty scheme for $2.99 and higher if competitors don’t show the same sales volume.

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    • geraldhornsby says:

      I’m pretty sure Amazon didn’t “create” the $0.99 price point. That was created by indie authors, who have now moved away from that except for special promotions. Through the 75% royalty rate, Amazon helped authors to create the $2.99 price point, although there is a good argument for raising that to something like $4.99 as being a ‘reasonable’ price for a full length novel (> 75,000 words). Pricing for novellas and smaller works are another matter entirely.

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      • Could you expand? Hard to get what you mean exactly. How could Indie Authors create or impose a price point on the Amazon platform?

        Amazon offered the price scheme, $0.99 was the minimum price point from the beginning. It wasn’t “created” by Indie authors.

        Amazon could have gone for $2.99 as minimum price point.

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    • If Amazon truly wanted to encourage 99c, it would offer 70% royalties for that price point. That charge can be laid against Apple, who do pay 70% at 99c, but not Amazon. In the last couple of years, they have further eroded support for 99c by introducing price weighting on the Popularity Lists. I would argue that all the algorithm changes of the last two years have resulted in self-publishers increasing prices, rather than the opposite.

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      • Then they would lose money on those, and writers flock on the platform that give them more sales. 1000 sales at $0.99 earn more than 100 at 70%.

        The market changes continuously, and for Amazon the price war is won (Apple will not gain market share with 70% on the $0.99).

        Amazon has won the price war, that’s why the algorithm can change and bring more cash to Amazon with more books selling at higher price point. Unfortunately I think the ‘marketing’ damage of the $0.99 price is irreversible now (for debut authors, or to build a readership from scratch).

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      • Besides, I didn’t say Amazon ever encouraged 99c. It was a price war to win the market. Of course now that they have achieved that goal 99c is no more an advantage for Amazon in terms of earning but in readers’ mind 99c is casted in stone.

        Now even paperback are sold at $0.99 (e.g., Compton Newton publishers) and for the same reason: conquer a market sector.

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  12. Really can’t agree enough re: Price≠Value. As I’m currently working on a scifi trilogy, I have a more funnel-based pricing model in mind ($2.99-$4.99-$4.99, maybe $8.99 for collection), which of course I’ll play around with until I find a sweet spot.

    It seems like some of the smaller traditional publishers are finally getting the message. I’m currently reading the first book in a popular fantasy series, which weighs in at an impressive 1,000 words, and I bought it for $2.99.

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  13. As usual, a well thought out post with plenty of details. Thanks David.

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  14. There wasn’t room to get into it in this post, but you should all check out Ed Robertson’s post which has a more radical view of pricing, esp. for launches: http://edwardwrobertson.blogspot.cz/2013/10/challenging-assumptions-pricing.html

    It’s a brilliant post, and I’m sorely tempted to launch my next novel at 99c then raise to $4.99 on maybe Day 5. It would be nice to let the mailing list peeps get a special deal and it’s always fun to experiment.

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  15. Pingback: The Great E-book Pricing Question | David Gaughran |

  16. susanspence says:

    Even though I’m a little known author, I have my books priced at $3.99 for a couple of reasons. First I think that any lower is selling them (and myself) short and also because of the Smashwords data. Incidentally, when I published my second novel, a sequel to the first, I gave the first away for a while as a promotion and received its two worst reviews. At $3.99 most everyone seems to like it. Go figure.

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    • I agree that pricing your book at $3.99 is the right thing to do. First if it was say $0.99 or $1.99 it would bring the wrong message of value to certain readers who may not have been your market audience in the first place. The 15 % free sample is enough to determine whether the reader will like your book or not, and so why try to make the wrong person buy your book based on the price being cheap?

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  17. The first book in my series has been free since Dec, and I’m making a nice paycheck on the whole series. Definitely worth the loss of income on the first book.

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  18. Melinda says:

    I originally set my eBook price around $4.99. It’s a full length novel and has a paperback version which someone occasionally purchases. That eBook sold a few copies but nothing to rejoice over. I dropped the price to 99 cents several years ago for a Read an eBook Week promo with the intention of raising the price at the end of the week. It rocketed to the top in its category on Amazon and remained there for over 2 years. I’ve earned far more at the 35% royalty and don’t feel it has devalued the book. That 99 cent eBook has sold roughly 41,000 copies on Amazon to date and I continue to sell at least 120 copies/mth. I wouldn’t dare change that price. I’ve built an audience and get great reviews. Why mess with a good thing?

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  19. Very thought-provoking. Maybe I should ask my small press to price at $4.99!

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  20. jasper2489 says:

    Some things to consider about prices when considering self-publishing. I think this is well-thought and taught me a lot.

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  21. jasper2489 says:

    Reblogged this on and commented:
    Some things important things to consider when self-publishing.

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  22. David, what I’m wondering, in the price – value continuum, is how the subscription models, like Scribd & Oyster, will influence this, if at all.

    But, with fair pricing at neutral, I do think the pricing-enticement goes away. Attraction to the work of art is all that remains, it seems.

    I’m in the baby stage of participating in these models, so we’ll see😉

    Best wishes on your new work, thanks David.

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    • Subscription models are interesting. I’ve been thinking for some time that they will ultimately be a significant part of the mix. It’s early days and we don’t know if revenue-per-lend rates will hold up at good levels or whether it will degenerate significantly, and we don’t know yet how popular with readers they will be.

      For us, if it does become a big part of the market, I don’t see our job changing too much. The currency of the internet is attention. Price is a tool we can use to gain attention. In a subscription model, that’s one less tool we can use. But we’ll still have to get eyeballs on our books, and I’m afraid I don’t foresee some kind of utopian system where cream automatically rises to the top. We’ll still have to hustle!

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      • Definitely agree about still needing to hustle. Maybe more so. Like with Netflix, price of an item irrelevant.

        Either way, already interesting, gonna be more so🙂

        Thanks David

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  23. DL Johnstone says:

    Rhetorical question on a tangential topic – are the big publishers trying to squeeze out Kindle or just milk it? Why else would prices for kindle editions of books from many of the top publishers be priced 15-20% higher than paperback editions? It’s a trend that only started in the past six months or so.

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    • It could be a game of pricing cat-and-mouse with Amazon. Since the price-fixing trial and the abandonment of Agency pricing, publishers are on a wholesale model with Amazon – meaning they set their list price, and Amazon is free to discount as much as they like (as long as they turn a profit overall across the list). Some publishers may be trying out higher prices, e.g. $12.99 or $14.99, in the hopes that Amazon will swallow the discount to keep them $9.99 or less. But they don’t have to. Who blinks first? I’m not betting against Amazon…

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  24. Ahhh, the age old question. My personal theory is that I price my ebook at what I would pay for an ebook. And I can’t see myself paying more than a few bucks for an ebook … precisely because it’s a digital copy, and not a physical item. I’m more than happy to shell out $20 for a softcover book, but if it’s an ebook, I just feel like I’m getting robbed if I pay more than $3. So I would never willingly price my ebook above $3 (unless, of course, the ebook pricing paradigm shifts in the future!)

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  25. dvberkom says:

    Reblogged this on DV Berkom Books and commented:
    Interesting thoughts on ebook pricing…

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  26. I’ve been experimenting with price for my novella, The Seals of Abgal, and I’ve found that it sells the best at $1.99 than it does at $2.99, which doesn’t say all that much because I haven’t sold a hell of a lot. However, it would be interesting to see what happens when I have the second book out and how that will impact pricing on the first.

    As for Mercenary, I am looking forward to that one. I’m really looking forward to that one.

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  27. Reblogged this on The Writer's Workshop Blog and commented:
    Some really sound and well balanced advice about pricing and value being two different things – important to keep in mind.

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  28. Thank you for this excellent article. I have not published anything (yet), but you answered one of my biggest questions–How much is too much or too little to charge? As a consumer, I have to consider price of course, but I have noticed that if I get a free book or purchase one for 99c, many times I don’t read it for several months, where if I spend 2.99-3.99, I generally read it right away. This would be particularly good to know if you are wanting people to write reviews.

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    • Kate Sparkes says:

      I’m the same way. If I grab a book on impulse at 99 cents or free, I might never get to reading it because it keeps getting bumped down the list by books I paid more for. I’m probably missing out on some good reads, but that’s how it seems to go on my Kindle.

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  29. Reblogged this on Ruth Nestvold – Indie Adventures and commented:
    Great post by David Gaughran on ebook pricing — when I have time for marketing again, I should do some more experimenting with pricing myself.🙂

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  30. Great post, David.

    Price v. Value. Yeah, Basic Econ 101 stuff. Too bad Big Pub doesn’t seem to get it. I have to wonder why, since BP employs so many beancounters and gives them carte blanche to screw around with so much of BP’s business practices. Pricing ebooks at $12 plus and hardbacks at $30 plus, and they wonder why self-pubbers are continually gaining market share. Doh!

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  31. To add another term to the pricing equation, Amazon rankings factor in not just number of units sold but also total revenue. For that reason, one of my novels at $3.99 can outsell my four-novel set by 5-to-1, but the set, priced at $8.99, can do just as well in the overall rankings. And rankings translate into visibility, which can boost sales, which…

    –Larry Constantine (pen name, Lior Samson)

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    • Hi Larry. Are you talking about the Best Seller list or the Popularity List. Because the Best Seller list is simply a list ordered by Sales Rank and Sales Rank is a function of sales (and time), nothing else. Price doesn’t influence it, nor does reviews etc. On the Popularity List however, price weighting is in effect, meaning that a sale of your $8.99 box set is worth more than your $3.99 novel and a lot more than someone else’s 99c novel.

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      • I referred to rank, not list, full title Amazon Best Sellers Rank, which appears in the Product Details block of every book. The exact formula is proprietary, but inside sources confirm it is a rank order of unit volume weighted by revenue (and possibly other factors) in a time interval, not simply unit volume. I believe you have been misinformed on this one. The Top 100 rankings that pop up below the overall rank (e.g., “#33 in Kindle Store > Kindle eBooks > Literature & Fiction > World Literature > Jewish”) are based on the same rank order calculation, but I cannot confirm whether they further massage the data.

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      • Larry, I’ve spent a long time studying Sales Rank and Best Sellers Lists and Popularity Lists and the various algorithms that go into ranking on same – I wrote a whole book on the topic. I can absolutely assure you that revenue plays NO part in determining Sales Rank or position on Best Sellers.

        As I said in my last comment, the list price of the book plays a part in positioning on Popularity Lists – sales of more expensive books are weighted more heavily, and sales of cheaper books are penalized.

        Sales Rank is purely sales. Nothing else. There is weighting in play, but it’s historical weighting. In other words a sale will be worth more that day, less the next day, less the next day after that, and worth virtually nothing in the ranking algorithm after a few days.

        No other factor is in play.

        Like

      • David, assure away and write all the books you want, but inside sources assert otherwise. Until and unless Amazon publicly discloses their algorithm (highly unlikely), anonymous sources and external experiments and data will have to suffice. My own time series analyses also support revenue as a factor in rank, so I trust my sources. Other indie writers can use their own data to confirm or disconfirm the factor. If two books are known to be selling at the same rate but are significantly different in price, the higher priced book will have a somewhat better (lower) Amazon Best Sellers Rank.

        The weighting you refer to is called an exponentially weighted moving average. The parameter alpha, a value between 0 and 1, determines the relative weight of past history versus the current value. A high alpha means current value dominates; low alpha means historical average dominates. Amazon is known to have played with the parameter, and seems to have settled on a relatively high alpha. Combined with their high frequency of updates, this means that rankings can fluctuate dramatically.

        Like

      • I have seen zero evidence for a revenue/price effect on Sales Rank, but if you have any I’ll take a look. I still wonder if you are referring to ranking on the Popularity List (often confused for the Best Seller List). There is a price bias in effect there, but that’s a rolling 30-day average and has other quirks compared to the Best Seller list (e.g. freebies are counted but at tenth of paid sales. Freebies aren’t counted on the paid Best Seller lists and are separated out in to their own lists. Popularity Lists aren’t split this way.)

        Like

      • To put it another way: it’s easy to figure out what a book is (roughly) selling, given its Sales Rank. If a price/revenue weighting was in effect, it would be immediately obvious, as it was when Phoenix Sullivan and Ed Robertson discovered the same bias on the Popularity List. This blog post goes into some depth about how the Popularity List is calculated: http://phoenixsullivan.blogspot.cz/2012/08/just-how-do-those-amazon-algos-work.html

        Quoting from that:

        So, to make this as clear as possible:

        The number of freebies you give away during a free run does not in any way affect your bestseller ranking.
        The price of your book does not in any way affect your bestselling ranking.

        These variables are used only for determining a book’s rank in the popularity lists.

        Like

      • I am not confusing Popularity Lists with Amazon Best Sellers Rank (or Sales Rank), as should be evident from my post. Merely repeatedly asserting the same thing adds nothing to the discussion. We all know what you as well as Sullivan and Robertson assert, but these assertions are not based on direct knowledge from Amazon. What I have been told is that the weighting on revenue is small compared to unit sales, but it is there. In other words, it takes a big price difference for the effect to show up. That fits with my own data. Maybe I was given incorrect information, maybe I am wrong. In any case, I have no stake in whether you accept that or not, I was just sharing what I know for what it’s worth. You do a great job with your posts and provide much valuable information, I just wanted to add to that.

        Like

      • I hope you don’t take my posts in an antagonistic way, I enjoy hashing these things out. Because Amazon is so tight-lipped, a good deal of fuzzy logic is needed to make any headway and things can easily be overlooked. If there’s no hard data to prod, I’d be somewhat skeptical of the Amazon source. In my experience at least, sometimes data-hungry indie authors like Phoenix & Ed know more about the various algorithms than internal Amazon people. But the whole point of throwing these things out there – whether in books or blog posts – is to figure stuff out, and it’s always good to re-examine any assumptions.

        Like

  32. Excellent post, my good Irish Sir. Shall we declare a race to the NY Times bestseller list? This assumes that multigenerational wild colonial geese are allowed in the race.

    Cheers.

    Like

  33. I found this very helpful, especially because I am preparing to publish my first novel, and it’s sequel after that. I’m sure I’ll have to experiment like you say, but it’s informative for someone like me (who is just starting out) to know where I should begin based on my goals. Thanks for the post!

    Like

  34. David,

    I didn’t read through the ton of comments so maybe someone pointed this out.

    Regarding: “I’m thinking about this topic today as I work on the 2nd edition of Let’s Get Digital, which I’m aiming to have out in a couple of months. I’m working on a way to make it free to all original purchasers – still some logistics with the retailers to sort out.”

    On Amazon this is an easy fix.

    Simply upload the 2nd edition to replace the file for the existing one…unless you want to keep both editions on the market. Then email KDP and ask them to pretty please and with sugar on top email the customers that purchased the first edition and they will receive an email that gives them the option to update to the new edition free of charge.

    I’m at a loss when it comes to easy answers to solve this problem on other retailers.

    Like

    • Hey AC, that’s exactly what I’m doing for Amazon. An easy fix. Smashwords should be no problem too as readers can download the book multiple times. For paperback purchasers (from Amazon), I’ll make the Matchbook free.

      Still figuring out what to do with Kobo, B&N, and Apple. Hoping to find a solution which isn’t too labor intensive.

      Like

      • Paolo Amoroso says:

        Having Amazon send an email to the readers who purchased the first edition is especially important, as I don’t seem to get any kind of notifications for updated ebooks even with auto update turned on.

        Like

  35. John Castle says:

    Reblogged this on John Castle and commented:
    Excellent post every indie author should read.

    Like

  36. Diane Tibert says:

    Reblogged this on Diane Tibert and commented:
    Pricing is always something self-published authors must give great thought to. David does a great job of explaining how you should go about it.

    Like

  37. Pingback: The Great E-book Pricing Question | In•de•fix•a

  38. jaylat says:

    “Shouldn’t e-books be priced more like print books?”

    I like your article but feel your arguments here are weak. The idea that digital should be automatically cheaper than print is debatable. There are a lot of advantages to digital – you can read it on multiple devices, store it anywhere, search it, easily copy and annotate, etc. None of this is easy with print. While a buyer can’t legally make a copy of his digital book, neither can a buyer of a print book.

    Very often I will decide not to buy a book because it’s not available in digital form. I’m sure a lot of readers feel that way.

    Like

    • If the issue of owning versus licensing doesn’t sway you, what about costs of production? All books – print or digital – need to be written and edited, and need covers, but e-books don’t need typesetting (more expensive than formatting), printing, binding, storing, or shipping. And the big albatross around print publishing’s neck is returns. There are huge costs associated with dealing with returns. In the e-book world, they are minimal and automatic – taken care of by the vendor. In the print world, those returns have to be shipped back from stores, cataloged and stored, and then re-sold – if they haven’t been too badly damaged (which will mean writing the stock off).

      Like

      • jaylat says:

        Pricing should be based on the buyers’ willingness to pay (demand), not the cost of production, that’s business 101. A customer really does not care what the seller’s costs are, he only cares about the value of the thing he is buying.

        You are correct that a seller needs to take all this into account in order to make a profit, but that should not affect his decision on how to price his wares.

        Like

      • Actually, price is the intersection of supply and demand. Econ 101🙂

        Like

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  41. jaylat says:

    Right, but again the cost to produce does not affect either of those factors. It does affect supply to the extent that a producer may decide not to produce if the costs are prohibitive. But consumers are not swayed by how much a producer has to pay unless the costs show up as additional benefits in the product.

    I don’t really want to go back and forth on semantics. I sell digital books for a living and will definitely consider your thoughts here, and appreciate your posting them. While I do take the cost of production into account, at the end of the day my pricing decisions are driven by expected demand.

    BTW I’m about to try out a “pay what you want” model and will be very interested to see what that does for my bottom line.

    Like

  42. Gilbert says:

    Reblogged on
    http://writerinaforeignland.blogspot.com/2014/04/midweek-teaser-great-e-book-pricing.html?m=1
    and commented:
    Awesome post David, thank you for these insights. For me it’s one of the more difficult parts of the marketing mix, especially with the increasing options in promotion and place in the digital world (eventually each one with its own pricing). Leaves me with the product – but is it really the story only or might this be a bit more complex too? What do you think?

    Like

  43. Penlateral says:

    Hi David, thank you for your sound counsel on pricing. It is an area, i have to confess, that has totally baffled me. I’m on the brink of a decision if i should self-publish or slog down the well beaten path of taping on publishers’ doors. I’m siding more and more with e-book publishing after reading your article. I wonder if you could advise on the best route to take to have books reviewed by credible people (hoping the work itself is up to scratch), especially for a first timer.
    thank you again for the tips on pricing.

    Like

  44. Last year I decided to write a few non-fiction e-books. The first was released last month and is about self-publishing, I also write novels, the fourth will be coming out next month. As an author who blogs I’m always thinking about the best pricing, but it has begun to really annoy me when I see bloggers flogging their PDF e-books on their websites.

    To me they are not authors and have absolutely no idea what we authors who slog our guts out go through to get our books up and published. They simply write up a word doc, add a few pics, do some formatting and then turn it into a PDF to sell through their website. And what really annoys me, is the prices they believe their books are worth. As authors we keep our books in the $.99 – $9.99 range as we know how things work, but bloggers have inflated egos and believe their little 40 or so page PDF “book” made up of old blog posts is worth far more than the average novel that’s several hundred pages long.

    I am constantly astounded that bloggers believe their “books” are worth anywhere up to $30+ for a few pages of tidbits they shared on their site. Bloggers are just looking for something to flog and unfortunately they have harped on making PDF books to flog to unsuspecting followers who have no idea how hard authors actually work when it comes to writing books.

    I don’t know if you’ve done posts on blogger books versus author books David, but I’d love to know what you think about it.

    Like

    • John Kuczero says:

      “They simply write up a word doc, add a few pics, do some formatting and then …..” Edit the end of that sentence to read “publish it on Smashwords.” and you have, unfortunately, just described a very large segment of today’s “authors”. I’m constantly astounded by the number of people that think they’ve written a book. Books tell a story that stands on its own. If your “book” requires the reader to buy another book to get to the end of the story then you’ve written an episode for a soap opera. Sequels are wonderful but they should be the “next” story.

      Speaking as a reader/consumer: Free – $.99 books are great for getting attention for your work but if the story doesn’t have an ending I’m not likely to buy any of the future books no matter what the price.

      Like

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  48. David, I’m okay with 99% of what you wrote but take issue with the following: “Marketing isn’t simply about reaching consumers but also about convincing them to place a value on the product higher than the price-tag. The higher the price, the harder that job will be.” And here’s why.

    “Marketing” is simply a bringing of a product to a market. The process of marketing is actually a composite activity comprised of Public Relations (PR), Promotion, Advertising and Sales – each has its own set of rules. PR garners attention from potential publics; Promotion makes something well-known and well-thought-of; Advertising not only captures attention (makes impressions), but also informs and presents a call to action (when done well); and Sales converts prospects into buyers who actually buy something.

    Rather than price/value points, in my experience, a great cover and the other important ingredients that go inside of a successful book, bring sales when they match the reality (what people agree on) of the targeted public, knowingly or unknowingly – the difference being whether the elements were surveyed before marketing commenced or not.

    A highly matched (surveyed) reality factor re: a book, causes a naturally high affinity for (liking for) that book, which in turn increases willingness to communicate to others about the book. In other words, finding the correct “buttons” (what people will agree on) elicits “likes” and communication about it (word of mouth), and a reach by consumers to possess or have (buy) it. Correctly done, direct market research surveys (not focus-group studies) contribute to this series of intended results with precision, allowing for more for more closing opportunities for sold books — more correctly stated as purchased books, at which point selling becomes a viable proposition.

    In my opinion, then, “…the higher the price, the harder the job will be…” is incorrect. In my book (no pun intended), desire to own a book, makes any price a non-factor – certainly not “harder,” since consumers ultimately never even buy a book; they buy the “promise” of that book – what they think they might get as a result of purchasing and/or reading that book. (Some books are purchased as gifts and are never intended to be read by the buyer.)

    When that perceived value exists, price simply no longer matters. People always find the money, when they think they know what they want.

    Like

    • cwest says:

      When that perceived value exists, price simply no longer matters. People always find the money, when they think they know what they want.
      * * *
      So authors would like to think but I’m not sure this is the case. There are very few authors’ works in a Kindle version I would buy at more than $6 for and there are none I would buy at $20. $20 is the ceiling for my hard cover book purchases. When I weigh the relative value of an ebook at $15 and a hard cover at $20, the hard cover is going to win every time.

      Ebooks are about immediate gratification, but if they get too expensive . . . I will just wait and buy a hard cover that I can give away to friends or donate to the library when I am finished. Publishers are not ever going to be able to convince me that the value of an ebook and a hard cover are the same.

      Like

      • Thanks for your reply, which I only saw today. Word of mouth — the Holy Grail of all Marketing, PR, Promotion and Sales departments — is capable of pushing limits of pricing beyond the norm. To wit, the post-championship books and merchandise sales in Columbia, SC, when the Gamecocks finally captured the elusive brass ring. And other similar events, albeit, perhaps, anomalies.

        Like

  49. Sandy Monroe says:

    A very important factor: reading becomes less and less common. Just check your neighbours, friends and relatives: how many people are reading? I agree with the smashwords philosophy: the only real danger for your book is becoming obscure. Any other models, including the “pay as much you want” is better than nont being read.

    Like

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  54. Jonas Lee says:

    Reblogged this on Jonas Lee's Imaginarium and commented:
    Normally, I will do these on Thursdays, but I shall be in another country and most likely away from electronics until I return. But, I read this article and found it useful if not enlightening. So, enjoy David’s work and look into his other posts!

    Like

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  56. namelesspawn says:

    I think $3.99 is a solid price, especially for first time writers (like myself), though, since I’m “somewhat” financially stable, I’m probably going to make my first book free.

    Like

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  58. Mark Winter says:

    Reblogged this on Mark Winter and commented:
    Davey G’s wisdom on e-book pricing. I went for 99p myself…

    Like

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  60. Reblogged this on expressionallyme and commented:
    Deep down I dream of publishing a book at some point. I have played with writing, but see little to encourage me right now. I do have a number of very articulate and entertaining friends that I hope get to read this blog. I am reblogging this one for future reference because I like his reasoning.

    Like

  61. Richard Batt says:

    Loved your blog. I confounded a company called Screwpulp to address the problem with Value and Pricing. We believe the readers determine the value of the book. As such, we give away the initial copies in exchange for a review/star rating. You can continue to get free books so long as you reviewed the previous one. After the free copies are given away the book goes up to 1$. As ratings, reviews, popularity, go up, the price goes up in $1 increments. We’re trying to let the readers find the value for each book. So what sold well for 3 stars at $4.00 might get a lower rating at $7.00. Instead of putting an arbitrary number, we let the readers determine the value. Happy to run across your blog today.

    Like

  62. JustinTimes says:

    Thank you so much! I really enjoy writing for fun and sharing with close friends and family. I have been working on a particular story for a few months now. I’ve had a bit of writers block lately and it may be due to a suggestion I received about selling my story as an EBook. Since the suggestion I have been fixated on pricing my book and not really having any fun:( . I constantly look at books in my genre and get discouraged. When I am writing it seems to be in the back of my mind. Although your intention here is to help publishers price more effectively, I gained something different from your blog. It has helped me realize that I MAY be able to make money from eBook sales, maybe a lot, maybe very little. Its not like I intended to even go this route and ……. I guess simply put. I shouldn’t really get caught up in the pricing. I’m truly taking so much of the “value” away from my potential readers and myself. So thanks again, and im going to grab my coffee and have some more fun. /cheer

    Like

  63. Blitz says:

    Reblogged this on The Real Life Stories from a Fantasy Writer and commented:
    I’m adding this to my list of things I’m throwing at friends and family that think I can upload a word document to Amazon slap a 99 cent price tag on it and quit my job.

    Like

  64. Reblogged this on The Wandering Barefoot Editor and commented:
    I frequently get asked how to price an eBook. It’s sometimes a tough decision and it’s difficult to explain all the angles to look at when making the pricing decision. David Gaughran sums it up nicely in this post.

    Like

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  68. Gregooch says:

    I am in the process of publishing an e-book. The book is is a study guide aimed at high school teens, more specifically juniors and seniors of which there are some four to seven million in the US and also some college students, mainly foreign students – probably another million or so. Since this is not going to be part of a series and since it is likely to be highly desirable I was considering pricing it in the $9.99- $14.99 range. Just wondering if anyone has experience with the teen market and any recommendations…

    Like

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  71. Good post with some great ideas on pricing! Thanks for sharing.

    Like

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  76. Shawn says:

    I didn’t get to read through all of the comments to see if this has been answered…I see many comments about books in a fictional genre. Are the pricing principles the same for a non-fiction book(s)? What’s your opinion of how they sell vs fiction? I’m a veterinarian, writing a book on animal care in disasters/emergencies. Is there any point in guesstimating based on the 40+ million pet owning households (Obviously just getting a very small
    Fraction…). It would be my first book. I know how to reach my audience but I have no name recognition. Thanks for your feedback.

    Like

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