Thursday, March 17, 2011

E-Book Pricing and the Black Hat

For any business, pricing their product is both an art and a science.  Yes writers, we are producing a novel, therefore it is a product.  For traditional authors this is not a hat firmly planted on their heads.  For the trad-author the discussion about price generally revolves around contract language and if their percentage will be based off MSRP, discount, or net sales.  The MSRP is set by the publisher as part of their strategy to position a book within their catalog and the market as a whole.

            For Indie-authors, pricing is personal. Among the many hats that the Indie-author must wear, I think of pricing as the Black Hat.  It is Black for some writers because, consciously or unconsciously, they view this as the Bad Guy. A philistine’s discussion of filthy lucre and demeaning to the art.
                                                                                               
  As a writer and a business person, I see the Black Hat as my goal.  I want my writing to be profitable---in the black.  So profitable that I can quit my current full-time job and make writing and selling my books my only job.  Some will say the odds are against debut authors today, but if you don’t have a goal you never achieve anything.

            So the question is: how to set the price of an e-book. There are many authors experimenting with the effect of price on sales (supply/demand) and list rankings, including Joe Konrath and his List Experiment.  It would be interesting to turn a herd of MBA students loose on any available data and see what they come up with.  While $0.99 pricing can boost sales in the short run (introductory pricing, special event/fundraising), I wonder if it may hurt in the long run.  I don’t have any data (hello Harvard Business School are you listening?) just a concern that readers may take a “you get what you pay for” response to prices. 

            Let’s assume I have followed the first rule of writing: Write a high quality book that people will want to read.  Does a discerning reader think less of my book and unwilling to even sample it if I price it at $0.99 as opposed to $2.99 or even higher?  What are the authors I consider peers pricing at?  I care where they price at because they are my rivals for the reader’s dollars.  As an example consider the change in pricing strategy taken by some colleges a few yrs ago.  Over a decade ago officials at Ursinus College in Pennsylvania decided that the tuition was too low to attract a large applicant pool. So, they raised tuition over 18% in one year.  They also raised financial aid 20%.  Applications jumped the following year.  Apparently, being cheap as compared to the colleges Ursinus felt were rivals left parents with the perception that Ursinus was a lower quality school.  The higher price with discounts strategy is also found in US healthcare billed to insurance companies, new car pricing and hardcover mass market books.  When I go into a Barnes & Noble I can buy a recent release hardcover for 30% of list PLUS an additional 10% off as a Member.  I am sure B&N forecasts revenues based on a percentage of books being sold at discounted pricing and the resulting volume not full price.  I suspect the big 6 also take this into account in their forecasts.

            Publishing and bookselling is undergoing powerful changes, but we are not the first industry to do this.  Let’s slap on our Black Hats and profit from what we can learn from others.