Pricing a book is an art, not a science. Forget about such quaint economic concepts as supply and demand. Oilmen and cattlemen would go bonkers in the book business. In fact, when starting out to set a price for your book forget about the marketplace altogether. Begin with yourself.
What do you dream to achieve with your book?
For many authors the motivation for writing a book is not money but the desire to tell a story, say something, be an influencer. These folks want their words to reach as many readers as possible. One of the ways to do that is keeping the barrier to entry – the book price – as low as possible. Start with a price low enough to attract the maximum number of readers. Then factor in the costs. The result may be a very small profit. And if it is an actual loss, so be it. That may be the price of getting your words into the marketplace. And there are authors who are willing to take a loss to produce a book.
Other authors are in the camp of Samuel Johnson who once observed, “No man but a blockhead ever wrote, except for money.” He said that back in the 1700s so this is scarcely a new concept in publishing. Take into account all the costs involved in producing a book and set the price at a point that leaves a comfortable bit of profit in the transaction. So how do we find that sweet spot?
Anatomy of a book price
For the sake of argument let’s say you have a 256-page book that you printed in a large enough quantity that the cost per copy, including trucking expenses, is $2.50. The traditional industry standard was to price a book at 8X those printing and delivery costs. Voila – a $20 cover price. How is that $20 parsed out?
- The production costs (12.5%) – $2.50. If you have paid for services such as editing, design work, and typesetting you can adjust this number upwards by factoring in their per unit cost. But production costs are one-time expenses and with additional printings the calculus will change so it is often easier to omit these costs in figuring your cover price. If you are printing strictly print-on-demand, work them in to the price.
- The middle men; specialty stores (25%), bookstores (40%), wholesalers (50%), distributors (55%) – $5.00, $8.00, $10.00, $11.00. There are many places readers are going to find your book for sale and each link in the delivery chain will charge a little bit different amount for carrying your book.
- Promotion (20%) – $4.00. The marketing budget will depend on a wide range of factors including the difficulty of the selling job, the creativity of the promoter and the monies available.
There is flexibility inherent in each of these cost centers but let’s call it $3.00 for production, $9.00 for distribution and $4.00 for promotion. For a self-publisher that leaves a $4.00 return for the book. For publishers paying out a royalty to authors that will cost another $2.00 – $2.50.
A quick word about that book price
In the publishing world, that $20 price is $19.95. What is the deal with that nickel? Everyone knows it is $20. And even if publishers try to make it look like the book costs less than $20 it will end up costing more than $20 with sales tax. Why perpetuate the charade?
- Consumers ignore the numbers after the decimal point. Westerners read left to right and the first number they encounter tends to anchor that price in the consumer’s mind. Book buyers are making fast judgements – 19 is less than 20, 12 is less than 13, 2 is less than 3. No one is rounding up to the higher number. No one ever accused humans of being rational creatures.
- Customers and retailers live in a world of categories. A $21,000 car is not that much different than a $19,000 car but the perception of that two thousand dollars is a lot greater than the cash differential. And a book selling for less than $19.95 is an entirely different purchase decision than one selling for $21.95. In an online world of search engines books are also segmented by price.
- It just looks like a deal. Admit it. You see .95 or .99 and you just feel like the retailer is doing the best they can to give you a good buy.
- Don’t make waves. You can pooh-pooh all the mind tricks and price your books at a nice round number. Some will applaud your clear-headedness. Or even use a strange number – $19.43. That may say to buyers that you are pricing the book as low as you possibly can for their benefit. But retailers have been employing this sales tactic for over a century and are you willing to introduce an element of discomfort in your potential book buyer?
Time to look at the marketplace
In our example the book posted a return of 20% using traditional industry formulas. You can set it and forget it but one size does not fit all. Turn to the market to further refine your pricing strategy:
- See what the competition is charging. Place your book in a broad category of similar titles and take note of what prices these books carry. Then make sure you slot your book’s price somewhere in the range. You do not want to go too high and price yourself out of the market and you do not want to go too low since that will devalue your book in the book-buying eye. Make your price what your target audience is expecting to pay.
- Compare apples to apples and books to books. Do as much scouting as possible in a bookstore and not online. That way you can get a sense of the quality of competing books – the binding, the size, the paper stock – that may account for a price that looks to be outside the expected range in your market niche.
- Narrow your target market. And you do have a market niche, right? Tailor your price to those you know will be buying your book. If your subject matter is upscale, price the book accordingly. Customers expect books on wine to be more expensive than books on metal detecting. If your book skews towards a teen market you are going to need a lower price than if it was aimed at homeowners. If your book contains specialized information that is difficult to find elsewhere, put a much higher price on your book than an industry formula would dictate. And so on. You know who you wrote the book for, make sure you set the price for them.
Review of pricing print books
Book buyers do not care about all the sleepless nights it took to write a book or all the costs involved in producing a book. They only know how much the book is potentially worth to them. It is your job to ferret out that value and it is the cover price that will convey that perceived worth of the book. Start by factoring in your costs to set a ballpark price and adjust for market conditions to settle on a final cover price.
Until the rise of electronic books there was not much gray area in the art of book pricing. A publisher put a price on a book and the customer decided to buy the book or not. But the digital landscape laid siege to book publishers on every front. In the beginning publishers released ebooks with prices close to the print editions – after all everything that went into producing the book was mostly the same except the paper. Consumers, however, balked at paying virtually the same amount of money and not getting a physical product.
Then Amazon created a market for ebooks with its Kindle ereaders. And the online retailer decided it would tell publishers what it was willing to sell those ebooks for – no more than $9.99. Publishers screamed and sued. Authors moaned and boycotted. Consumers waited for the dust to settle.
The upshot is that only a select few ebooks, mostly from major publishers, are sold for more than $9.99 on Amazon Kindle, where some 70% of ebooks are bought. You can sell ebooks direct to readers on your own website for whatever the market will bear and maybe higher on other distributor sites but for all intents and purposes the price ceiling on ebooks is $9.99.
With ebooks it is possible to get a little more scientific in your pricing technique since you can change the price with a few mouse clicks. Start at $9.99 and track the sales. Run short-term tests by changing to different price points and find out where the sweet spot is for your ebook.
Try to conduct test marketing in the most comparable scenarios. For instance, online sales traffic is higher on weekends so try to measure results from price drop experiments only on similar days.
How to set your ebook price on Kindle
The Amazon Kindle author compensation schedule is tiered so your goals regarding exposure and revenue will dictate where you slot your ebook price. The tiers are:
- $2.99 – $9.99. Amazon pays 70% of the cover price for ebooks costing between $2.99 and $9.99. Also be aware that if your book is lengthy the file size might force you to charge a price in this range even if you wanted to gain wider distribution at a lower price point.
- $0.99 – $2.98. For ebooks sold in this range the return to the publisher is 35%. The advantage is many more sales and a boost in Amazon rankings. But clearly you will need a mighty big reason to price your book above $1.99 or even the base of $0.99 and not make it $2.99.
Incidentally, other retailers such as Smashwords, Apple, Kobo and more offer returns that are the same above and below the $2.99 threshold. But because Amazon’s Kindle is such a major player in the ebook world so many publishers made $2.99 their ebook price that it became the standard for many ebook buyers. They are so used to seeing $2.99 ebooks that you price yours much higher than that at your peril.
What about Free?
There are many sites, such as Smashwords, that will allow you to publish and distribute your work for free. With Amazon if you sign up for the Kindle Select Program (requires you to give Amazon exclusive distribution rights to your ebook for 90 days, among other things) you can run special pricing promotions including making your ebook free for five days each quarter. Why would you do such a thing?
- Maximum Exposure. Again, if you are writing a book because you want people to read what you have to say, free is even more popular than a low price of 99 cents. It is not unusual to give away thousands of ebooks in a burst during a promotional period.
- An advertising tool in a publicity campaign. By announcing that your book will be free for a specified number of days you can drive potential influence leaders to get a hold of your book and then help spread the word on their blogs and social media sites.
- Build momentum for a series of books. If your book is part of a series of books or you plan on writing upcoming books, freebies can jumpstart interest in your work. It is also possible to create a bite-size version of your book as an ebook and give it away free or sell it for $0.99 to promote the larger work.
Book pricing is a balance between seeking exposure and revenue. Although not always the case, generally the lower the price the more books you will sell. But that lower price might not return the money you desire. You need to determine a range of prices into which your target market expects to find a book like yours and then it is up to you to decide if you want “as many readers as possible” or “as much profit as possible” in nailing down a final price.