The Business Rusch: Pricing (Discoverability Part 7)
I dread writing this blog. Every time I discuss price, free, or discounts, I get carpet-bombed by people who treat price like a religion. Whether that price is free, a 99-cent e-book, or a $45 hardcover, writers seem to “know” what price is too much and what the market will bear. They base this knowledge, not on a study of pricing, but on their gut or their friends or their own price prejudices.
In addition to the fact that I get carpet-bombed when I discuss this topic, I’m also traveling this week to a place with a marginal internet connection. I’ll be able to put up comments, but the last time I was at this particular place, I wasn’t able to answer e-mail or work for a long time on the website.
So, if you have questions, they’ll probably go unanswered. Honestly, that’s probably the best for me, but not so great for you. And I’m sorry. Also, if you’re going to comment, please see the assumptions I’ve listed at the end of this piece. It is Part 7 of a series, after all, and you need to read the rest of the series to know where I’m coming from.
Whew. That’s a heck of an introduction. Okay, here goes:
I promised last week that I’d discuss methods to get your work discovered, moving from passive techniques to active ones. Passive techniques are, essentially, ones that work whether you know the customer or not. You have to do initial work, as in designing and branding your covers (last week’s topic), but after that, your effort is more or less done.
Pricing is similar. You need to make initial decisions, and occasional changes, but for the most part, once you make your decisions for your business, you are done until something major happens.
Pricing is not something you do by gut instinct or what your best friend tells you or how the people on your Facebook page react to the price you set. Nor is it something you should just trust to your friends on writer boards.
Pricing is a major field of study in both economics and in business. There have been more scientific studies on price and the impact of price on the consumer (on the business, on an industry) than anything else in retail. Price is extremely complicated, and people’s reaction to it even more so.
Remember, price is at the heart of the Department of Justice case against Apple and the traditional publishers. Price is important enough that parts of it are regulated, and regulated differently in different industries, and in different countries.
If you don’t believe me, just go to Wikipedia and start down the “price” rabbit hole. If you read all the links related to pricing, just on Wikipedia’s site, not the footnotes, you’ll lose the better part of an evening.
With that in mind, I’m going to discuss only those aspects of price that will bring more consumers to your work. I’m going to do this without linking because of the rabbit holes and because this information is out there. Much of it is basic economics.
If you’re in business, and you don’t understand basic economics, that’s like being a writer who has never read a book, but believes they know everything there is to know about storytelling.
Forget your economics classes from college. If they were anything like mine, the professors were hired after a search for the dullest presentation possible. Economics truly isn’t dull, and believe it or not, neither is pricing. Go forth, read. Learn.
That said, here we go on pricing and discoverability.
Here’s how you get discovered:
1. Set the right price for your work: As I mentioned above, this is harder than it looks. If you’re traditionally published, this has little to do with you—except that you need to remember this: the longer your book, the higher the purchase price will be. If you want an affordable mass market paperback for your readers, then write three 70,000 word novels instead of one 210,000 word novel. Yes, your readers will pay more in the end than they would if they only bought the big honkin’ book. But price is a factor only at purchase. Which means this: a consumer will hesitate before buying a fat fantasy priced at $12.99 in mass market paperback, but won’t hesitate to buy a single mass market one-third the size at $7.99.
Once the purchase is complete, and the reader is hooked on the novel, she’ll buy the next two at $7.99, because she wants them. Which means she will spend more in the end than if she hadn’t balked at the $12.99 mass market (which, you can now see, was an actual bargain).
Price is most important to the consumer at the moment of purchase. I’m not just referring to high prices. I’m also referring to low prices.
If a price is too high, you limit the number of consumers who will buy your book. Some might find value in that perceived high price, but most will not.
If the price is too low, the consumer believes something is wrong with the product. In fact, low-priced items get returned more and receive more complaints from consumers than overpriced items.
The price has to be just right. It’s the Goldilocks rule, and believe it or not, it’s not individual.
Prices work on three levels:
1. The industry level (the standard prices for everyone in the field; the prices the consumer expects)
2. The market level (the prices that competing works or similar works have in the same market)
3. The transactional level (the discounts on one particular product or with one kind of consumer, which generally occur at the moment of purchase)
Too many indie writers only operate on the transactional level, ignoring the first two. Traditional publishers work on the market level, ignoring the other two levels. In book publishing, the industry level is always there, but never really discussed.
So, let’s begin with the industry level. You need to know how traditional publishers price their books. Like it or not, consumers have a price expectation on books, and that expectation is set by traditional publishing. Hardcovers can and do cost $25-30; trade papers generally run $14-18; and mass markets $7-10. These prices have remained relatively stable for the past ten years.
The problem in pricing has come from electronic books, not because indie publishers made things cheap, but because consumers are smarter than everyone realizes. Consumers know that a paper book has costs. They hold that paper book in their hands, feel the pages and the ridged letters on the spine. They know that item had materials.
They also know that the book was written by someone, and edited, and formatted in some way. But consumers also know that once a book is formatted and uploaded onto various electronic devices, there is not a massive per-unit cost, like there is with paper. There is a per-unit cost, more like a rental space, for the digital files, but it didn’t cost trees and printing and binding and shipping and shelf space.
So, consumers balked at paying $20 for an e-book at the same time as the hardcover. However, as this new side of industry has stabilized, consumers have shown a willingness to pay more than $10 for an electronic book, as long as that electronic book is two things: 1) the cheapest edition available and 2) a brand-new title. Once the title is older, then the price needs to go under $10, but not significantly under $10.
In other words, electronic book prices have started to stabilize for novels between $5-$10 for backlist and $8-$12 for front list.
Industry standard is something you as an indie writer need to pay attention to. You don’t want your possible consumer to ask who the hell you think you are when you charge more than $15 for an electronic book, nor do you want that consumer to ask what’s wrong with the content when your electronic book’s normal price is under $5.
That’s e-books. Paper books, which remember, you need to do for discoverability (see the assumptions, below), must be priced properly. You need to make at least $2 on your paper book, and possibly more. But if you want your book to go to traditional bookstores, like Barnes & Noble and Powell’s, you need to price that book the way traditional publishers do.
Not to be like those publishers, but so that everyone else in your supply chain makes their usual profit off the books.
Here’s something most indie writers don’t know, something we will discuss more in future blog posts on this topic. If you click extended distribution in CreateSpace and fill out the proper forms on Lightning Source (not deep discounting), then you will get into the catalogues offered by traditional distributors like Ingrams and Baker & Taylor automatically. Traditional bookstores order 99% of their books through these venues.
However, if your prices are too low, Ingrams and B&T won’t put your book into their catalogs at all, even if you clicked extended distribution. Why? Because they can’t make their usual percentage profit on the book. If they can’t make their usual percentage, then they can’t sell the book at a discount to bookstores. Bookstores need to buy books at a discount so that they can then sell the books to readers at the book’s suggested retail price. If there is no profit margin on that book for the bookstore, then the bookstore won’t carry your book either.
So, when you hear indie writers complain that they have POD books through CreateSpace and Lightning Source, but those books never show up on bookstore shelves, you have to look at a few things. Does that book have a good cover, blurb, and story? If so, is the price too low? Because the low price, more than almost anything, will keep a book off bookstore shelves.
Why do you want to be on a bookstore shelf? God, do I have to answer that? Because over 80% of all readers buy paper books. So, if you’re not putting your books into paper, you’re cutting out 80% of the market.
And if you price your books wrong, you’re still cutting out 80% of the market. Got that?
After you’ve done all the production, uploading, design, storytelling, and everything else right, price is the most important thing to do.
Set a price range for your publishing company. Hardcovers should run between x and y, depending on size; the same with trade papers. E-books should have a price range as well. The best thing to do is to use industry standard pricing for the suggested retail price of your book. It’s easiest.
Note I use the term “suggested retail price.” It’s not firm. Amazon will discount you, so will Barnes & Noble. If you’re lucky enough to get into some other chains like Wal-Mart, they will discount you as well.
But they’ll discount off the suggested retail price. You need some give there. (And for god’s sake, don’t complain about standard retail practice. That’s how business works.)
Here’s the other things you need to do on setting the right price:
1. Your newest book should have the highest price. The demand will be highest for the new work, so charge at the top of your price range for it.
2. Have a standard price for backlist. Use that price for works that are not new.
3. When your next book comes out, decrease the price of your most recent book to that standard backlist price. In other words, when you’ve released Book J, reduce the price of Book I to the same price as Book H.
4. Make sure your hardcover costs more than your trade paper, your trade paper more than your e-book. (Of course, most indie writers under price, so I have no idea why I’m even putting that here.)
5. If the industry makes price shifts, make sure your prices reflect those shifts. Usually, the shifts are in an upwards direction. Even if it feels bad, raise the price on newer titles to reflect the shift.
6. Do not underprice your books. Let me repeat that louder: Do not underprice your books. Do not set your suggested retail price for a novel in ebook format at $2.99. Do not do it. If you look at what has become industry standard, $2.99 is the price that most traditional publishers are charging for short fiction, and most consumers (outside of the tight world of indie writers) are paying that price. I am not talking about specials here or discounts or anything. I am talking about the suggested retail price for the book. Or what most people call full price. Your full price should be, at minimum $6 for a novel in ebook. Minimum.
The worst thing you can do as a business person is under price your product. Perceived value goes way down, for one thing. Your profits do as well. But that’s less important than the things I mentioned above. If you underprice your paper books, your book doesn’t get into most retail markets. If you underprice your ebook, then you can’t offer the kind of discount pricing that makes a book attractive to a consumer—and we’ll get to that below.
2. Set the right price for your work overseas. You need to take into account currency fluctuations and pricing prejudices in other markets. The ebook markets have ways to help you price properly. When Amazon first started to go into non-US markets, we only had one choice on pricing. We set our price in the States, and then Amazon would mark the book overseas at whatever the equivalent price was in pounds or euros. That led to ebooks being priced at things like 1.17 Euros and weird stuff like that, which of course, made consumers balk.
Kobo, iBooks, and Amazon now allow you to set your price per country, and I suggest you do so, using the same rules as in point one. Each country has different price prejudices, and honestly, life’s too short to learn them all. But at least you can price your books in the same way that other publishers do, rather than some weird-looking price that automatically makes the consumer aware of price instead of clicking the “buy” button.
Yes, changing the price to reflect other currencies will often raise the price of your book. Ah, well. Consumers will pay for those books anyway. Since WMG changed its prices on my work to reflect various currencies, my overseas sales have increased. Yours will too.
Discounts aren’t something you do willy-nilly or because it seemed like a good idea at the time. Here’s the thing most writers don’t understand.
You don’t offer a discount to get someone to buy your book.
Got that? The discount exists for other purposes. The fact that the consumer buys your book at discount is a side effect of your promotion, rather than the reason for the promotion itself. The only exception to this in discounting is when a retail store has ordered too much inventory, and wants to get rid of it. Then they discount that inventory that isn’t selling to get it out of the store forever.
Consumers know this: that’s why they don’t pay a lot of attention to discounted items (unless they need that particular item, and even then, they might not buy something discounted).
Why would you use discounts to promote your book?
Here are just a few reasons.
1. You want to build readership for all of your books.
2. You want to build readership for a particular series.
3. You just released a new title, and you want readers to sample your older work so that they will then buy the new title at full price.
4. It’s Black History Month and your protagonists are African-American and/or your books are set in the Harlem Renaissance. In other words, there is a real world reason to run a promotion at this particular time. (Downton Abbey just premiered so you discounted your World War I historical. See? Stuff like that.)
5. It’s the slow season (summer, for example) and you want to goose all of your sales just a little.
And so on.
You need a strategy, every time you discount.
Before you discount anything, you need to:
1. Have more than one book published. You discount book one in your series so that people will buy the rest of the series at full price. If you do not have any other books, then write more. Once you have at least three books, then you can start contemplating a discount on the first book. But only then. Because if readers like your discounted book, they will often buy more. But readers don’t’ remember author names if they encounter that name only once. Even if they have read one book by that author. So asking the reader to wait and remember doesn’t work.
2. Place a time limit on the discount. One day, one week, one month—but nothing more than that. In fact, one month might be too long, except in something like the Black History Month promotion. Offering your book at a discount is one of the very few times when you work off the old publishing model of velocity. Actually, it’s the Buy Now! Before It’s Too Late! model of retailing.
3. You do not offer the same discount again for several months. Because it subverts #2. Think about it.
4. Offer a good discount. That means you need an industry-standard suggested retail price. The bigger the discount, the more likely the reader is to buy—except in one area. Free. Free has its own problems and pitfalls. Right now, I’m not discussing Free. I’m talking discounting from full price to half price or more. We’ll discuss free next week.
If you don’t believe me about having a proper suggested retail price and then offering a good discount, look at this post by the good folks at BookBub. They have empirical evidence on this topic. (Of course, so does every single business book about pricing, but I know you guys ignore that stuff. [Yes, your sarcasm detector just went off]). They wrote:
…we ultimately found that the size of the discount does make a difference….The effect was magnified when we isolated our analysis to titles that had all been reduced to $0.99. The only price difference between these books was the original price, and of course a title that is marked down from $7.99 is more steeply discounted than one that typically sells for $5.99. Once again, the data suggests that readers may respond better to titles that are more steeply discounted, even if the deal price is the same….
They have lovely charts and graphs and everything else. What’s fascinating to me about BookBub’s site, is that they assume that book publishers don’t want to offer discounts—and you know what, they’re right. Because most places understand that discounting is a weapon that should be used sparingly, with lots and lots of forethought.
You need a marketing plan whenever you offer a discount. And then you need to test that discount.
What do I mean?
In 2013, WMG Publishing and Sourcebooks tried various book discounts on several of my series titles. WMG always used the first book in one of my series. Sourcebooks seemed to just use old backlist titles, without care as to what they were.
Most discount promotions through a major retailer (like Amazon or Kobo) really didn’t have much effect. Big discount promotions done directly to readers, like Book Bub, had a strong effect—so strong, in fact, that we could see the wave of readers flow through the rest of the series like a mouse being digested by a snake. I’ll be discussing these kinds of promotions more in a different part of this discoverability series, but here’s the takeaway on the price side.
When you experiment with a discount, make sure you then watch to see if the discount had long-term effect on sales—not just of the title you discounted, but of the other titles related to it (either in a series or under the same pen name or in the same genre). Test your promotions. Just because you goose the sale of one book for a weekend doesn’t mean the discount worked.
Again, you don’t offer a discount to get someone to buy your book.
You offer the discount as part of a marketing plan that should have an impact on your entire business.
Put another way, if your entire business is one book—and that book is fiction—then your discount hurt your profit margin and gained you nothing. (This technique works better for non-fiction, which we are not discussing here.) If your business includes several books, then the discount might actually improve your profit margin.
Ack! I know. I just discussed profit margin at the same time as discoverability.
Most writers never think in those terms. They want readers to read their one book, logic be damned. I want writers to build long-time readership, to become an automatic buy for readers, so that the new book, priced higher than the older books, gets pre-ordered no matter what the price. (Yes, we’ll discuss pre-orders later.)
As I mentioned, pricing is complex, and I’ve only just touched on it. I’m at my word count, so I’m going to continue to discuss pricing—and free [sigh]—next week.
It feels so weird to discuss price when I offer this blog for free with a donation button. But honestly, that’s a pricing strategy. I decided I want the information available. In this market—on my website—I have decided to let the reader decide the price, based on what the reader can afford and whether or not the reader finds any value in what I’m doing.
This pricing strategy has kept me writing the blog for nearly five years now. However, it also means that a select few are supporting this blog for the rest of you. I’m grateful to them. They’re great people who deserve our thanks. They have mine.
I do appreciate the payment that comes in other ways—through e-mails and links and forwards, not to mention the loyal readers.
Thanks, all of you!
“The Business Rusch: Pricing (Discoverability Part 7)” copyright 2014 by Kristine Kathryn Rusch
Please Read These Assumptions Before Commenting:
I’m going to make some assumptions in the next group of blog posts, and I’ll repeat those assumptions each week until I’m done.
Assumption #1: I’m going to assume you’ve read the previous posts, beginning with this post here.
Assumption #2: With only a few exceptions, we will be talking about fiction here. There are promotion techniques that work for nonfiction—even on the first book—that do not work for fiction. I don’t want to muddy the waters here. We’re discussing fiction in these posts.
Assumption #3: You have learned your craft well enough to intrigue readers. You know how to tell a good story, you have grammar, spelling, and punctuation under control, you create interesting characters, and you write what you love.
Assumption #4: If you have indie published your work, then your work has a good blurb, a great cover, and a well-designed interior. Your work is available in ebook and trade paper formats. (I also hope you have audio books, but for our purposes here, I’m not going to assume it.)
Assumption #5: If you have indie published your work, your ebooks are available in every ebook venue you can find. Your paper novels are in extended distribution on CreateSpace or Lightning Source. In other words, if a bookseller whom you don’t know and never will know wants to order your paper book, that bookseller can call up a catalogue from a major distributor (Baker & Taylor, Ingrams) and order your book at a bookseller’s discount.
Assumption #6: If you are traditionally published, your books are with a company that makes the books available in e-book and paper formats, and your books are still in print. (If they aren’t, ask for those rights back and then publish the books yourself.)
Assumption #7: You have at least a minimal web presence. You have a website that readers can easily find. You have a list of your published books somewhere, also findable. You have some passive marketing in place. (A mailing list, a social media presence, or a contact button on your website. Something.)
Assumption #8: You have published more than one book. Most of what I tell you won’t work on one novel. You’ll need several—or at least a novel and some short stories. If you’re haven’t published much, make sure you’ve done 2-7, and write the next book.
Assumption #9: You will finish this discoverability series before you decide which of the things I mention is for you. Because one of the last posts I’m going to write is how to measure success. That should have been one of the first posts I wrote, but of course, I write out of order, and so it’ll go at the end. [VBG]
Those are the assumptions.
Now, I have one big WARNING:
Everything I say here, everything, MUST take place after you’ve finished writing your story/book/novel. Do NOT take ANY of this advice into your writing office. None of it. Be an artist: write what you love. When you’re done, then worry about marketing it. This new world of publishing allows us to write whatever we want and publish it. Please take advantage of that. When you write, be an artist, be a great storyteller, not a marketer or a salesperson.
I know, I know. Lots of warnings and assumptions. But I had to be clear, because these points are extremely important. I won’t get to everything this week or even the next week. So…you need to be on the page that I’m on to understand what I’m talking about.