Pricing: There is No Magic Bullet (Self-Publishing Roundtable (2/6))

(As a reminder, this is part two of the series discussed here.  This series was originally concieved to be part of a roundtable discussion, so don’t be afraid to comment, disagree, offer new suggestions, etc.)

INTRODUCTION

I’m on a lot of blogs and facebook groups for people interested in self-publishing.  One of the most commonly asked questions, in some form or another, is “What should I price my book?”

It is a complex issue, and every veteran self-publisher seems to think they know the answer.  I won’t say I’m all that different, but I will admit that I only think I know the answer.  With so many things to consider when deciding on a price, I don’t think anyone knows the right answer for everyone.

In this roundtable post, I’m hoping to identify as many of those things you need to think about as possible.  My goal isn’t to tell you what to price your book; in this business, things can change so fast that any prices I recommend could be obsolete tomorrow.  Rather, I want to give you what you need to consider when trying to set a price yourself.

STATS:  WHY THEY DON’T SAY WHAT YOU THINK

There is a lot of data about e-book sales out there, but little of it is convincing.  A lot of it is raw or poorly interpreted.  Some of it seems to say one thing, but says something else entirely.  And some conclusions can be drawn from these surveys, but rarely should they be drawn univerally across all books.

Take, for example, the Smashwords Survey.  One of the most commonly cited surveys giving statistics on sales based on things like title length, price, book length, etc.  All important information.

Unfortunately, some things need to be taken into context when considering that data  It refers to a “subset” of ALL books published through Smashwords and distributed through its affiliated bookstores.  Which means:

  1. It does not distinguish any of the data by market (Barnes and Noble, Kobo, Smashwords, etc.).
  2. It does not distinguish any of these stats by genre (Science fiction\fantasy, Thriller\Mystery, Romance, etc.).
  3. It does not distinguish many of these stats by the author’s prior publishing experience (new author, veteran self-publisher, transitioning from a trade publisher, etc.).
  4. With regard to pricing, it does not distinguish books by length (short story, novella, short novel, novel, long novel).

Different markets are more successful at different prices; different genre are more successful at different prices; more experienced authors can can sell books successfully at higher prices than less experienced authors; longer books can sell successfully at a higher price than a shorter book.  All of these things matter.

Take, say, genre as an example.  The Romance genre has, historically, been a genre that sells a large bulk of low-priced books.  Higher priced books in the romance genre rarely sell well.

But the audience for mystery novels typically doesn’t buy low-priced books in bulk.  There used to be a pulp detective audience, but that market has dwindled.  Sell a mystery novel at the price that you sell a romance novel and you won’t get the same bulk sales that Romance novels do.  In fact, there is some evidence that modern Mystery readers would avoid that book, thinking the lower price suggests inferior quality.

So if the Smashwords survey tells you that more ebooks sell at $3.99 than at any other price point, that’s probably true.  But when you consider that the bulk of those sales are Romance novels, should you — as a Mystery writer — take that as gospel?

Amazon’s KDP program offers a pricing tool.  So far, I have yet to determine what formula they use to suggest book prices; if I were to follow Amazon’s advice, however, I would raise the price of all of my books by $1-2 to maximize income.  This would put my books well past the price that the various surveys suggest books sell best at… but then, I have yet to find any surveys on how successful Amazon’s pricing tool is.

So, for now, I stick to the prices I’ve already set.  Those prices seem to be working out, so far, at least .  I could possibly tweak the prices either way, for a multitude of reasons, but there we get into…

DIFFERENCES IN PHILOSOPHY

When a self-published author is setting the price for their books, they need to decide what their sales philosophy is.  Are they aiming to sell massive quantities of their book in bulk, hoping to make up for low prices through sheer numbers sold?  Do you want to be able to have promotional discounts (sales)?  Are you only releasing this book to build up your platform?  Etc., etc.  There are lots of things to think about before you set your price.

  • Do you believe you have produced a professional-grade product?
  • Are you interested a pulp sales (sometimes called a discount) model? (Hint:  If you are writing romance, your answer should be “yes.”  If you are writing science fiction\fantasy, your answer should be “maybe, depending on how fast you write.”  If you are writing mystery\thriller, your answer in this day and age should be “no.”  If you’re writing in some other genre… uh, I’ve got no idea).
  • Would you rather expand your marketing possibilities but reduce your potential customer base (by going exclusive with Amazon and signing up with KDP-Select), or would you rather have a broader customer base but fewer marketing opportunities (spreading your books through Nook, Kobo, iBooks, Smashwords, DriveThruFiction, Libiro, etc. in addition to Amazon)?

There are some writers who don’t believe they’ve produced a professional grade work, but who self-publish anyway.  Some are just out for a quick buck (most of those don’t make much), but others view this as a “practice” effort.

If you aren’t going to charge anything, and you don’t think your writing is at a “professional” level, you’re better off posting your work to a free distribution site like Wattpad or Fictionpress.  That’s where practice pieces are expected, and there is little or no risk to your reputation posting there — in fact, it can be a stepping stone towards building your fanbase for future professional-grade material.  If you insist on charging money for your practice work, however, the price needs to reflect that.  Of course, that means that when you do start producing what you consider “professional grade” work, you will need to raise your price accordingly… and hope that your reputation is strong enough that people will buy the higher-priced work.

But some people lower their prices for reasons other than the quality of their work.  Lower prices can also be a smart business decision, too, and are a requirement for pulp sales models.

What I’m calling a pulp sales model (some call it a discount or bargain sales model) relies on trading low prices for bulk sales on a large number of books.  If you are a very fast writer, and you think you can release professional-grade books at a fast enough pace pace (say, for example, you can consistantly release a new full-length novel every month), you’re probably ideal for the “pulp” model.  To keep up those bulk sales, you need something “new” and “fresh” released all the time — it doesn’t really have to be every month, but you do have to be able to manage a pretty quick turn-around.

It can be tiring, but if you can pull it off (and it’s hard to believe for slow writers like me, but there are writers out there who can) this method of pricing can be very rewarding.  A lot of self-publishers are making a living with this model.

Trade publishing, on the other hand, likes to price new-release eBooks very high — above the cost of a paperback — in order to encourage people to buy the print copies instead.  Then they gradually reduce the price for people who refuse to buy a book at that high of a price, until a year or two after they’re released the prices are down around the level most Indie models keep them.

I’m not sure what it is formally called, but some self-publishers succeed using what I would call a “modified trade” model.  Basically, you charge the maximum amount you’re comfortable with on your book (ensuring it is large enough that a discount matters).  Once you get book two or three out, you start discounting book one.  By book three or four of that series, you make book one free.  With each “phase”, you’ll open your books to a whole new customer base, some of whom will buy all of your other books once they’ve read the first.

Whatever sales model you use (and there are more models than the ones I’ve listed here), you have to decide on the exclusivity issue.  Exclusivity with Amazon can effect your prices.  I would argue the largest impact exclusivity has on price is on print sales (which we’ll go into below), but there is one point to consider:  Going exclusive through Amazon allows (and only makes sense with) participation in the Select program.  The Select program offers the following:

  • Automatic Enrollment in the Kindle Unlimited program, one of several attempts to create a “Netflix for Books”
  • The ability to discount your book for a limited number of days over the course of the 90 day enrollment.  Please note that discounts are only possible if your book is priced over $0.99.
  • The ability to make your book free for a limited number of days over the course of the 90 day enrollment.  This ability is unaffected by price.
  • The ability to purchase KDP Select ad campaigns.

Kindle Unlimited is a virtual library program Amazon offers.  In it, customers pay a flat fee to be able to “borrow” up to ten books in the program at a time.  The authors used to be given a flat fee when 10% of the book was read.  For many authors, this was a very hit and miss prospect, and a number of them were dissatisfied enough to leave Select over it.  Some people were taking advantage of it by “serializing” long novels, or publishing extremely short stories, as you got paid the same amount for someone reading 10% of a 100 word flash fiction and 10% of a 100,000 word novel.  It also ignored how much you charged as a cover price, so reading 10% of a $0.99 flash fiction gave the author the same amount of money (in some cases, more than the cover price) as the author of a $9.99 novel whose book some borrower read 10% of.

Very recent — and controversial — news has come out declaring a complete revamp of how Kindle Universe handles payments for borrows.  There is no real way of knowing how much the new system will change things, but it’s pretty much guaranteed that it will change things.

And that isn’t the only incentive the KDP Select program offers that is of dubious value — the KDP Select Advertising program hasn’t yet built a track record that makes it seem all that useful.  It’s still very new, however, and I am confident that someone has had some success with it, somewhere — otherwise, I doubt it would exist.

That leaves the two more useful things KDP select offers — scheduled discount days and free days.  And these are biggies — most of the more successful advertisers out there (BookBub being the best known and most successful) require you, or at the very least strongly encourage you, to have a “price promotion” (a discount, sometimes all the way to free) every time you run an advertisement with them.  It is technically possible to do these promotions without KDP Select, but it adds layers of complications.

For this to make sense, you must price your book high enough that a discount, in fact, is recognized as a discount.  If you’re charging $0.99, you simply can’t discount (outside of making your book free).  If you’re at $2.99, any discount halves your royalty rate (so you will need to make at least double your normal sales just to break even).

As always, I’m not trying to tell you how to price anything — I’m just giving you things to consider.

COMPETITIVE PRICES

I’m mostly using print pricing for my examples, here, but the point stands for every form of published work (or any product, for that matter):  You need to know what books similar to your own are priced at.  This means Trade publications, not just other indies.

One of the things some self-publishers find hard to understand is what their print books are actually competing against.  I have seen authors horrified that Print-on-Demand books are so expensive, judging them against the price of Trade publishers’ Mass Market Paperbacks.  These self-publishers believe they can’t put them in Expanded Distribution because it forces the price too high, or even that it’s so expensive there’s no point in producing a print book at all.

This is a mistake on their part.  They’re comparing apples to oranges.  Full length novel-sized Mass Market Paperbacks (MMPBs) have list prices (I used to have a links, here, but they no longer distinguish MMPBs from other types of PBs, so that is temporarily removed) that run between $7.99 and $9.99 (please note we’re talking list price, here, so look for the crossed out number).  The minimum price for a (roughly) 350 page Createspace-printed novel (the equivalent length of several of those novels) in Expanded Distribution runs somewhere between $12-13, wholesale (leaving no room for profit for the author, mind you).  (Note:  To clarify, by “wholesale,” I mean for people to purchase from expanded distribution.  You will still be buying your book at the same wholesale price, whatever distribution service you use or price you set).  So, it would seem impossible to match a Createspace-printed novel against Trade and enter it into the Expanded Distribution program.

What the people who use this line of reasoning don’t consider is that POD books are not MMPBs.  They are Trade Paperbacks.  MMPBs are intended to be cheaper and more disposable, while Trade Paperbacks are intended to be lasting and collectable.  There are differences in size, paper quality, and more.  The production of a Trade Paperback is more expensive than a MMPB, and so the prices of Trade Paperbacks are higher.

If you look at a similar list of trade paperback costs, you’ll find that list prices tend to run from $15-20.  Now, with POD, if you want to avoid exclusivity with Amazon you probably will be required to price it in the middle to high range of that; otherwise, Expanded Distribution won’t mean anything (for reasons which we’ll go into more, below), but even if you remain exclusive you aren’t gouging your customers if you price at the low end of that window.

Now, when it comes to eBooks, your competition is all over the map.  Other self-publishers might publish brand new novels as low as $0.99 or even free; trade publishers frequently publish new novels in ebook form at $12.99 (I’ve seen them higher, in fact, but this is a fairly common price point for Trade publishers) but will price their backlist titles all over the map.  Amazon strongly encourages self-published writers to price between $2.99-9.99.  And if you’re doing non-fiction or textbooks, the price range gets even wider (from Free into the hundreds of dollars).

There are people who will not buy your book if it is more than a certain amount (say, for example, $5).  There are also people who believe if a book is priced for less than a certain amount (say, for example, that same $5) they must be priced that low because they are an inferior product, and hence are worthless.

I won’t say the numbers are equal, but there’s enough variation between the groups that, perhaps, the number of customers lost by pricing higher can be made up for by the higher prices of the books.  (This is debatable; I’ve seen surveys which disagree with this assessment.  As the earlier section on stats mentions, however, those surveys aren’t definitive.  They (a) do not distinguish by genre and (b) were conducted by a self-selected audience of book-bargain hunters.  The numbers they talk about are probably correct if you’re selling at a promotional discount, but beyond that….)

So what I’m saying is, with eBooks, don’t be afraid to price your book at, well, whatever you feel is reasonable.  If the quality shines through, you’ll find readers who will buy it.

EXPANDED DISTRIBUTION’S LESS-OBVIOUS COSTS

I mentioned, above, that books sold through expanded distribution must be priced on the high end of Trade Paperback prices in order for expanded distribution to be worth anything, and that I would explain why, later.  Well, it’s later.

Please note:  The numbers used in this example are all fictitious, but are close (probably within rounding in most cases) assuming you have  your book printed and shipped inside the US.  Amazon is said to outsource printing in other countries for their Expanded Distribution chain.  What effect this may have on sales outside of the US I don’t know.

When you are selling a Createspace-printed novel without Expanded Distribution, Amazon will sell it even if you set a price that pays you nothing in return.  The reason it will is that all of its expenses and all of its profit are accounted for in their minimum cost.  Say, for example, that the minimum price, no expanded distribution, of your book was $8.  $5 (roughly) would go to Createspace — the wholesale cost of printing your novel.  The remaining $3 goes to Amazon.  This $3 is profit for Amazon, but frequently would be dipped into for Amazon’s discounts or to cover the cost of the “free” shipping some customers get.  This ‘profit’ is, therefore, not guaranteed; $8 is approximately their worst-case-scenario break-even cost; they only make a profit on something better than their worst-case-scenario.

“Expanded Distribution” costs more, however, because there are more people trying to pull money out of that purchase price.

Createspace Expanded Distribution offers three potential channels in addition to the Amazon.com channels:

  • “Bookstores and other Retailers” (this is actually Ingram, which is the largest book distributor in the United States; possibly the world, but I’m not certain about that.  However, this gets you listed, at least for special or online orders, in bookstores like Barnes and Noble, Books-A-Million, and Powells)
  • “Createspace Direct” (this is a wholesale distribution service run by Createspace itself.  It claims that independent bookstores and book resellers use this service, but I cannot find verification that anyone actually uses it)
  • Libraries and Academic Institutions (this is actually Baker and Taylor, the second-largest book distributor in the US (an increasingly distant second).  This service is only available if you use a “Createspace-assigned” ISBN.  I’ll go into ISBNs in a later post, but unless you’re doing high-price textbooks this option is unnecessary; anyone who uses Baker and Taylor as a distributor is just as likely to use Ingram)

Which of these services your bookseller or library use to acquire your book is irrelevant; all that matters is that, if you are trying to get people (or libraries) to buy your book, they must go through one of these services first.

So, take that book which had a worst-case break-even of $8 going through Amazon.  Well, if a distributor buys that book, Amazon still gets its $8.  Then the distributor’s cut is added onto that — say, another $3, just to make it consistant with Amazon’s cut.  Also, there are shipping costs (add an average of $4, though it can ship for a little more or a little less) that are tacked on to the price.  That brings the cost up to $15.  And that’s before the bookstore gets to sell it.  Your profit and the bookstore’s profit are split on top of that.

To make the bookstore to want to put it on his shelf (and this does not guarantee he will put it on his shelf, mind), he needs to make a profit.  Kristine Kathryn Rusch suggests that minimum profit needs to be $2, but I imagine that’s up to your local bookstore.  Regardless, if you aren’t making a profit, your bookstore isn’t making a profit either.  So, just for argument’s sake, add $4 ($2 for you, $2 for the bookstore) to that $15.  Then drop a penny, because it looks nicer.  $18.99 — on the high end for a Trade Paperback, but still within the range of prices you can find in stores.

Now, these numbers are — admittedly — fictional; the real numbers would never be that clean (that $8 figure would probably be $7 and change, for instance; the shipping is a variable number; the cuts going to Amazon and the Distributor are percentages, etc.).  You could probably knock a dollar off that price in real-world numbers and still get that $2 bookstore profit.  You might, if your printing costs are high (due to illustrations or whatnot) have to add another $1 to get to that level.  Regardless, if you want to be on a bookstore’s shelves, you need to price it at the higher end of the Trade Paperback costs rather than the lower.

And if you don’t want to be on a bookstore’s shelves, why are you bothering to put it through Expanded Distribution, anyway?

CONCLUSION

I have seen discussions about pricing in fiction become quite heated.  The thing is, as my subject title suggests, there is no “magic bullet” formula for determining exactly what you should price your novel.  Books can sell at just about any reasonable price point; there are multiple factors which make one price better than the other, but nothing is right for everyone, or even for the majority of writers.

But if you consider the stats, business strategies, and other factors, maybe you can figure out the right price point for your own books.