Book Pricing Strategies

Amazon recently launched Kindle Unlimited, which allows customers to download multiple books all for just $9.99 per month. The selection includes all 500,000 KDP Select books plus an additional 100,000 books, including Harry Potter. (Read more about Kindle Unlimited by clicking here.)

If Kindle Unlimited really catches on—it looks quite promising for readers—it could be a game-changer for pricing Kindle e-books.

Many customers are indeed trying Kindle Unlimited out, and as more customers do this, it will surely impact sales ranks of Amazon e-books.

Let’s look at a little history:

• 99-cents has often been a popular price-point. It’s cheap enough that customers can buy on impulse and not worry too much if it doesn’t work out. But many also believe that you get what you pay for, and believe this more strongly after a few books don’t work out.
• When KDP Select first launched, FREE was a popular promotional strategy that worked for many authors. But then FREE lost its luster.
• $2.99 has been a popular price point. You have to sell 6 times as many books at 99 cents to make the same royalty at $2.99, plus the higher price suggests higher quality than 99 cents.
• Recent studies have shown that $3.99 to $5.99 is a profitable price-point. Indeed, many customers shop this slightly higher price range, expecting to find better quality here. (The study also showed that $9.99 was highly profitable, but nonfiction and big-name authors have lent popularity to that range.)

In the past, many books have sold in the free to $2.99 price range because many customers have been thinking about saving money—and about the risk of a higher-priced book not turning out well.

Kindle Unlimited customers are likely to have a different mindset:

• Kindle Unlimited customers aren’t asking, “What’s affordable?” Once you spend $9.99 for the month, every book you want to read is essentially free.
• So they are instead asking, “What’s the best book I can read?” They are looking for the best book, not the best price. If they do look at price, it’s as a guide to value.

The value of e-books may be changing. It is, at least, for Kindle Unlimited subscribers:

• Cheap price-points have no value to Kindle Unlimited readers. Free isn’t a good deal to them. Instead, low prices may suggest low quality.
• Higher-priced books may have more value to Kindle Unlimited readers. You have to read ten 99-cent books to get your $9.99’s worth for the month, but if you read ten $5.99 books, that’s a $60 value.

Since Kindle Unlimited has just launched, it still remains to be seen how much Kindle Unlimited customers will impact book pricing strategies and Amazon sales ranks.

Here are some things to look for:

• Will 99-cent thru $2.99 books slip in the Amazon rankings?
• Will $3.99 thru $9.99 Kindle Select books rise in the Amazon rankings?
• If higher-priced Kindle Select books do rise in rankings, will that improve their sales, too?
• Will KDP Select freebies and Countdown Deals become less effective?
• Will BookBub and other promotions become less effective?

Even if $2.99 and lower books are enrolled in KDP Select and receive downloads, if other books—such as $5.99 books—are receiving even more downloads than they are, then those $2.99 and lower books will still fall in the rankings despite the downloads. There may be a lot of books that used to have sales ranks in the 100,000’s moving up to the top and pushing other books down in the ranks.

The effect may not be immediate. Customers also look at reviews. Covers, blurbs, and great beginnings will always matter. Books at the top probably have good packaging and many reviews, and books at the bottom may still need to build reviews. But as more readers try out higher-priced books, their popularity may grow and they may gain more reviews. Many Kindle Unlimited readers will approach the book-buying process differently, and it will eventually have some discernible effects. If the cover, blurb, or Look Inside have problems, this will deter sales regardless of the price-point.

Either way, the book must command the price it has. If you simply take a 99-cent short story and reprice it at $5.99, it’s probably not going to be perceived as a better value suddenly. Plus, if customers think the book is worth much less than the list price, it’s likely to show up in a review.

Rather, if a book really is worth $5.99, but has been priced lower based on how the market had been prior to Kindle Unlimited, if that book is enrolled in KDP Select, it might be a good time to reconsider its list price.

It depends on two things. First, will Kindle Unlimited customers favor higher-priced books? Second, how popular will Kindle Unlimited be? Time will tell.

If sales ranks of lower-priced books slip over the next two weeks, this will become food for thought.

The other side of the coin is that KDP Select borrows pay the same regardless of the list price. Books priced $3.99 and up would earn higher royalties for sales than the KDP Select borrows have historically paid (about $2 per borrow). But if their inclusion in KDP Select generates additional sales because of the perceived value, it may well be worth enrolling those books in KDP Select.

It remains to be seen how popular Kindle Unlimited will become and how much (and what kind of) impact it will have. But authors need to decide which side of the fence to stand on, and how to best plan their marketing strategies around the introduction of Kindle Unlimited, and so authors must make many decisions, such as whether or not to enroll in KDP Select and whether or not to change the list price. These decisions won’t be easy, but they may have a significant impact on a book’s sales in the coming months.

Chris McMullen

Copyright © 2014 Chris McMullen, Author of A Detailed Guide to Self-Publishing with Amazon and Other Online Booksellers

• Volume 1 on formatting and publishing
• Volume 2 on marketability and marketing

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