Daily Archives: July 30, 2014

Jul 30 2014

Elasticity of e-book Prices

Elastic

Kindle e-book Prices

Here are three important considerations that go into e-book prices:

  • What list price to set
  • What the per-book royalty will be
  • What the net royalty will be

These three figures are related by price elasticity.

The general trend is that a lower list price will attract more readers. But more readers doesn’t necessarily translate into a greater net royalty. It depends.

Suppose you price an e-book for $5.99 and would sell 500 copies at Amazon. Assuming a negligible delivery cost, the royalty would be $4.19 per book, and the net royalty would be $2095.

Pricing the e-book instead at $3.99 may reach more readers. The per-book royalty would be $2.79.

  • If you sell 1000 copies at $3.99, the net royalty would be $2793. In this case, the lower price is worth it.
  • But if you sell 600 copies at $3.99, the net royalty would be $1674. In this case, the higher price earns more.

Sometimes, the lower price may still be advantageous, even if the higher price earns more. That is, the larger reader base may pay off in other ways, e.g. more add-on sales of other books, building a following faster to help sell future books, etc.

A lower price doesn’t always attract more readers. Occasionally, an author raises the price from $2.99 to $3.99 and sales actually improve. At the lower end of the price spectrum, the perception that you get what you pay for can have a significant impact on price. Of course, the book has to appear to be higher quality (and have ample content) to command the higher price, but if it does, the $3.99 to $5.99 price range may actually be more profitable for some books than $2.99 or less.

$2.99 is often more profitable than 99 cents for books that would earn 70% at $2.99, since any book price $2.98 and under earns a 35% royalty. You would have to sell 6 times as many books at 99 cents to earn the same royalty as you would at $2.99. Very short books don’t have much choice; they might not sell at all for a higher price. Series authors sometimes use the 99-cent price point to attract new readers into a series. For authors with numerous books, 99 cents can create some impulse buys of several titles at once.

Predicting Elasticity

Kindle Direct Publishing (KDP) actually has a new beta pricing tool to help authors see some actual data.

You can find the new KDP Pricing Support tool on page 2 of the publishing process at KDP. Check it out.

What you see is a graph. There is usually an abrupt change in curvature at $2.99, where the royalty changes from 35% to 70%. Sometimes there are a couple of price points where the net royalty is predicted to be about the same. For example, I’ve seen cases where 99 cents and $2.99 have the same net royalty, or where there is scarcely any difference between $2.99 and $3.99. But other times one price really stands out, like $3.99.

What we don’t know is how reliable the data will be for any specific new title, or precisely how Amazon is determining which titles are similar to your book.

But any data is better than none at all, right? At least it gives you something to go on.

Well, you can always get your own data. Try experimenting with your price and you can see the impact first-hand.

I like the new KDP Pricing Support tool. When I’ve used it, the graph has seemed reasonable; i.e. the data resembled my experience and expectations.

Of course, each book is unique, and won’t necessarily follow the trend.

The Amazon Book Team recently offered some fascinating insight into Kindle e-book price elasticity regarding the famous Amazon-Hachette dispute.

You can check that out by clicking here (it’s an Amazon page).

Keep in mind that the change in price from $9.99 to $14.99 is probably much more sensitive than a change in price from $3.99 to $5.99 or from $2.99 to $3.99. At the lower end of the price spectrum, a lower price doesn’t always result in more sales, let alone more profits. But in the higher bracket, like $6.99 and above, lower e-book prices usually draw in many more customers.

I must admit, some of my favorite traditionally published authors have e-books selling for $7.99 and up, not too different in price from mass market paperbacks I’ve read in the past by the same authors, and there are dozens of such books that I ordinarily would have read in the past, which I’ve declined to read in the last couple of years because I felt that they were unfairly priced. They could have had much more of my business, and probably millions of other customers, with lower prices. But some of my favorite authors’ e-books have been priced $6.99 or less, and I’ve read many of those books.

Note that print books are understandably different, where the publisher invested in materials, distribution, etc. I expect to pay more for print books. In the case of print-on-demand paperbacks, the $6.99 to $9.99 price range is often less sensitive to price changes, while much higher prices, like $25, tend to be more sensitive.

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

Follow me at WordPress, find my author page on Facebook, or connect with me through Twitter.

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Jul 30 2014

What the Dreck?

Slush Pile

The Dreaded Slush Pile

Two popular terms among authors and readers make me cringe every time I see them—which is much too frequently. There are some very strong opinions about this subject, too.

  • dreck
  • slush pile

These terms generally refer to the ‘worst’ of the books, but this definition by itself creates some problems.

  • There is more than one way to define the word ‘worst.’ Do you mean editing, subject matter, sales rank, very short books, web content disguised as books, or something else entirely?
  • Thus, some authors take this the wrong way. “Are you talking about my book?”

Any one of these things, by itself, doesn’t necessarily make a book bad:

  • Maybe an author has a fantastic story, but on a low budget, chose not to invest in an editor without knowing if the book would sell. Given a choice, I’d rather have a great story that needs editing over a lousy story with superb editing. (But there are many excellent stores with good editing to choose from, so this isn’t a decision that we really have to make.) My point is that editing alone doesn’t imply that a book is bad.
  • Similarly, if the book simply has poor formatting, it could still have great content. I wouldn’t call a book poor just because it could use some tender-loving formatting care.
  • A miserable sales rank—or no rank at all—doesn’t make a book lousy. Maybe the cover and blurb aren’t attracting attention, but the story is amazing. Perhaps the author didn’t attempt any marketing. Or maybe there is a very tiny audience for the book. These things don’t determine that a book is poor. (Just that the author isn’t getting rich from that particular book. At least not presently—for all you know, it could have sold like hot cakes when it first came out, but just hasn’t sold in recent months.)
  • How about a very short book—just a few pages? If the information is valuable, people will want it. If it’s very well written, what’s the problem? The beauty is that customers can decide if that appeals to them. More people writing short books doesn’t mean that other books won’t sell. It doesn’t mean that shorter books are selling. Kindle Unlimited makes it easier for customers to reach 10% of shorter books, but Kindle Unlimited doesn’t encourage customers to download shorter books. Why borrow ten very short books? Customers spending $120 per year may be more inclined to get the best possible value for their money. But let’s just say that shorter books do start selling more. This means that those books are appealing to customers. If those short books truly are dreck, customers will stop buying them. So if they sell frequently, they must not be dreck just because they’re short.
  • Perhaps you’d like to judge the content as dreck—e.g. certain kinds of romance novels, sales pamphlets, get rich schemes. Return to my last point. If it’s selling and continues to sell, apparently it’s satisfying readers. How can you call something dreck if readers appreciate it? Because if there is something that you’re sure is better, then wouldn’t readers also agree that it’s better and stop buying the ‘dreck’? But again, even if it’s not selling, that doesn’t necessarily mean that the book is bad.
  • There are, indeed, books that we may agree are lousy. Maybe we can judge by the intention of the author. If the author made a poor effort, and was just hoping to turn a quick buck, perhaps that could properly be classified as lousy. If the author tries to deceive readers, does that make the book lousy? If the author recruits dozens of reviews to make a book seem far better than it actually is, when the author knows that nobody would have bought the book otherwise, can’t we call that book lousy?

The worst of the worst, however you want to define them, are important for two good reasons:

  • When a reader experiences a book that turns out far worse than the reader was expecting, it leaves a significant impact on the customer’s reading experience (and it tends to change the customer’s book buying habits).
  • When one of the worst books sells, it frustrates authors who have worked very hard to master their craft and publish a quality book.

Not all mention of the ‘slush pile’ stems from good intentions, though:

  • Some authors feel a sense of superiority and mention the slush pile with a sense of arrogance and disdain. This isn’t expressed as the frustration of an author who worked hard, but comes out as an “I’m better than you” feeling.
  • Some authors feel a sense of inferiority and mention the slush pile to feel better about themselves.
  • It may be in the financial interest of traditional publishers to advertise the slush pile as often as possible, hoping to create a perception that self-published books aren’t worth reading so that more customers will, hopefully, buy traditionally published books.
  • Editors and book formatters may advertise the slush pile, hoping to encourage authors to hire their services. (Editing and formatting are important. I’m not saying you shouldn’t pay for such services, just that this might be one of the motivations for advertising it.)
  • Some readers want to feel superior in terms of what they are reading. For example, they might feel superior reading literary works, and thus denounce everything else as dreck.

Personally, I feel that not enough people read. A greater selection improves the chances that everyone can find a book that he or she would like to read.

Here are some truths about the ‘dreck,’ including reasons that I cringe every time I hear it mentioned. (Am I a hypocrite for mentioning it here? My hope is to help improve the perception, and that some good may come from the following points).

  • Every indie author who mentions the slush pile or dreck is marketing a poor image for indie books, which in turn hurts his or her own sales indirectly. Oops!

  • The worst books aren’t in the way of better books. Lousy books that don’t sell quickly fall in the rankings and fall down into the depths of obscurity. Why worry about lousy books that are hard to find?

  • When a self-published author says derogatory things about other authors’ books, how does that affect his or her image? Brand a positive image for yourself. It might even help your sales.

I’m not saying that we should ignore books that have problems.

Here are some positive ways to address this issue:

  • Don’t advertise lousy books.

  • Don’t use the words ‘dreck’ or ‘slush pile.’

  • Do find a few excellent examples of self-published books and advertise those instead of the bad ones.

  • Don’t put other authors down.

  • Do find indie authors who are producing quality books and bring those authors up.

  • If you know a friend or acquaintance who is a newbie author, offer some helpful tips that will result in a better first book.

  • Occasionally share tips in your social media posts that would help fellow authors produce better books

  • Help motivate self-published authors to perfect their books.

  • Do your best when you self-publish. Do some research. Seek feedback. Don’t view your first book as an experiment. You only get one chance to make a good first impression.

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

Follow me at WordPress, find my author page on Facebook, or connect with me through Twitter.

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