Pricing And Business Performance
April 19, 2024 --- Price is a key performance lever in any business. Many companies employ whole departments solely focussed on pricing related tasks. For example: monitoring market and competitor prices, identifying price trends, establishing how the demand for the product changes at different price levels, setting list prices, defining promotional prices and monitoring the return on investment of such promotions.
Author Income and Pricing
Many independent authors, especially beginners, tend to focus on the number of copies they sell and the corresponding sales rank of their books. This is totally fine, but one should not forget that author income is a function of three major variables: sales volume (i.e. number of copies sold) × book price × royalty rate.
(The royalty rate, if you go exclusive with Amazon Kindle Direct Publishing, is probably set to a maximum of 70% for titles between $2.99 and 9.99; so we leave this aside for now.)
As an independent or self-publishing author you are fully in charge of the prices for your books – both list prices and promotions –, even if you do not have the means to "employ a whole department taking care of it" like a major publishing company would do.
Three Key Questions Before You Set Your Book's Price
The three key questions you have to ask yourself and answer before you set the list price for your book are:
1. Who is the audience?
Is your book for the masses or for a specific niche audience who may be prepared to pay more for the special information that your book may contain? This is a question that is often forgotten, because intuitively we want to sell as many books as possible (i.e. "for the masses"). To illustrate, go on the Amazon Kindle Store and search for books on "private wealth management". Please note how many titles sell for more than $40 per copy.
2. What is the value of my book and how is it positioned?
This question refers to the book itself and to the whole positioning of your author brand (if you have one.) Is your book a Mercedes, a GM or a Toyota? Think about it. Is the whole package an "exclusive high quality product" or a "me too and one of many" type of title?
3. What are the book prices of your competition?
This is where many authors fail to realize that each book genre comes with a distinct price level or "pricing profile" as we call it. Take the following example (see exhibit). The graph contains all the prices observed for the Top 100 best selling titles in two different Amazon Kindle book categories, monitored over a seven day period.
You can see that in CATEGORY A about one third of the top 100 books sell at prices higher than $9.99; in total, two thirds of the books sell for $5.99 or more and only less than twenty percent of the books have prices as low as $0.99, $1.99 or $2.99.
CATEGORY B, by contrast, shows a totally different pattern: Only about 20 percent of of the books have prices higher than $4.99, and two thirds of the books sell at $3.99 or less; in fact, more than 25% of the books sell at only $0.99.
Take A Guess
Category B above is the genre "Romance" in the month of August 2014, and Category A is, well, take a guess...
... it is the book category "Business & Money".
This is a snap shot and prices do fluctuate, of course, but you clearly see that the price points or "pricing profiles" of the two categories are different and distinct. Taking a one-size-fits-all approach such as "Let's just do $2.99" bears the risk of systematically over- or underpricing your book title, especially when you target specific niches.
Book Prices - Kindle Ebook Market Data
When setting the list price for your Kindle ebook, try to answer the three fundamental questions above. In doing so, the monthly market reports by K-lytics can provide you with the pricing data, not just for the 28 main Amazon Kindle categories but for more than 340 book sub-categories. Monthly reports are available for K-lytics PREMIUM members.
Excellent information. It seems alot of new authors just price their books at $2.99 in order to get the 70% royalty cut. By doing a little research with K-lytics, you may be able to actually raise your price and make more on royalties. The one size fits all model can actually cost you if you use it on every book you publish.