Pricing is an inaccurate science, but necessary for businesses that deal with products and services. In setting a price, businesses need to look at what they are trying to accomplish. Maximizing volume? Maximizing revenue?
For many businesses, the real goal is to maximize profit, and that means walking a fine line between volume and price. If you set the price too low, you leave money on the table. If you set the price too high, volumes suffer and overall revenues go down.
Prices also need to consider the cost of goods that go into making the product – the higher the cost to build the product, the higher the price.
Pricing is not an exact science, but it’s not rocket science.
Nowhere is the market more confused over pricing models than in the book industry today. Disruptive technologies – e-books, mobile devices, internet distribution – are all contributing to massive change in the media world that appears to be confusing book publishers and causing irrational e-book pricing.
In the old days (by that I mean just a few years ago) hardcover books were released first and were priced higher than the trade paperbacks and mass market paperbacks that came later. It made sense. The hardcover books were more expensive to produce, and those who wanted the book fresh out of the gate were the consumers who were willing to pay more.
Enter the e-book.
The cost to produce an e-book version of an existing book is close to nothing. E-books can’t be placed on a bookshelf, and can’t be sold at a yard sale, yet some publishers seem to believe that the price for an e-book should be more than the paperback version.
Here’s one example; at the time of writing this article, Harlan Coben’s Caught, published by Penguin Publishing, is available on Amazon in paperback format for $9.99, yet the Kindle version is priced at $14.99.
All of the Amazon Kindle bestsellers are priced at $9.99 or below, except for those on the list that are not yet released in paperback. Some e-books are priced considerably lower. Consider Karen McQuestion’s A Scattered Life, which has been in the top ten Kindle bestsellers in recent weeks. The Kindle version of her book is priced at $2.99, a price point that surely contributed to the book’s success.
Author J.A. Konrath routinely prices e-books at $2.99. He has written extensively about his success on Amazon with his e-books (having sold more than 100,000 e-books), and has clearly demonstrated with his pricing strategy that e-books can and should be priced lower than print books.
While $2.99 may not be a magic number (many e-books have been sold at the $9.99 price point), the market dynamics have clearly shown that e-books should be priced lower than print books.
What’s your take? What should the price of an e-book be?