One common theme I’ve found among authors–both indies and trad pubbed alike–is that many feel a bit lost when it comes to the business aspects of publishing. Indies obviously need to know some basic business principles because they have to handle their spreadsheets and pricing decisions on their own, but even if you are trad pubbed (or have chosen that direction), you need to know some basic facts in order to make smart decisions about things your agents or publishers tell you.
Recently, I was explaining my pricing choices on Southern Fraud to someone in the book business. I explained that I chose the $.99 price point for book 1 because it would generate a lot of sales, but little income. I wanted bulk sales and didn’t care about money; I just wanted to share the book with as many people as possible. I then explained that I wanted to earn money from book 2, so I priced it higher, knowing that I would not achieve the same sales numbers. I also explained how I wanted to find the sweet spot at the peak where income and sales reach are maximized.
This response I received surprised me: the apparent belief that this was something unique to certain books, implying that my book in particular could not support a higher price based on the fact that it sold fewer books at that price than it had at $.99. The response also indicated that past experiments in this area had yielded the same results with certain other books, ie. raising a book’s price caused sales numbers to decrease.
Well, this just in!
This shouldn’t be a surprise. And there shouldn’t be any need to experiment to discover that a higher price means fewer sales than the same item at a lower price.
This is the way it works in economics. It’s an economic fact. If all things are equal:
Lower price = more sales and less income per unit sold.
Higher price = fewer sales but more income per unit sold.
Look at your own personal economics. Let’s say you’re shopping for an item online and find it for sale on two websites. One site offers it for $.99 and the other for $9.99. Shipping costs the same at both sites, and you are not purchasing anything else. Most likely, you are going to choose the cheaper site so that you can save money. The $.99 business is trying to earn their money through bulk sales, and the $9.99 business is trying to earn more per unit sold.
There are lots of “market forces” out there that complicate this simple principle, but this is the basic fact of economics where we’ll begin and branch out from there.
Next week, I’ll explain the pricing sweet spot.