Saturday, October 27, 2012

Kindle Pricing Strategy for Self-Published Authors

Pricing has a lot to do with maximum sales and maximum net profit for any business. It is particularly true when it comes to selling Kindle books, one of the main sources of income for a self-published author.

The Christmas retail season is approaching and so is the peak seasonal sales period of the year for my non-fiction books. As a business enterprise, I need to earn as much as possible in the coming months. The overall gross revenue for the calendar year, as well as net profit, depend a lot on what happens in the next several months.

With this in mind, I have been thinking about pricing strategy for my Kindle books. I have three specific goals in mind for the next few months:
  1. Generate the maximum number of sales possible.
  2. Generate the maximum amount of net profit possible.
  3. Obtain the maximum number of first time customers possible.
Pricing will have a lot to do with whether or not I achieve these goals, allow which are important to the growth and success of my self-publishing business.

Amazon has suggested pricing guidelines. To earn a 70% share of a sale, Amazon wants a Kindle book priced between $2.99 and $9.99. If the price is above or below the suggested price range, the share of the sale drops to 35%.

A great deal has been written about pricing strategies for Kindle books. Here is a brief summary of the strategies:

Reasons to price a Kindle book at 99 cents:

First in a series: If a book is the first in a series of books, the goal is to lower the barrier to begin reading, and buying, the books in the series. While the profit margin will be low, readers who purchase this first book will have overcome the initial purchase barrier and a good percentage, if the book lives up to the buyer's expectations, will purchase additional higher priced, and more profitable books, in the series.

New Author: If the book is a first novel or first book of any kind, the author needs readers and the more the better. The low price of 99 cents establishes a low level of risk to try a new author. If the buyer likes the book, the author has a better chance of selling the reader another book at a higher price.

Amazon Sales Ranking Position: When launching a book, setting an introductory price of 99 cents to generate sales quickly, particularly for an established author who has a legion of fans eager for the author's next book and an author platform to do so, can help to drive the book up the Amazon Sales Rankings quickly in order to expose the book to the greatest number of potential buyers possible. The price should be raised shortly after launch to the optimal sales price. The 99 cent introductory price is solely to raise the rankings of the book thereby raising the book's search result position to the highest possible level in the shortest time possible.

Reasons to price a Kindle book from $2.99 to $9.99 or somewhere in between

This might be the optimal price point, striking the balance between the maximum number of sales and generating the highest level of net profit. For many self-published authors, the sweet spot of the price point could be in this range, particularly for works of fiction.

Many readers will not pay more than $4.99 for a work of fiction unless they simply must have the latest book by an author who has already earned the reader's trust and loyalty.

The idea is to find the price that will earn the 70% share of the sale yet generate the greatest number of total sales. For example, which would you rather have? 500 sales at $2.99 generating over $1,000 in net profit for the month or 100 sales at $9.99 generating $700 in profit?

To determine which price will result in the greatest net profit in sales, some experimentation will be necessary. Set different prices for set periods of time and carefully monitor sales results. Do the math and determine which price produced the best results.

I have yet to price a Kindle book over $9.99 and will probably never do so. I have not, and will not, pay over $9.99 for a work of fiction. I have paid over $9.99 for non-fiction Kindle books because I needed the information. About half of the time it was worth breaking my rule concerning the $9.99 price barrier which I think is actually a pretty good hit or miss ratio.

To be honest, I must also state I only cross that price barrier for non-fiction under the following conditions:
  1. there is no used paperback edition available at a lower price.
  2. there is no paper edition available period.
  3. I don't have time to wait for the information to arrive via mail in the form of a traditional print edition.
This retail season I have selected a few books to test what I think will be the best pricing strategies for my books. I have several books for sale for 99 cents. These are intended to lure in first time buyers for my books in general.

I have several books priced at $2.99. These are also intended to lure in first time buyers but also contain more information than the 99 cent books. These books are also priced to generate the largest possible sales volume. I consider the books to be "shorts" and by design they are single topic non-fiction books of a limited scope.  I plan to make money on these books by high volume.

I also have a newly launched book I plan to eventually sell at a much higher price for the Kindle edition. This new book is the first of a new line, or brand, of books and has the potential for a much larger market for me so I my goal for this book is to reach readers in that wider market. The $2.99 price is meant to help me reach that goal.

I have other books, with proven track records of sales that are priced at my high end price limit of $5.99. I have found for these two books, this is the sweet spot pricewise. These two books are also my biggest sellers having sold just under 8,000 copies combined. No, neither is a break out best seller, but considering I am a niche non-fiction author, I feel pretty good about how these two titles have sold in the last two years.

My last price range is a series of books with a price of $4.99 each. These books sell roughly 20 copies a month on average but these books make up the largest part of my list. Multiply 20 copies times 10-12 titles and the sales and the money adds up.

Experimentation and record keeping is how I have arrived at which price to set for each book. It is hardly an exact science and I may be doing it all wrong and costing myself a lot of net profit. I will continue to experiment and adjust prices on a few books and work to fine tune both my pricing and my net profits.

One of the advantages of self-publishing is you, the author, have control over your pricing. You can experiment and determine the best possible price to achieve a specific goal you have for your book or series of books.

Michael Marcus has written an excellent post about pricing as a matter of value. This is another consideration in the pricing equation and not to be overlooked in the decision making process.

It's a business. Even if making money is not your primary goal, reaching the greatest possible number of readers should be. The more books you write, the more income you will need for editing, cover design, marketing, etc. You need sales to pay for these production costs.

Spend some time developing a well thought out pricing strategy. Experiment with pricing and keep careful records. It will be worth the time and effort to do so.