Is your book priced right?
With the rise of self-publishing, authors have the responsibility of setting the price for their book. I am often asked for guidance and have seen pricing mistakes. This article considers basic pricing components and a simplified break-even analysis to help you understand pricing options.
“The moment you make a mistake in pricing, you're eating into
your reputation or your profits.” - Katharine Paine
There are a number of factors in pricing your book. The main questions are: Where is the value? How much will they pay? How much does it cost?
There are several other considerations such as your goal for the project. Is spreading the idea paramount, or profit, or leaving a legacy? Your goal will affect your pricing strategy, but more on that later.
The value question
What is it worth? The amount of value your book brings to the reader is the most important pricing consideration. How big is their need? How much authority do you have? How does it change the reader’s world?
A textbook is a door to completing a course and new career opportunities. Overcoming a habit brings peace and confidence. What price can be placed on a smile? How rare is the information or experience?
Your authority reduces their risk and increases the book’s value (or the sale-ability). Readers will question if your solution will work for them. A proven track record can inspire confidence that they too can see success, or feel transported.
Consider how your book promises and delivers value. This should be the main price consideration.
To understand the current market for your book, look at the direct and indirect competition. Where else can people get a similar experience or the same information? Would potential purchasers spend the time at a movie or take a course, instead of purchasing and reading your book?
What are books in your genre priced at? Check similar books on-line, or at your local bookstore, including how they are actually selling to determine direct competition. Ask, “How is my book better?” Knowing the market price can help determine what they will pay, but ultimately the motivation to purchase is determined by the perceived value.
Know your costs
Knowing your costs is critical in any pricing decision. If your costs are too high you will not have enough margin and you need to address costs and get better alignment. This is one reason to do preliminary numbers early so you can reduce costs or add value; or drop the plan before committing major resources.
Costs are broken down into fixed and variable. For your book; your time, editing, designing, cover illustrations, and initial setups are fixed costs. Variable costs are tied to each unit produced.
Calculating your books costs
To assess your fixed costs, list and add all the one-time expenses. You may want to include some or all of your contribution here, or allocate it to the “profit” section. If you know certain promotional items are required, add them here, too. If they are optional indicate them separately to make decision-making easier. Include promotional copies and postage, your web site, travel, and other essential items.
Next, find the gross profit per item. Printing and marketing costs will vary somewhat with volume, but make an estimate. For budgeting, a simple approach is to include a standard wholesale discount, traditionally 40%. A distributor will take an additional 15% and you may want to allow for that as well.
Let’s say your book cost is $5 to produce and retails for $20.
At 40%, you have $12 net revenue and $7 gross profit ($20-40%-$5).
Some items like advertising are harder to budget, as they may be both fixed and variable. You need testing to know how many books an ad spend may sell. Print ads, conferences and other events fall into this category. Once you have run tests, you can roll out your campaign with more confidence. With a cost-per-click campaign, your conversion ratio (clicks to actual sales) is the critical number which then can become a variable cost.
Find your break-even point to understand the book sales required, and to set realistic expectations to guide decision making. Total your fixed costs, and divide by your gross profit per piece.
For example, if your up-front costs were $5,000 your break even for our example book above would be 715 copies at $7 gross profit. If you reduce your upfront costs to $2,000 you would need to sell 286 before any return. If you sold the books directly, your gross profit would be higher, but you also need to account for your time and energy.
You may want to add scenarios for e-books and other distribution channels. These are your best guesses, caution and flexibility are advised.
There are pricing strategies based on format, product life-cycle, long-tail, and niche markets. If your book’s content has longevity your chance of success as an independent is greatly increased. A series or number of titles also increases your odds. Adding a course or coaching options can make your book price seem like a bargain.
Publishers traditionally profit from blockbusters and put out many works, hoping the ones that sell well make up for the duds. As independents, a blockbuster is not something we (or anyone for that matter) can count on.
Pricing elasticity and market size
An important pricing factor is elasticity. Elasticity is the effect that a price change will have on the number of units sold. The more unique and in-demand a product is, the less elastic the market is said to be. Textbooks are an example, where the only other option is buying used. From a pricing point of view, you want to find the balance between price and volume. A low price may bring in more sales, or the market may be too small to have a significant affect.
Another important concept is TAM or total addressable market – a realist estimate on market size. A large market may have more competition and be harder to reach with a limited marketing budget. Smaller niche markets are easier to reach as you can focus limited marketing dollars and speak to them clearly. To estimate potential sales, calculate a probable percentage of TAM.
Ask, “is there a way to easily reach your buyers?” Knowing where they hang out helps understand required publicity and advertising budgets, which in turn affect your potential sales.
Adjusting costs or adding value
Find a way to adjust costs if you find they are too high so you have a reasonable margin at a realistic price. Consider what the reader values, possibly reducing the size or number of colour pages will make the book viable. Content is king. Or maybe you have room to add extra value adding wow, and increasing buzz by those who buy.
Trim size, number of pages, paper and number of colour pages do affect printing costs. Size and paper variations are shown in the above table for a 200-page book in black.
Share your pricing experiences and questions in the comments.
To get a personalized book estimate visit https://pagemaster.ca/book-estimate/