I spend far too much of my time thinking about eBook pricing. It's partly because of the emotional attachment and respect, I have for books and partly a fascination with the digital transition currently underway. There is an obvious conflict between what the market wants to pay for an eBook and what price publishers are setting, based on legacy value chain principals and perceived savings on physical delivery and printing as a proportion of production costs. This transition or evolution is happening right in front of us and in lots of ways it’s really exciting to be here, on the front lines.
Most publishers are trying to bolt digital capabilities onto their existing structures so that some of the opportunities in the eBook market are being exploited. However, the majority of publishers are still reliant on, and locked into, traditional book printing for core revenue. Return on investment is difficult to judge foreBooks, sometimes the costs involved in creating and marketing eBooks bear little or no relation to the price of the eBook, and indeed to what people are prepared to pay foreBooks.
Why is Price so important?
Price is the revenue earner. The price of a product is what the company gets back in return for all the effort that is put into manufacturing and marketing the product. It is therefore essential that managers understand how to set prices because both undercharging and overcharging can have a dramatic effect on profitability
Price is a key factor in determining Return on Investment, and probably the biggest single influence on profitability. Publishing has a long history of unconventional pricing models such as
1. The Net Book Agreement
2. Sale or Return
3. Consignment and
4. Firm Sale.
Finding the right price point for eBooks that maximises the relationship between value and volume requires experimenting with different models and possibilities. The risks to publishers of not engaging in this experimenting are plainly visible. Unless the right price point is reached, then revenue is being lost as either volume or value is being restricted. Publishers are facing constant downward pressure from print sales and digital sales need to balance out this deficit. Generally, eBooks are priced at significantly lower prices than the traditional book – but this only makes it harder to make up lost print revenue. How we set Price: There are three basic methods of setting prices: based on cost, based on competitors, and based on the market. Pricing is a fundamental strategic consideration, influencing consumer perceptions and stimulating certain sales channels. Publishers can set the price at whatever they feel is correct, (and indeed publisher opinions on this do vary) but we recommend basing it on external factors like what is competitive against other similar titles rather than basing it on internal factors like a percentage below print RRP. Publishers working with us on this strategy are generally seeing positive growth curves are able to generate the kind of sales levels they need to hit their digital targets.
Factors to help you make your decision:
1. Test your pricing. See what works. This is a fantastic digital opportunity that traditional publishing cannot offer. You can put the price up and down as you wish - and you can track the impact through our eBook Analytics.
2. If you are pricing a series or brand . . . price to build sales and a following.
3. Look at your competition. Price accordingly.
How to take action: Feel free to get in touch with us for more information on pricing. We track average sale prices (ASP’s) across multiple genres across multiple territories and are able to advise publishers on the best way of making their titles competitive. Right now, we are finding the US market is significantly LESS price sensitive that the UK market, so publishers can price their eBooks higher in that market and still be competitive. Just setting an RRP and doing a currency conversion across the board doesn’t help. This ASP differential is particularity true of the more commercial genres and we are seeing up to 60% difference in the ASP's between the US and the UK. I suspect we are seeing the ebook adoption curve in practice. The price appears to be normalizing in the US market faster than anywhere else and because the UK is about a year or so behind the US in ebook adoption, I suspect we will see similar trends there as time goes on. I think the key message is that publishers need to really consider their pricing strategies carefully and put a deliberate policy in place to max their ROI, or they can easily undercut themselves and miss out on potential revenue.
--Patrick Crowley, Digital Marketing Manager.
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