Saturday, February 18, 2012

E-Book Pricing Strategy

No, this isn't a post about price point and whether or not 99 cents is the new Number of the Beast. I try hard not to repeat arguments you can find elsewhere. It's about a timing strategy for books in Select based on some trending observations. Sort of a companion piece to go along with last week's post about launching a new ebook. As with all strategies discussed here, what works for some books may not work for others, no guarantees, yadda yadda.

For Steel Magnolia Press, each price point we launch a book at is determined using the usual factors: genre, length, how well-known the author is, etc. We come up with two prices: an introductory, short-term price and the price we think that can sustain the book. We're open to those price points changing, though, and will re-evaluate price based on historical data -- we just need more historical data for it to be convincing. So far, we're only talking a difference of $1 between the intro price and the sustained price. As the gap between the two increases, the landscape may well change. We're happy to hear from anyone who's experimented with different price points and has data to share!

Once we have the two price points in mind, we obviously launch with the introductory price. We promote it as an introductory price and don't necessarily communicate an end date as that gives us flexibility to change the end date at need. Per our launch strategy, we set the book free for 2 days. Trending shows that books following the "normal" post-free cycle seem to hit their peak rank and sales on Day 3 or Day 4 then begin a slow decay. Our intent is to capitalize and maximize. We want to shore up royalties in the face of the decline, keeping the monetary base from eroding as quickly as sales. In theory, this should mean more money earned overall for the books by the time they plateau in the week or so after the price change.

On Day 5 post-free, we watch to be sure the book is dropping rank by comparing sales during the past 24 hours with the previous 24-hour period. Be sure you're comparing 24-hour periods and not days in general. Part of Amazon's ranking algorithm appears to be based on sales velocity during that past 24 hours. So a rank at 2:00 PM takes into account the number of sales from 2:00 pm the day before to 2:00 pm that day.

What this means is that watching and recording sales is important, at least for the first week or so after the book is back in the paid store after going free. Authors who don't fuss and fret and obsess about watching the KDP dashboard are doing themselves a disservice. Authors who proudly admit they only check the KDP dashboard once a month, once a week or even once every couple of days aren't able to capitalize and optimize in an industry that now moves at digital speed. Why do you think Amazon updates rank every hour rather than just recalculating every 24 hours? Because when books are selling, it's a volatile business. Sometimes you can't do anything with collected data. Sometimes you can. In the case of our repricing strategy, we can.

Once we're sure the book is on the normal decline, we up the price to its sustained price. But how can we tell whether the new price or the natural decline is affecting sales more negatively? Well, we can't. But we can compare the next 24-hour period to the one that just passed. If revenue is greater in the next period than it was in the last, we're at least keeping royalties from decaying.

So what are some real-world examples? Let's look at the 3 books we've used this pricing strategy with at Steel Magnolia Press. For now, we'll just look at numbers in the US store.

The Rent-A-Groom by Jennifer Blake

This book peaked on Day 4 around noon at #192.
On Day 5, we changed the price from $1.99 to $2.99 at 6:00 pm.

191 books sold in the 24 hours before the price change.
321 books sold in the 24 hours before that.
126 books sold in the 24 hours after the price change.

In the 24 hours before the price change, The Rent-A-Groom made about $192.00.
In the 24 hours after the price change, the book made about $252.00.

Catering to the Italian Playboy by Tamelia Tumlin

This book peaked on Day 3 around noon at #170.
On Day 5, we changed the price from 99c to $1.99 at 10:00 am. We could have changed the price on Day 4, but Day 4 was Valentine's Day, and we didn't want to up the price on a holiday so closely themed with romance.

116 books sold in the 24 hours before the price change.
358 books sold in the 24 hours before that.
77 books sold in the 24 hours after the price change.

In the 24 hours before the price change, Catering to the Italian Playboy made about $40.60.
In the 24 hours after the price change, the book made about $53.90.

SECTOR C by me

This book peaked on Day 4 around 9:00 pm at #224.

On Day 8, we changed the price from $2.99 to $3.99 at 8:00 pm. This was our first book to test our strategy, and we delayed the price change until the book crossed out of triple-digit ranking. In hindsight, we likely waited too long, but the first test is always the scariest.

69 books sold in the 24 hours before the price change.
94 books sold in the 24 hours before that.
41 books sold in the 24 hours after the price change.
57 book sold in the 24 hours after that.

In the 24 hours before the price change, SECTOR C made about $140.20.
In the 24 hours after the price change, the book made about $112.00.

While the day of the price change seems to negate the pricing theory, if we extrapolate the decline across the 24-hour periods, the book would likely have sold 73% of 69 copies -- or 51 copies -- during those same 24 hours after the change, which would have yielded about $103.50 instead of $112.00. Given the jump in copies sold over the next 24 hours, it also seems that the day we made the price change might have had normal depressed sales as it was a bank holiday in the US. Remember, no data point exists in a vacuum!

One huge advantage to working with a company that offers its vendors multiple snapshots of sales throughout the day and that offers easy, remote access for adjusting price and promotion is being able to react quickly to market changes. If, say, your free promotion and launch don't go as well as expected, you can simply let your introductory price ride. Then perhaps the next time your book goes free, you can consider a repricing strategy.

Do YOU have a pricing strategy? We'd love to hear it! (However, please refrain from arguments for or against free and/or low price points - focus on the strategy you use instead. Thanks!)


Jim Hockings/ The Hawk said...

I too believe that watching closely can bear fruit. I do this with my Facebook ads, which unlike the results from hundreds of other authors, makes me a profit. About 20 to 30% profit after sales, but consistent...

Wilkins MacQueen said...

Hi Phoenix,
I'm interested in knowing the word count on Extinct, Sector C and Spoil of War, also an approx. count on Jennifer's romance novels.

From what I've read, romance is typically 55,000 up depending.

If word count is avail in the pdf I haven't been able to find it, but like I'm from the Stone Age.

Have you noticed (or has anyone noticed) a word count trend or change in different genres?

Yes, there is info on the 'net but who knows how accurate/up to date that is.

Thanks, enjoying the inside look at epubbing.

Phoenix Sullivan said...

@Jim: Coming from a marketing/advertising background, I know a percentage return of even 20% is pretty remarkable. Nice to know FB CAN return those kinds of numbers!

Phoenix Sullivan said...

Hey Mac:

One thing digital has done is make it possible to sell different story lengths stand-alone. The novella, especially in romance, is seeing a huge revival. By removing the physical constraints of needing to make a book long enough to fit a typical format that fits on a typical vendor's shelf or in a seller's rack and still have a wide enough spine to 1) use inexpensive glue for the binding and 2) carry a legible title, ebooks allow a story to be told at its natural length.

That said, readers still expect certain lengths, especially at higher price points. Amazon is starting to add an approximate page count to its automated descriptions. When it doesn't, I always add a word and page count to the descriptions I input so folk know approximately how long a book is. Even so, though I haven't seen it reflected in any of our books yet, I've seen reviews that ding a story for being too short or not a "regular" novel even when the description clearly states it's a short story or novella.

In romance, there are "category romances," which are short novels at 50,000 to 60,000 words. There are "single title" romances, which run 80,000 to 100,000. And there are all the rest, which run 60,000 to 80,000, plus a very tiny fraction of sagas that run 100,000 to 120,000. Harlequin, especially, has numerous imprints that are very strict about word counts.

Steel Magnolia will be publishing original Jennifer novels starting near the end of 2012. Meanwhile, she has some rights-reverted novellas plus a couple of original ones we'll be putting out between then and now.

Word counts:
Extinct - 72,000
SECTOR C - 82,000
Spoil of War - 112,000
Catering to the Italian Playboy - 48,000 (category length)
Gypsy Bond - 16,000 (short novella)
The Rent-A-Groom - 31,000 (long novella)
The Warlock's Daughter - 18,500
Out of the Dark - 25,000
A Vision of Sugarplums - 30,000

Hope that helps!

Wilkins MacQueen said...

Dear Phoenix,
Exactly what I was looking for. Thank you so much.

I couldn't find any thing that seemed current on how the epub world was changing this aspect. I felt it was changing but had no idea how. This tells me a lot.

Thanks again, valuable info.

Phil Bryant said...

Out of ignorance I did the opposite, opened too high and then tried to find a good price point (prior to select) and never found traction but at 1.99 but it was more a question of visibility at that point.

I had a 2 day free run three weeks ago after I'd already set price at 3.99 and came off free at the same price. I did have several hours of "Oh no, I should have knocked it down to .99" but once the lift in sales caught up I was glad I left it at 3.99. It's been a little over 3 weeks and I'm at the point of trying to gauge when to try .99 to keep sales up enough to stay on the first page of the catagory I'm now (history civil war). I'm trading spots hourly with several titles that are 1.00 to 1.99 but in general they are not doing gangbusters beyond where I can catch up to.

I have been watching my KDP sales reports hourly these last three weeks. But, the strategy you are using is geared more for taking advantage of the drop off but maintaining $$. I've been focused on staying on the first page of 20, so my next move has been governed by how can I stay visible more than $$, but I am really glad I didn't lower my price when I was about to have the explosion of sales.

Great post1

Phil Bryant said...
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