As a professional economist, I thought I knew something about pricing. The higher the price, the less people buy, right? After all, don’t demand curves slope downward?
Well, yes, they do, but putting theory into practice is more difficult than I expected, particularly in retail sales world.
I was schooled in this lesson the hard way when I published my first novel, The Pirate of Panther Bay. We made the mistake of trying to compete with the major traditional publishers. Most paperback teen novels were selling for $8 to $10. So, we priced The Pirate of Panther Bay at $8. Big mistake.
What we failed to realize was that our book didn’t compete in the same market as the big traditional publishers. Our readers were different, their willingness to pay was higher, and our costs were much higher. Traditional publishers have access to national markets with a very broad readership base and well established distribution system. Their authors increasingly have their own established marketing platforms. They are selling to the broadest market possible because their distribution networks can support that level of sales effort. Their books are routinely reviewed at key places such as Booklist, Library Journal, Kirkus Reviews, major newspapers, and picked up by major bricks and mortar book stores and chains. The big publishers are capable of selling hundreds of thousands of copies of (the right) books through these networks, allowing them to price them very low. Indeed, they depend on the “mass” in “mass market.” That requires exceptionally large volumes at very low prices in very large, broad-based markets.
Because we were a small press (and a start-up to boot), we weren’t competing in that space. For us, 10,000 copies sold would be grand slam home run, not 500,000. We were building our network and starting with virtually no distribution or marketing platform. Not surprisingly, the “small book” market functions very differently than the “big book” market, and our failure to understand the difference significantly undercut the financial viability of our debut book project (The Pirate of Panther Bay).
Our pricing strategy is a case in point. First, since we didn’t have a broad distribution system in place, we were really focused on selling to a niche market. Our initial customer base wasn’t going to be thousands of general readers. It was more likely to be hundreds and, if we were lucky, thousands, mainly in the area of teen fiction with a strong interest in action stories with pirate themes. We simply weren’t realistic about what we could achieve as a small, start-up press with no existing distribution network, and our pricing failed to reflect that.
Pricing a book for smaller, niche markets requires a more sophisticated approach. Most sales come directly from the authors’ marketing efforts, usually by personally selling copies through book fairs, speaking events, special corporate or nonprofit sales, or through their own internet-based marketing efforts. (This is typically true for most authors publishing through conventional presses, too, but they don’t tell you that.) A small market author’s ability to discount the retail price is critical to selling our book in these niche markets while remaining competitive with on-line retailers and even bricks & mortar book stores.
So, starting with a price of $20 allows the author (me) to discount their book to bulk purchasers or special events customers without eating away at critically important revenues. By discounting from a higher retail price, we have the option of giving niche customers the same financial benefits wholesalers get but outside the conventional book distribution system while protecting our margins (revenues earned per book sold). To achieve that, we need to start from a realistic retail price that recognizes the narrower, niche base of our market. While we dreamed of selling The Pirate of Panther Bay to large general readership, realistically we needed to establish our sales base in a narrower, niche market that could be directly influenced by our personal marketing efforts.
This is the first of three posts on book pricing.
Next up: Why we can price niche books higher and get away with it while making our readers happy.