This is the second post in a three-part series on how to realistically price books in the small or niche book market. I’m using my experiences with my debut novel, The Pirate of Panther Bay, as the quintessential example of how not to price a book. We priced it to be competitive with the “big boys” (large mainstream publishers) and got our shirts handed to us. Rather than pricing our book at $8, we would have been much better setting a retail price of $17.95 or $19.95.
Would this have worked? Yes. And the reason is basic microeconomics. You should set your price at the level your customers are willing to pay. We could sell The Pirate of Panther Bay at a higher price because, quite simply, our readers were willing to pay a higher price. Readers of pirate novels have a stronger interest in our book because we were positioning it to fill a specific need in the market. So, readers who love pirate books are willing to pay more for a pirate novel than general readers whose interest in pirates is secondary. Big publishers need to sell to both groups. Actually, they focus on the general readers, expecting to pick up the pirate enthusiasts along the way. Start-up and niche publishers don’t have that luxury; we need to focus on a more targeted audience from the beginning and work outward from there. Our books are a “slow burn.”
We also didn’t understand or appreciate the difference between the retail price (cover price) and the effective price—the actual revenue we received for each book sold. Although we priced the Pirate of Panther Bay at $8, we needed to average something close to that to make money. We didn’t recognize the importance of the standard 40 percent discount off the retail price that comes with the wholesale distribution of our books. For on-line retailers such as amazon.com, the discount can be as high as 60 percent. So, we were already starting in the hole. That was a rookie mistake, and we paid dearly for it. We didn’t just lose money on the book; we couldn’t generate the revenues to further market it to its natural and logical readership base. We ended up with a great product (based on reviews) but no ability to broaden its distribution.
Thus, in retrospect, we should have priced The Pirate of Panther Bay at $17.95 or $19.95. We could have then discounted the book to $12.95 or even $10.95 to many targeted audiences although many readers would have been happy to pay the full price. As our readership expanded, we could have printed new editions with larger print runs to bring down the price as our distribution network became more robust and resilient as our base broadened.
Final post in the series: Why setting a higher retail price doesn’t violate the fundamental economic Law of Demand.