My previous posts on book pricing covered the importance of marketing and distribution systems (Part 1) and the willingness to pay (Part 2). Today, I want to conclude my series commenting on why charging a higher retail price for our book is actually consistent with a well functioning economic world. In other words, demand curves do in fact slope downward, even for niche books (like mine) that focus on a narrower reader base. I’ll still use my experiences with my debut novel, The Pirate of Panther Bay, as the illustrative case.
So, what about the Law of Demand? Won’t a higher price discourage sales? The short answer in the classroom is “yes,” but the practical answer is you need to have the right price for the right market.
This is why preserving the ability to discount from a realistically high retail price for our book is essential for our success as authors. Discounting can only be achieved by setting a high initial retail (cover) price. So, even though the price may be higher than most books sold in bricks & mortar book stores, the effective price for most of our customers wouldn’t have been that much different because the sales path for small books is so radically different from the “big boys.” For readers of pirate novels, the difference between $8 and $12 is really not very much and has almost not effect on their willingness to buy the book. (In technical terms their demand is inelastic; less responsive to changes in price.) They value the story in the book more highly than the typical romance reader. They are willing to pay the higher price because they believe the story is worth it. Real-world pricing is about market segmentation—niche markets give us more ability to set a higher price based on willingness to pay.
This is quite consistent with the Law of Demand and the downward sloping demand curve I teach in the university classroom. We tend to forget (and neglect to teach) that each buyer has a different price point. In the real world, publishers and authors should be trying to match a price to each buyer’s preference. The market demand curve represents all the buyers for a particular product for the entire market (niche buyers + general readers). Some buyers will pay the full price for our book (in our case $19.95). Others will not be willing to pay much at all (mass market readers without a specific interest in pirates or action stories).
So, pricing in niche markets is really about recognizing that we operate in a different, segmented market with different buyer sensitivities to the retail price. We can price higher because our customers see enough value in what we produce they are willing to pay for it. Moreover, a higher retail price allows us to provide a more competitive price to customers in very specialized parts of our market such as book clubs, nonprofit organizations, corporate sales, or book fairs. In the end, to stay viable, we need to price based on what the market will bare, not simple theory that neglects the nuance of how real markets operate.
Oh, and by the way, the retail price for my newest novel, A Warrior’s Soul (a bully action story with a martial arts theme) is $19.95, but you can buy your copy now at a 25 percent discount before June 20, 2011 through an exclusive arrangement with the SKH Quest Center for Martial Arts (www.skhquest.com)!