I've been learning more about book pricing lately and what I've learned is either a) self-publishing gurus know more about pricing than renowned pricing experts or b) self-publishing gurus are wrong about book pricing.
Then again maybe it's c) I have no idea what I'm talking about.
It's probably the last one, but hey, let's talk anyway.
The psychology of pricing your book
According to Markus Husemann-Kopetzky, marketing professor and author of The Psychology of Pricing, prices for goods are largely determined by existing market prices.
For example if you are selling a baseball hat, then you would be wise to price it similarly to other baseball hats that are of similar quality.
Competing on price to push sales is generally not recommended because you will narrow your margin so much that it becomes impossible to make a profit, ultimately driving you out of business. (Selling more units doesn't help when you make zero dollars per unit.)
In addition, discounting has negative psychological consequences, including perceptions of lower quality.
Perceptions of quality are essential when selling luxury goods, which is why high fashion brands can mark-up their items 2.5x. These products, which are associated with "conspicuous consumption" (i.e., social cache) actually demonstrate a direct correlation between pricing and demand, making them "Veblen goods."
Normal goods show an opposite correlation, as shown below.
Okay so that was kind of a lot of rambling.
Here's my question: Are books Veblen goods?
Books are not Veblen goods
According to Tucker Max, author of I Hope They Serve Beer In Hell, and this helpful guide to book pricing, some books are Veblen goods (sort of).
He writes:
Books are, within certain ranges, Veblen goods. This means that people will often judge the quality of your book, at least partially, on the price of your book. You can even see the impact of the Veblen goods effect in the book pricing data. The fact that there is no sales difference between $7.99 and $9.99 tells you that within certain price bands, the price actually does not have an impact on demand.
Unfortunately for us booksellers Mr. Max is stretching the definition of a Veblen good, as books are not associated with "conspicuous consumption." Plenty of people carry Louis Vuitton handbags to show-off their socio-economic status, but nobody—or at least very few sane people—buy a hardback book predominantly because it is more expensive than a paperback version.
Which is why—apart from rare books—you don't see books selling for hundreds of dollars each.
The same article by Mr. Max also includes the following graph:
Now I'm no economist, but the above graph looks a lot more like the normal goods graph than the Veblen goods graph.
In other words, books are not Veblen goods. Books are normal goods.
Mr. Max's observation about equal demand for books priced at $7.99 vs $9.99 simply shows that price is not the only factor driving consumer decision-making.
It is also true that consumers become less price sensitive after exiting the bargain basement.
Self-published authors are learning the wrong lesson
So if you want to sell more copies, then you should price e-books at $2.99 or $3.99, right?
A number of self-publishing gurus promote this practice, which is one reason why self-published books are often cheaper. They may be priced as low as $0.99 or even free, with the latter used as a mechanism to "find readers" who will—in theory—one day buy your books with...you know...money.
I think self-published authors are learning the wrong lesson here for at least two reasons.
1. Discounting negatively impacts perception of book quality
Unfortunately it is a common perception that books by self-published authors are inferior to those published by traditional authors. Perhaps there is some truth in this, on average, since there are no quality barriers to self-publication, increasing probability of "inferior" books reaching the reading public.
Whether or not your book is above or below average is besides the point. What matters is this: Discounting negatively impacts perception of book quality before that book is even read.
When the average person sees that a newly released e-book costs only $2.99, they will likely assume it is an inferior book to one of equal length and subject matter—probably by a traditionally published author—that costs $13.99.
Of course some readers will pick the cheap book just because it's cheap, which brings us to problem number two.
2. Discounting attracts discount shoppers and reading addicts
The above leads to a second and I believe more serious problem. Discounting attracts discount shoppers and reading addicts.
Discount shoppers—meaning people who only buy cheap books—are a tough reading audience for an obvious reason: They only buy cheap books. Which means they are unlikely to buy you books once they are actually priced at a level that generates a reasonable margin.
And then there are the reading addicts.
Yes, reading is generally a "good" way to spend your time. Beyond the pure enjoyment it delivers, you can also learn a thing or two while reading, and maybe even develop increased empathy from spending all that time imagining what it's like to be other people.
But there are some people who are addicted to reading, and, like many addicts, quality is not their chief concern—price is—because they just want their fix.
I mean this literally.
Some people are addicted to reading in a pathological way, and super-cheap self-published genre fiction is their drug of choice.
In the fascinating book Dopamine Nation, author and Stanford psychiatrist Anna Lembke recounts her own addiction to romance novels.
Dr. Lembke—who was struggling with some personal problems at the time—was reading romance so much that it was keeping her up at night, and she felt like she was behaving against her will. After a time she became aware that she wasn't really "enjoying" these books as much as getting a buzz from them.
She's not alone. Although statistics on the prevalence of reading addiction aren't available, Dr. Lembke is not alone, as shown here and here and here.
I can actually feel some people rolling their eyes right now.
Fair enough. Maybe I am overselling this reading addiction thing, but I return to my point about readers who only trawl the bargain bin: They probably aren't buying full-priced books, and they are less likely to pay for quality.
Discounting is not the answer
Suggesting that genre fiction simply sells for less—another theory promoted by self-publishing gurus—isn't necessarily true either. There is an implicit suggestion here that genre fiction is inferior in quality to non-genre fiction, but that's just pompous BS.
Some of the best-selling and most-loved books of all time are genre fiction, suggesting that—time being the greatest critic of all—they are high-quality books.
And they have been priced appropriately by traditional publishers.
Fantasy series like Harry Potter and A Song of Ice & Fire (Game of Thrones) sold for full-market hardback prices when they first came out, and special editions still sell at a mark-up, suggesting, again, that readers will pay for quality.
I wish I could remember the name of the guest on the Self-Publishing Formula episode who said this, but I clearly remember a self-published fantasy author saying that she has never discounted her books, yet she makes a good living as an author.
I believe this is because she is writing high-quality books, and because most readers have no idea/don't care when a book is self-published or traditionally published when the quality is the same. Despite writing slowly (i.e., not 4 books per year), this author has cultivated a loyal readership who pay her full price to produce quality work.
I suggest that we all do the same, whether we are publishing genre fiction, literary fiction, or anything in between.
As a (non-publishing) business consultant once told me: "Price is only an issue in the absence of value."
Ponder this deeply.
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