There is an ongoing debate among authors on how best to price their ebooks. As the author of your ebook, you are in the best position to determine the optimal price for your ebook. You have access to all your sales data and how it fluctuates when you run different promotions.

However, it’s always useful to have macro trends and data points to refer to as you are analyzing your data and deciding what your next price promotion should be. We decided to run a high-level analysis on all Kindle books sold through our sister site, Bargain Booksy, in the last 6 months so we can share the aggregate demand for ebooks at different price points. (Freebooksy features books that are free, so we don’t have any sales data to analyze from Freebooksy features).


The Data:

  • The data includes all Kindle books sold on Amazon.com in the past 6 months through Bargain Booksy.
  •  The Kindle book sales include both indie titles and traditionally published titles.
  • The data does not account for other variables that may impact demand, such as genre, reviews, ranking or popularity of author.

The Bargain Booksy audience consists of avid readers who have signed up to get deals on ebooks, so they are likely more price-sensitive than the general population (but they likely account for a larger share of ebooks purchased on average than the general population).


The Demand Curve

In a typical demand curve the number of units sold declines as the price of the product increases. A typical demand curve looks like this:

Typical Demand Curve showing the relationship of Price to Quantity Sold (Q) at that price.
Typical Demand Curve showing the relationship of Price to Quantity Sold (Q) at that price.

This is what the demand curve looks like for the Bargain Booksy data:

eBooks+Demand+Curve

Unsurprisingly, the most Kindle units were sold at the $0.99 price point. The demand then drops slightly for ebooks priced at $1.99, and again for ebooks priced at $2.99. The demand for ebooks priced above $2.99 drops steeply and eventually normalizes at low volumes for books priced $4.99 and above.


What About Revenue? 

So, what is the implication of this demand curve on author revenue?

Screen+Shot+2014-02-18+at+2.03.47+PM

Even though more Kindle books were sold at the $0.99 price point, the $1.99 and $2.99 price points generate more revenue. 

This is even more pronounced when you factor in the royalty rate. If you are not enrolled in KDP Select, your royalty on books priced at $2.99 and below is 35% vs 70% on Kindle books priced at $2.99 and above. If you are enrolled in KDP Select, you can take advantage of the Kindle Countdown Deals and retain your 70% royalty (though you are limited to how many days you can run a promo at the discounted price). Factoring in the royalty rates, the revenue to an author looks like this:

Screen+Shot+2014-02-18+at+2.18.53+PM

In this scenario, you are better off pricing your ebook at $2.99 if you are trying to maximize revenue.


Conclusion

As mentioned above, there are many variables that are not factored into this analysis. And there are many reasons you may choose to price your book at $0.99, for example:

  • You are a newly published author with no reviews or audience. Pricing your book at 99c will help to get more copies into readers hands which will in turn generate reviews and sales. If your goal is to get your book out there, running a free promotion is another effective tactic you may want to consider.
  • Your book is a novella or the first in a series. In this scenario, the goal of your 99c book is not to generate revenue on the first book, but to spur the sales of the following books in the series.
  • You are in a genre where there is competitive pressure to price your book at $0.99. As our analysis does not take genre into account, it is likely there are some genres that do not display the aggregated demand curve that we share above.

What do you think? Have you tried pricing your book at different price points? What were the results? Please share with us in the comments below.