A question we get all the time is “what’s the best price point for a book on your site?”
The answer is more complicated than a number: it depends on your goals. Pricing any product, including an ebook, needs a sophisticated strategy based on data and is wholly dependent on your specific goals.
Authors tend to have two distinct goals: 1) grow readership / acquire more readers and 2) make money from their titles. An author who wants to maximize a financial return on their marketing dollars will use a different pricing strategy than an author who wants to acquire the most new readers. Both goals are undoubtedly part of your marketing plan. Which strategy you deploy depends on which goal applies to the specific title you’re promoting.
In this analysis, we seek to answer the following:
- How should an author price their book to maximize new readers acquired?
- How should an author price their book to maximize revenue?
Goal 1: Growing readership
If your primary goal is to acquire the most new readers, your key metric to watch is copies sold. Why? Because the more copies you sell, the more people there are reading your book. When optimizing to this goal, the metric to measure is cost per reader acquired.
Cost per Reader Acquired = Net Marketing Cost / Copies Sold.
For example: If your net marketing cost is $50 and you sell 50 copies, your cost per reader acquired is $1. If your net marketing cost is $50 and you sell 25 copies, your cost per reader acquired is $2. (Net marketing cost = Amount spent on marketing – royalties earned on sales)
Acquiring new customers is hard and expensive. Keeping customers is much easier. Once a reader has downloaded or purchased one of your titles, there is a good probability they will go on to purchase other titles in your catalog (as high as a 56% chance, according to Mark from Kobo Writing Life). So the $1 or $2 you spend acquiring the reader pays off in future sales of other titles. It also pays off in non-monetary ways: getting more reviews of your book and word of mouth recommendations.
Looking at the demand curve below, you can see that more copies of a book are sold at the $0.99 and $1.99 price point. If your goal is to acquire the most new readers, price your book at $0.99.
Takeaway: if your primary goal is to maximize the number of readers you acquire, $0.99 is still the most impactful price point, but $1.99 is not far behind.
Goal 2: Making money
If your primary goal is to generate the most revenue from a title, the key measure of success is Return on Investment (ROI).
Return on Investment = Net Revenue to Author – Marketing Cost
For example, if you spend $50 on advertising and you earn $100 in net revenue, your ROI = $50. If you spend $50 on advertising and earn $50 in net revenue, you are break-even. If you spend $50 on advertising and you earn $40 in net revenue, your ROI is -$10 (it cost you $10).
Maximizing ROI is a goal that is generally employed by authors who have very small marketing budgets and need to constantly refill the pot before spending more on promotions. It’s also used by authors who only have one title and therefore cannot rely on sales of other books to recoup the marketing investment.
Due to the differing royalty rates, it’s important that authors evaluate ROI on net revenue (revenue after royalties), and not book sales revenue generated.
Looking at the graphs below you can see that when we look at total book sales generated, $1.99 looks like your best bet. It’s a low price point which compels readers to convert at a high rate, and it garners the most total book sales.
But of course, that’s not the full story. Net revenue to the author (after royalties) is where things start to change. As authors are all-too familiar, the 35% royalty on $0.99 and $1.99 books make things complicated if your goal is to maximize revenue.
Looking at Net Revenue to Author, $4.99 is the price point at which you maximize revenue.
Note: this chart assumes that all $0.99 and $1.99 books are NOT Kindle countdown deals and therefore subject to the 35% royalty rate.
Takeaway: if your only goal is to maximize revenue on the day of a promotion, price your book at $4.99. You will acquire far fewer readers, but generate the most revenue.
But I Want to Acquire Readers AND Generate Revenue.
As you should. Both goals are important, and completely ignoring one to maximize the other is myopic in the long run. Most authors’ pricing strategy falls somewhere in the middle for that very reason. So where is ‘somewhere?’ Again: it depends on which goal you value more.
Here’s what the copies sold and net revenue to author graphs look like stacked on top of each other:
Takeaway: If you want to achieve both goals, but value acquiring new readers more than maximizing revenue, go for $1.99. If you want to maximize revenue more than you want to acquire new readers, price your book at $2.99.
But What About Countdown Deals?
If your book is enrolled in KDP select and therefore eligible for Kindle Countdown deals, you should absolutely take advantage of the 70% royalty at the $0.99 price point. You’ll maximize new readers acquired AND revenue generated in one promotion.
So Why Doesn’t Everyone Do Countdown Deals?
Because of other devices. KDP Select’s exclusivity clause prevents authors in the program from listing their book for sale anywhere else. This exclusivity clause is fine for some – like a new author who does not yet have an established audience. A countdown deal strategy makes sense for someone who is new to the game and needs to acquire new readers and maximize revenue at the same time for every single promotion.
Kindle’s market share is massive – massive enough that we’re confident this Kindle-only data gives insights into the market as a whole – but other devices are compelling revenue-generators for authors. Kobo sales and Nook sales in particular can really move the needle on an author’s monthly revenue. They are not to be ignored.
Here’s the part to which you scrolled in order to read all of the main points:
Yep, we’re on to you. Our main discovery when running our current demand curve: how you price your book should be dependent on what you want to achieve with this specific promotion.
If your only goal is to maximize the number of readers you acquire:
- $0.99 is the most effective price point.
- $1.99 is not far behind.
If your only goal is to maximize revenue on the day of a promotion:
- Price your book at $4.99.
- You will acquire far fewer readers, but generate the most revenue.
If you want to achieve both goals:
- …but value acquiring new readers more than maximizing revenue, go for $1.99.
- …but want to maximize revenue more than you want to acquire new readers, price your book at $2.99.
Ready to apply some of your new found knowledge and run a promotion?
A Note About the Data: This demand curve is based on a sample set of 14,620 Kindle books purchased from May 1 – July 31, 2015. It does not include Nook, Kobo or Apple sales.