Pricing to Fail: Case Studies in Dumb Pricing – Harvard Business Review Short Cuts, the Irrelevance of Cost Issues

This post on ebook pricing follows yesterday’s post on the failed pricing approach behind Stephen King’s baseball novella. As you can doubtless tell, it’s excerpted from a forthcoming book on ebook pricing and related issues.

Of course I exaggerate when I use any form of the word "failure" in a discussion about even the weakest-selling titles among Stephen King’s books, but there are plenty of other authors and publishers for whom dumb pricing can condemn otherwise viable book projects to death-like sales doldrums.

In January 2010 we noted the launch of an initiative called "Harvard Business Review Short Cuts." An Amazon press release at the time said that "Short Cuts are individual chapters and summaries from Harvard Business Review Press publications that are broken down by the time it takes to read them (i.e. ’30 minute read’ or ’10 minute read’). They are specifically chosen to give business readers quick and informative business information and theory while they drink their morning coffee, wait for a meeting or travel for business."

Six months later, the initiative looks like a failure, despite heavy promotion by Amazon and the valuable imprimatur of the Harvard Business Review Press. Most of the titles are languishing far out the "long tail" in Kindle Store sales rankings, i.e., over 70,000 in most cases. Part of the problem, it seems likely, is that the "Short Cuts" series is overpriced, with a list price currently set at $3.99, discounted 20 percent by Amazon to $3.16. Even at $2.99, a reader wanting to work through all eight to 12 chapters of the full books from which these short-form ebooks are drawn would have to shell out roughly $25 to $35.

One would think that anyone with the wherewithal to be able to digest Harvard Business School materials with his morning coffee would also be capable of the number-crunching necessary to determine that the convenience of bite-size ebook chapters is more than offset by the high price. At $1.49 to $1.99 each, "Short Cuts" might well be a winning proposition.

Sometimes bad pricing decisions result directly from bad publishing decision. An old friend and organizing colleague told me with some excitement that he was approached by a publisher with a proposal to collect some of his essays, speeches, and blog posts on labor organizing in what became a nice little 96-page paperback and ebook. Had my friend (and even perhaps his publisher) come to me first, I would have counseled them that as a first-time author with little marketing budget and a 96-page book for a niche market, they would have done well to price the paperback at $9.95 and the Kindle edition at $2.99. I would have told them how they could have secured print and ebook packages with a truly professional appearance and feel with a total front-end expenditure of less than $100, and earned, at the prices just quoted, royalties of $2.05 for every Kindle edition sold, $2.13 for every paperback sold to bookstores and libraries, and $3.82 for every paperback sold at Amazon.com.

At these affordable prices, I would have been able to give the book a significant marketing boost via my Kindle Nation Daily blog, and my friend’s first experience as an author would have been a successful one. Instead, probably because he didn’t want to bother me, he made a bad deal with a publisher who made a bad deal with a printer and ebook publisher. Because of cost slices taken by intermediaries at each step of the way, they were stuck pricing the paperback at $12.95 and the ebook at $7.99. At those prices, the paperback and ebook are languishing far out the "long tail" in the Amazon and Kindle bookstores with sales, in a good week, of a copy or two a week. The unsustainability of the prices also makes it impossible for me to help: the author’s a great friend and I love him like a brother, but my Kindle Nation readers would laugh me out of the Kindlesphere if I recommended to them that they spend $7.99 on a 96-page ebook.

The lesson in that final case is a simple but essential one for everyone from the first-time self-published author to the Big Six publishing company executives responsible for property acquisition and the economics of pricing and cost: books of all kinds, but especially ebooks, must be priced based on the value proposition they present to their prospective buyers and readers. If you get forced into setting a high price because of your costs for editorial and creative, property acquisition and royalties, pre-press and publishing, or the slices taken by publishers, aggregators, distributors, wholesalers, or retailers, that high price is your problem, not the customer’s. Unless you have a truly hot property for which customers will pay above-market prices, the fact that you can "justify" your price based on costs is irrelevant. The book will not sell.

 

This is a reprint from Stephen Windwalker’s Kindle Nation Daily.

Comments are closed.