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It all started with John Lehman’s call-to-arms to app developers:

“Those of us in app development love to talk about how ridiculous it is that people will drop $4 every other day on a cup of coffee but will not ‘waste’ 99 cents on our hot new app. I hope by now we’ve learned something: This comparison doesn’t work.”

Lehman goes on to explain that Starbucks coffee is a trustable experience, and ‘your app’ is not; that is has no free substitute and the app does; that its craftsmanship is on full display unlike an app, and so on.

Then, Nate over at The Digital Reader picked up the baton and made the comparison with e-books, adding a few other points about author brands, Project Gutenberg, and so on. But it was in the comments that I found this gem:

“Just because you don’t approve of the decision tree people use to make purchases doesn’t mean they’re not using it or that it is invalid.”

True words. The point that I have tried to make with indie authors when I’ve discussed pricing over the years is this: There is no such thing as a good price or a bad price. There is only a relative price: What does this sum represent, relative to the other like choices people will have at this same level? Take the example of $50. It might be a fair price for a dinner for two at a restaurant, or a pair of shoes, or an Xbox video game. But if someone tried to charge you $50 for a gourmet chocolate chip cookie, you’d balk. It’s not that you can’t afford $50. Rather, it’s that relative to your other choices in that same market, that price is well beyond your comfort zone. There are numerous alternatives at lower price points which provide the same value to you.

Relative pricing doesn’t mean people won’t choose your product. There may be times when you decide you want the fancy steakhouse dinner even though you could eat at McDonald’s 50 times for the same price. But it would be foolish of the steak house to assume that its average customer is going to choose to come there on a nightly basis. So they market themselves as the special experience, and target customers accordingly.

Similarly, book publishers recognize that some authors are brand names who can command more, and they price new releases by those authors at higher levels—that’s why for years, it was considered a mark of success to become famous enough to merit a hardcover. Those books cost more, and having a publisher print one for you meant they felt your readers would pay the extra. Not all authors merited a hardcover. So, in the minds of many readers today, they transfer these expectations to the e-equivalents and expect to pay less for the indie-unknown than they do for the new King or Grisham. They look at the choices available to them at the price point of ‘best-seller,’ and they decide to either spend it, or allocate those dollars elsewhere.

So, with that in mind, I present the following case study: What choices are available to me for my entertainment spending these days? If I pass on the Big Pub Bestseller, what can I do with that money instead? To start, I checked the Kobo bestseller list. The first non-series novel to appear on it that interested me was Gone, Girl by Gillian Flynn, which is at #9 on the list and currently selling for $13.99. Now, let’s see what else I can get for my entertainment dollar at around that same price point …

TIER ONE: $11 and above

$15.99 ….. one movie ticket for a 3D film (source: Cineplex.com)
$15.00 ….. one drop-in pottery class at the Ceramics Museum
$15.00 ….. my share of a restaurant dinner date with my sweetie
$15.00 ….. typical price of a Nintendo DS game at local second-hand shop
$14.99 ….. typical price of new workout dvd, including shipping
$13.99 ….. price for current e-book produced by legacy publisher
$12.99 ….. one movie ticket for a general film (source: Cineplex.com)

TIER TWO: To $10

$10.00-15.00 ….. my price range for a one-year magazine subscription
$10.00 ….. my share of a restaurant brunch date with my sweetie
$10.99-14.99 ….. one full album on iTunes
$9.00 ….. one general admission to the Royal Ontario Museum on Fridays after 4:30 p.m.
$7.99 ….. one-month membership to Netflix (unlimited streaming of all available titles)

TIER THREE: To $7

$6.50 ….. a drink, small treat and writing time with two hours free wifi at local fancy coffee shop
$5.99 ….. one HD movie rental on iTunes
$4.99 ….. one non-HD movie rental on iTunes
$4.99-9.99 ….. my price limit for paid Kindle books
$3.99 ….. price for one issue of a Dell fiction magazine, without coupon code, at Fictionwise

 TIER FOUR: To $3

$3.00 ….. one single-fare public transit ticket (for free live events)
$1.99-4.99 ….. price I will pay for an indie book by a known-to-me author
$1.99 ….. price I will pay for an indie book by a new-to-me author
$1.29 ….. one song download on iTunes
$0.99-1.99 ….. price for average Kindle Deal of the Day book
$0.99-4.00 ….. price I will pay for paid apps on iTunes
$0.25 ….. price to rent a locker for visit to community centre to use the free pool or track

TIER FIVE: Free

Free ….. admission to Art Gallery of Ontario permanent collection on Wednesdays after 6 p.m.
Free ….. guided ROMwalk walking tour led by staff at Royal Ontario Museum
Free ….. download of free games and apps on iTunes
Free ….. on-line viewing of Canadian National Film Board films
Free ….. on-line viewing of major network shows (CTV, CBC, Slice, Global, etc.)
Free ….. on-line viewing of classic films at Archive.org
Free ….. on-line viewing of music videos at Vevo and YouTube
Free ….. download of free books from Project Gutenberg, Mobile Read, Kindle Free Books,etc.
Free ….. download of free classic magazines on Project Gutenberg

I could go on, but you get the idea. None of these choices are good or bad choices in and of themselves. But they do exist on a relative scale in my head when I weigh my decisions both for time and money. The ROMwalk might appeal to me more than a movie on Netflix if the weather is nice and the featured walk (there is a schedule, updated yearly) interests me. But if the walk of the week is featuring an area I can’t get to by transit, or it’s one I’ve done already, or the weather is bad, or I’m not feeling great and can’t be bothered to get out of bed, I’ll go online for the book or movie.

Similarly, a brunch out for pancakes with my sweetie is a favourite outing for me and one I will nearly always choose if given the option. But this entertainment choice is dependent on his being able to accompany me. If he isn’t, I will definitely choose something else. Whether that is ‘download an e-book and curl up on the couch’ or ‘go to the coffee shop to read magazines and write for a bit’ depends on a whole bunch of things. If I’m buying at the coffee shop, I won’t spend more money on a book—I’ll read what I have already or download a freebie, for instance. Or, if a new book is out that I really want, I’ll spend the money on that, and not on the coffee.

The mistake is thinking that $4 or $7 or $13 are inherently good or bad prices, because they’re not. The only absolute is that every reader will have a scale in their heads which on some level resembles mine. The higher you price yourself on the scale, the more options you’ll have available to you, at or below your number. It doesn’t mean you won’t choose the high end sometimes. But you’ll have to think about it a lot harder and be a lot more sure of what you’re buying. I’ll buy the Gillian Flynn because I like her stuff, but my price point for new-to-me authors is a lot lower because, at the $14 level, there are so many more sure things I can enjoy.

 
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