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Some interesting threads on here these last few days about the price of content. Are publishers gouging customers with prices that are unfairly high? Are customers bringing about the ruination of the media industry by demanding prices that are too low? Is there a halfway point at which these two conflicting groups can meet?

I think there is. I would like to introduce the concept of pricing relativity. That is, a price should be considered not so much as an entity unto itself, but an entity in relation to what other choices a customer who may be in the target market might have available to them in the same purchasing moment. If you can’t deliver your product at a price that is competitive to that customer, you need to lower your production costs. Similarly, if you find you are all but giving it away and the customer is happily paying elsewhere, you can adjust upward a little and see how it goes.

There are two key arguments I want to make in favour of this pricing model. Firstly, I want to emphasize that what I, as a customer, am asking for here are FAIR prices, not free ones. I don’t think all content needs to sell for a dollar. I recognize that quality content does cost money to produce. I don’t think it costs as much money as Big Pub seems to, and I don’t want to feel like I am being taken for a ride, but I am willing to pay a reasonable and fair price for content.

This is where the second factor of pricing relativity comes in—you need to consider what else your customer might spend this same money on in that moment of making their purchasing decision. I am not asking publishers to give me a trip to France for the cost of a croissant from the deli here. But if I am in the market for a croissant from the deli, I could possibly be persuaded to buy a muffin instead. We are talking about like content here, not trying to apply the pricing models of wildly different media to this one purchase.

So, how would pricing relativity work in practice? Consider the person who is searching for a new release best-seller. Yes, they could buy a Smashwords indie book for 99 cents, but that’s a wholly different demographic. What other options might be available to THIS customer in this same product niche? If the hardback new release is $20, you can get away with charging them $12 for an ebook. For that product, for that demographic, it may be a fair price.

But let’s say the customer is looking for an older title which has been available in cheap paperback for some time? You are competing not just with used paper copies, $6 mass market paperbacks and so on, but also with backlist titles of a similar pedigree which their authors are self-releasing for a dollar or two on Smashwords. A DRM-infested, typo-filled $12 OCR scan is not going to fly with that crowd! If you are selling a backlist title, you are not competing with the $12 Stephen King new release so you need to price according to the niche your customer is buying within.

And it’s not just books either. Like many customers, I have a media budget which covers not just books but video games, movies, music and so on. These are different types of products, but they come at similar ranges of price point. My boyfriend is into those console video games which retail for $40-50. I like the little 99 cent iPod puzzle games. That fact that I could buy 40 of them for the price of his one game is not going influence his purchasing decisions in the slightest. We’re different markets. But it does mean that if I have 99 cents to spend and I know I could get an app, a song, a movie download or an indie Smashwords title, I might choose among those options, just as he might choose between the $40 game or the $40 Star Wars movie box set.

So, on the high end, what can I get for $10-12? A year’s worth of a magazine at Zinio. A month of unlimited movies at Netflix. A shared dinner in a medium-nice restaurant. If you are offering me an ebook at that price and you cannot convince me that is going to provide, in my mind, at least as much entertainment value as these other options, you’ve lost me. In some cases, the author will be a big enough ‘name’—to me—that I’ll decide it does provide that value. That will maybe happen for most readers once or twice a year. In other cases, I’ll go with the restaurant or the Netflix movie. And similarly, knowing that my 99 cents can get me a game or a movie if none of the books on offer appeal, I choose accordingly.

I subscribe to a cooking blog whose author recently started releasing weekly meal plans by donation, and she is learning about pricing relativity the hard way. She suggested a $5 minimum download. But the e-version of her cookbook—which serves the same market—goes for about $9 at the Kindle store. Why would I pay $5 a week for a two-page pamphlet when I could spend just a few dollars more and get a book with 50 times the content? I know she puts work into them and I know SHE values them at $5, but that’s all academic unless she can demonstrate to the customer that THEY should value it that way too. After a few weeks of apparently lackluster sales where she all but begged people to please start donating if they chose to download, she finally got smart and put out a survey. The market will tell her what value they place on this particular content, and if it comes out too low to make it worth the author’s while, I imagine she’ll stop making the weekly plans. Alternatively, it could work out that I am the lone dissenter and there really are droves of people willing to pay her the price she is asking. If so, best of luck to her. I won’t buy it at that price, but others will and she has a perfect right to sell it to them.

It’s not about blanket statements here where $12 is evil and $4 is good and greedy customers want books for free, free, free. It’s about smart marketing. It’s about recognizing what kind of product your book is, who is buying it, and what other choices they might make at this same level. If you can price your product in a way that provides equal value to other choices they have available to them, you’re golden. But if you overprice, they’ll simply turn to something else. In some cases, that means that if they can buy it in paper for less than the e-price, they’ll do so. But in other cases it might mean defecting to a different entertainment choice altogether. The important thing is that the vendor understand who they are aiming for and price to that market.