Amazon eBook Pricing Strategy
The process of self-publishing an ebook on Amazon is pretty simple and straightforward. The process appears to be designed for ease and accessibility. But there's one aspect to Amazon Kindle Direct Publishing that is not very easily understood by everyone. Beginning authors find themselves scratching their heads at the pricing page trying to figure out the right sales model for their ebook.
The complete topic of ebook sales is vast and complex, but for starters, an author needs to know how to price their book to complete the self-publishing process. Making a pricing strategy from the beginning will help you grow as a self-published author and find more success in the long run.
In this guide, we discuss all the factors you need to consider before deciding on your ebook pricing. Let's dive into it.
Picking a Royalty Rate
Before we start discussing how to set ebook prices, let's set the ground. The first thing to get clear on, if you're not already, is Amazon's royalty rates for ebooks.
There are two different royalty options: 35% royalty and 70% royalty.
eBooks that are priced between $2.99 and $9.99 are eligible for the 70% royalty option. eBooks priced between $0.99 and $2.98, and those priced at or above $10.00 get a 35% royalty rate.
This gives most people one obvious conclusion. To make the most amount of money, they should aim for the 70% royalty option to make the most amount of money from their ebook sales.
But it is obviously not as simple as that. Let's dig deeper and see what's the correct course of action to take for maximum success.
Your Goals as an Author
The same ebook will yield different results at different price points. In order to come up with the best possible sale price for your ebook, you need to know what result you're looking for from the sale of your book.
Are you looking to earn the maximum amount of money from one book?
Do you have more than one book in line for publishing?
Do you want as much reach and visibility as you can get as a self-published author?
Do you want maximum reach for other reasons, like marketing your business, bringing more traffic to your website, or getting more people to subscribe to your newsletter?
What is the end goal that you want to achieve from your book?
Remember, you can not be greedy in your goals. You have to pick one that is most crucial to you at the current stage of your journey. It is okay to have more than one goal in mind. However, remember that aiming at both targets might get you some good of both worlds, but you won't hit the bullseye at either if you shoot two targets with one shot.
For effective aiming, you have to first know where you stand at the moment, so you know what goals to set to become successful.
As a self-published author, you need to answer some of these questions to know what's the right goal to set:
What are the prices of some of the other Kindle ebooks in your genre?
Do you already have any books you've published? If yes, then what kind of response did you see? Did you earn enough to justify the amount of work you put into it? Did you sell more copies but still did not make enough?
Was your book prepared professionally? Was it edited, formatted, and designed by a professional? Was the cover designed by a professional book cover designer, or did you DIY?
How many reviews do you have on your backlist?
What is the length of your book? The number of pages of your book matter.
The answer to these questions and perhaps other statistics around your portfolio as a self-publishing author on Amazon will help you create a clearer picture of where you currently stand. Once you know where you stand, you can decide your plan to achieve your goals.
Royalty vs. Actual Earnings
Before we start discussing different ebook pricing strategies, we have to clarify that the royalty rate is not exactly what you earn from your book sales. There are some deductibles that reduce the bottom line.
First are the delivery costs. There is no delivery cost for books in the 35% royalty bracket. For books priced between $2.99 and $9.99, Amazon charges $0.15 per megabyte of your book's file size. The delivery cost is not calculated for the initial file size that you upload on Amazon. After Amazon is done converting the file, the final size is used to calculate the delivery costs.
Second is the VAT (Value Added Tax) that is deducted from the author's royalties and not Amazon's own commission. There are more than 160 countries in the world where you'll have to pay the VAT. Luckily, no VAT is applicable on books sold in the United States.
Selling the Most Copies
Now that we know what we're actually getting according to how we set our book price let's start with the first basic goal of an author. If you want to sell the most number of copies of a single title, then the ideal book price for you is $0.99.
According to Written Word Media, an author is likely to sell twice as many books at $0.99 as they would at any other price.
For beginning authors, getting their first or second book in the hands of as many readers as possible is the goal. Initially, building a rapport is more important than filling your pocket. Once you have a good many readers who enjoy reading you, you might earn some fans. Your discoverability will increase, and with it, your ranking on the KDP charts. You will have a strong backlist that is well recommended. So that when you sell your book at a higher price, it doesn't disappear into oblivion like the hundreds of other over-priced books on Amazon.
But if you're wondering if your book costed you more than you will earn, then the money probably does matter. However, initially, it is advised to focus on making a name for yourself, and the money follows after.
For anyone who is not looking to establish their name from scratch, the $0.99 price is not a good ebook pricing model. The only exception is promotion deals, but even those have a limit.
Making the Most Money
To make the most amount of money from book sales, the one thought that must've been floating around in your head ever since we've mentioned the royalty rates is that you want the hefty 70%. It is true that in order to make more money, your ebook pricing should lie somewhere between $2.99 and $9.99.
According to the data that nerds around the internet have collected and analyzed, the key to making the most amount of money is to price your book at $3.99.
But what if you sell your book at $9.99? Wouldn't the royalty you earn per book be the highest at $9.99? The answer is no. It is a rookie mistake to price your book at $9.99 to make the most money. The number of book sales tends to drop as you go higher in the ebook price range.
But, of course, $3.99 is also an average value calculated after observing thousands of ebooks. This does not directly help finalize the ebook pricing. But the statistics are used to give the authors a perception of the perceived value of their ebook. So what's a perceived value, and why is it important to understand?
The perceived value of your ebook is what the readers think the worth of your book is. For example, a reader is less likely to pay $10 for a 50-page long book when tons of novels in the same genre are 500 pages long. The reader would think that your $10 ebook is too expensive, but at the same time, they will buy another $10 book of the same length that tops the charts, is written by a renowned writer, and has tons of good reviews. The difference is how valuable the readers think the book is. If they don't believe that their reading experience will be worth $10, they won't buy it.
So you have to look at your book from the perspective of the end-users. The more accurately you can determine the perceived value of your ebook, the more benefit you earn. If your ebook pricing is more than how much the reader thinks it should be, then you won't sell enough copies. If your ebook pricing is lower than the perceived value, you're leaving money on the table that could very well be yours.
Remember, as we discussed earlier, you could have your reason for leaving some on the table. Maybe your goal is not to make the most money but to earn the most sales.
Factors Affecting Perceived Value
Naturally, you would wonder if there is anything you can do to increase the perceived value of your ebook. Yes, there is. Remember we asked you to answer some questions to determine the current position of your book so you can set your goals? Those factors play a huge role in the ebook pricing strategy.
The genre of your ebook decides the pricing game for you. Look at some of the big players in your genre because they are the ones setting the bar. If the price of your book is more than a bestseller title in the same genre while everything else about both books is more or less the same, people will think you're asking for too much. These big players set the rules on the upper end, so you know that you can not possibly cross that line. You have to stay lower than a bestseller book that is identical to yours in terms of length, theme, and target audience... but how low can you really go? Depending upon your goals, that's up to you. We suggest being realistic in your expectations.
Whether it matters to you or not, the length of your book does have an impact on the buyer's decision. While comparing your book to others of the same genre and target audience, consider their lengths too. As discussed earlier, you can not price your 50-page long ebook at the same price point as a 500-page novel of the same genre.
Your reputation as an author is represented by the reviews you've earned on books you've previously written. If you have a good number of reviews on your backlist, only then can you expect to compete with the average book in your genre. If you have little to no reviews on your backlist, you would still be considered a rookie. A reader will think ten times before spending money on something they're not sure is a good buy or not.
This is why some authors set their prices low at the time of release. This way, they start by selling more copies, get quickly ranked in recommended lists, and earn a large number of reviews. Once their book has gained some traction in the market, they increase the price of their ebook. (Just in case you were wondering: Yes, you can change the price of your ebook after publishing too. The number you set on the pricing page is not set in stone.)
The backlist is why some self-help books can sell for way more than most entertainment books of similar size and quality.
The quality of production of your book in ebooks is just as important as it is in the print book industry. Readers will not be willing to pay top dollar for a book with a second-rate cover design and poor formatting. On the other hand, they will be more forgiving towards some errors and a bad cover design in a highly engaging and entertaining book they bought for just $2.00.
The reader can most obviously tell the difference between a book that is professionally published and one that was done as a DIY project. And remember that your potential readers will probably notice the cover art before they even read the title of the ebook.
The Best Strategy
The best ebook pricing strategy would be one that ensures maximum sales with maximum earnings. Publishers like Amazon run on business models that incentivize authors who use their exclusivity programs. And the incentive with Amazon KDP Select is huge. Authors who choose their Kindle ebook to get enrolled in KDP Select tend to do significantly better than ones who don't unless they have strong marketing to sell print books through other publishers.
What is KDP Select?
KDP Select is Amazon's exclusivity program in which you give up your right to sell your book to another publisher to earn some benefits. So you can not sell your book on Apple, Kobo, Google Play, or Nook while your ebook is enrolled in KDP select. Although, you can send your print copies. What are those benefits? Let's enlist them.
Kindle Unlimited (KU)
Kindle Unlimited (KU) is a subscription program that allows readers to borrow your Kindle ebook and read it without paying the full price. Readers pay a monthly subscription fee of $9.99, and they get access to all the books available on Kindle Unlimited (KU).
Authors become a part of the Kindle Global Fund that pools all the money collected from subscriptions every year and pays the author for every page read of their Kindle ebook. This is not linked to the price of your book but the number of pages consumed.
Kindle Unlimited (KU) is similar to Kindle Owners' Lending Library, which has been discontinued now. But the amount of reach Kindle Unlimited (KU) has is unmatchable. It is basically impossible to lead the charts if your book is not available on Kindle Unlimited (KU).
The amount of visibility you gain from KU is so outstanding that if you're not planning to release your ebook on any other platform than Amazon KDP, then we don't know why any author would not enroll their ebook in KDP Select. The only logical reason could be if they choose to publish through multiple publishers in a way their marketing plan ensures added advantage in that. If your Amazon ebook pricing strategy is all the plan you have for the success of your book, then anyone with some experience in ebooks will suggest you choose KDP Select and leave other publishers for later.
Amazon has designed its program to influence authors to go exclusive, and they get to hold the lion's share of the ebook market. This, coupled with their agency model of pricing, makes them rule ebooks. Amazon Kindle has so far been beating all other ebook business models and leading the market. You don't have to be an expert in business studies to know what the agency model of pricing is and how it relates to the ebooks market. You just have to see the most lucrative path for your success and follow it.
Kindle Countdown Deals
For one week, the authors have the option to book their book on a discount deal where readers can buy the book for less than the full retail price of that book. But there's an added benefit of Kindle Countdown Deals that lets you circumvent a rule. The rule that your book should be priced between $2.99 and $9.99 to earn a 70% royalty rate becomes void. Although it remains true for the full retail price, if after the discount, the price of your book falls below the threshold of $2.99, you still get 70% of the royalties.
KDP Select also lets you put your book on free for a limited period of time. If you worry that you can not have giveaways on your author's website if you enroll in KDP Select, then the Amazon free promotion option should ease you a bit.
If you clearly defined your goals initially and are true in the judgment of your ebook's value, you should be able to evaluate all the factors fairly enough to make up your mind.
Remember, the ebook pricing can be changed later. If you get a response that's different from what you expected or you want to test different price points, you can change the price anytime. Whenever you do, make sure you consider all the factors again to put the next price tag.
We hope this guide solved your queries, broadened your perspective, and supported you in coming to a clear conclusion. We're sure it will help you make a better decision.