Thursday, August 23, 2012

Pricing like a Business Person

This week, on one forum, someone opened a thread saying she'd raised the price for book 2 in her series, but book 2's sales went up and book 1's sales were tanking. She asked what to do to salvage book 1's sales—if she should drop book 2's price again.

Now, take a moment to think about that situation. Now that Product B has a higher price, Product B sells more copies than Product A, and Product A's sales are dropping (though it's priced lower). What should you do?

When I last looked in that thread, responses were "Drop Product B's price" or "Don't worry about it."

What puzzles me is that option #3—the one that makes the most sense, if the author's concerned about profit—was ignored: Raise the price on Product A. With Product B's increased sales at the higher price, perhaps the higher price made it compare better to similar titles.

To be fair, there are some different schools of thought on pricing, but creative types have a tendency to get ridiculous in how little they charge.

For example, I bought a scarf recently from someone. It was simple, and I could've easily made it myself, but I recognized the yarn. It would've cost at least $3 for the yarn alone—assuming the scarf only took one skein. (It might've been two or three.) It probably took about an hour to knit.

What did I pay? $15.

Why am I calling something "cheap", when the maker might've made $12 for an hour's work?

First off, self-employment taxes and health insurance. That $12 an hour ends up being closer to $8, which isn't much money, considering how hard knitting can be on the forearms and wrists.

Second, in my state and in that city, there are business licenses needed even to sell crafts. Artistic folks can get a special one that costs less than the regular one. (I guess the state knows how much being a hobbyist tends to net folks.)

Third, it would've cost around $40 to get that type of scarf, machine-made, from the store. So that scarf, including materials, cost less than half of what its comparable store product would've been.

Fourth, it was exactly what a particular friend of mine would like—a friend for whom I needed a birthday gift. The color, width, and length were perfect for her. I considered buying two, because another friend of mine (with the same birthday) loves the same color, but I realized she wouldn't wear a decorative scarf.

I would've paid more for that scarf.

In fact, I almost didn't buy it, because it was so cheap. I eyed it carefully, concerned that the maker wouldn't have taken the time to do the ends well.

Now, depending on how the lady who made the scarf wanted to target her products, she might only worry about the expense factors. However, if she wanted to, she could have also targeted her prices to attract buyers who definitely wanted her work, rather than who maybe wanted her work.

See, that's the problem with handicrafts: The up-front expense in time and money tends to be high, so you have to be a speed demon, make bulky items that don't take much time, or target folks who are after the handmade appeal. Fewer customers fall into that category than not, but you have to sell fewer products to make ends meet, too.

Writing is a bit odd—and nice—in that you can write a bunch, sell it for whatever you want, and then you can keep reselling that same thing and not worry about it. So it can be hard to see that the similar detail still applies.

That doesn't mean it's wrong to, for example, price a novel at $0.99. It isn't even wrong to price one at $18. The latter price… Well, evidently the publisher's trying to milk that bestseller name to get the maximum revenue possible from the "true" fans who'll buy whatever Rowling writes. The former price targets bargain shoppers who are after cheap, which tends to be a different audience from folks who buy at $3.99, which can be a different audience from folks who buy at $6.99.

Different audience.

Different customers.

So if raising a price (or lowering it) makes one of your products sell better, then perhaps your target readership tends to hang out in a different price zone.

But to assume that an option—of raising or lowering a price—is always the best thing to do, in every scenario…ignores how varied customer bases are.

Is there something that you would've bought at a higher price? What about something you almost didn't buy because you thought the price suspicious? Or something you would've bought, but you thought its price ridiculous?


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