There are several schools of thought when pricing an e-book. One school says price it as low as possible and make up for small profits in volume. Thus a 99 cent e-book should sell more copies than a $9.99 e-book. The other school of thought says price your e-book as high as possible because you’ll make fewer sales, but more profit per sale. As always, there’s more than simplistic guidelines to worry about.
Amazon once fixed maximum e-book prices at $9.99 until publishers rebelled. Then publishers won the right to set e-book prices anywhere they want and what did they discover? That higher prices meant lower sales.
If you keep raising prices, you’ll keep reducing sales. The trick is that if you price an e-book too low, you’ll actually lose sales because a low price implies lesser value. Thus you can deprive yourself of profit by pricing your e-book too low.
For example, suppose you sold an e-book at 99 cents and sold 10 of them. That would mean roughly $10 with the author taking a traditional 70% cut, which means selling 10 e-books at 99 cents earns you roughly $7. Now if you priced that same e-book at $9.99 and sold one copy, you’d make that same amount of profit. The real trick isn’t just arbitrarily choosing a low or high price, but in finding the specific price that maximizes your e-book sales.
Unfortunately, every e-book is different. Fiction e-books tend to be throwaway purchases, so a low price is better since you want impulse buys. Nobody’s going to buy a $9.99 novel from an unknown author so a lower price reduces the barrier to a sale.
On the other hand, non-fiction e-books tend to be more important. If someone wants that information, they’re willing to pay for it up to a certain amount. If you price a non-fiction e-book too low, people think it can’t be that good. If you wanted to learn how to reduce your chance of a heart attack, would you trust a 99 e-book or a more expensive one? It doesn’t matter if the information is identical. A higher price (up to a certain point) creates an aura of value.
So the general rule is to price fiction low and price non-fiction higher. You may need to experiment to find the right price for your particular e-book but don’t think there’s a magic price that works for all e-books because there isn’t.
Price e-books too low and you may miss out on profits. Price e-books too high and you’ll also miss out on profits through reduced sales. The real answer is to experiment with different prices until you find the price that maximizes sales and profits. It’s not a fast processor but it’s the eventual answer.