Update May 30/11:  I just found an excellent post, “The Pricing of eBooks and Perceived Value“, on Bob Mayer’s blog.  Seems I missed two critical points in my post: 

1) There’s a place for 99-cent e-books as a method of diminishing risk for potential buyers.  The important point here is that not all your books get priced at 99 cents, and they don’t necessarily stay priced at 99 cents.

2) I didn’t mention the sliding royalty scale that’s applied to e-books.  Bob does the math in his post.  When I advocated jacking up the price of e-books, I was thinking in the range of $2.99 to $8.99.  Bob’s post explains why that range would be okay, but anything over $9.99 doesn’t currently work to the author’s advantage.

Here’s my original post:

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I’ve seen a lot of discussion on blogs lately about the idea of selling electronic books for 99 cents.

I’m a business owner in real life.  I’ve spent the better part of the last four years reading up on marketing, consumer behaviour, and pricing.

This is like watching a trainload of people hurtling towards the proverbial busted trestle sagging into the proverbial canyon.

I only hope a few passengers will notice my frantic gesticulations.

Oh, look, charades!  Two words, sounds like… head… no… brain.  Neck.

Brain neck?

Yeah, that’s what I said.  Train wreck.

Bail out now, folks, ‘cause if you stay on that train you’re gonna end up with a locomotive parked on your chest.  At the bottom of the canyon.  Submerged in a raging river.  Surrounded by hostile…  Well, you get the picture.

On my business website, I priced my computer training workbooks exactly the same for the paper and electronic versions.  Nobody ever quibbles.  They buy electronic, because they can have it immediately.  They rarely buy hard copies.

Your work has value.  When people buy your book, they’re not paying for the way it’s delivered.  Whether it’s fiction or non-fiction, they’re paying for the privilege of transferring a little bit of your brain into theirs.

That value isn’t diminished just because nobody killed a tree.  Spin that another way, and the electronic version is actually more valuable because the customer can have it instantly.

As soon as we begin to discount electronic books, we’re entering a commodity pricing system.  Simply put?  Some cheap bastard will always offer it for less.  And everybody loses.

This train ride is a one-way trip.  Once we let consumers believe that electronic books are “less valuable”, they’ll take it as a personal affront if we try to jack up the price later.  We’re in the early stages of this game.  Now’s the time to educate our customers about what they’re really getting.

Some people argue that lower pricing decreases the perceived risk for the buyer.  “I’ll buy it because I can afford 99 cents.  If it’s crap, I haven’t lost much.”

True.  But what’s the customer really thinking?  “This might be crap.”

Gee, that’s the reaction I’m looking for when somebody considers my book.  Not.

There are better ways to reduce perceived risk without diminishing value.  Let ‘em see the first chapter.  If it’s crap, I won’t sell any books.  But, arguably, if it’s crap, I shouldn’t sell any books.

When people buy something expensive, they value the item more.

Pens come to mind. Cheap pens cost about thirteen cents apiece if you buy a box of fifteen.  Or I can buy one fancy pen for upwards of thirty dollars.  A single refill for it costs six or seven bucks.

Why the hell would I buy one pen when I could spend the same amount of money and get enough pens to last me the rest of my friggin’ life?  When they look at my signature, nobody can tell what kind of pen I used.

But fancy pens still sell.

Why?  Somebody sold the customer on the look of the pen, the feel of the pen, the quality of the writing experience, the status of owning a pen that murmurs in a well-bred voice, “I am worthy of respect because my pen cost more than your shoes.”

That’s differentiation.  It’s a “better” pen.

As writers, our opportunities for differentiation are somewhat limited.  As long as the cover art is good and the title looks interesting, there’s no way to tell whether the book inside will whisk you to the pinnacles of literary ecstasy or make you recoil at the steaming heap concealed within its pages.

But ya know what?  If I pay six bucks for it, I’m gonna expect a little more ecstasy.  And if it delivers, I’m gonna go back and get me some more.

Whether I sell one thirty-dollar pen or three hundred cheap pens, it’s the same amount of money in my pocket at the end of the day.

Except that tomorrow, I have to go out and find more customers.  Three hundred is a lot.

We can’t stop people from pricing their books at 99 cents, short of creating a self-policing professional association.  I’ll stop laughing now.  The phrase “herding cats” comes to mind.

But maybe that’s a good thing.  It gives us an opportunity for differentiation.  I say jack up the price of those electronic books so people understand and expect the value they’re getting.

What do you think?