I’m trying to set a retail price for a 600 page computer book. Is there a formula or guideline for determining a fair retail price that generates the best profit?
This is a tough one because of two dictums: “charge what the market will bear” and “value is in the eye of the beholder”. Not to sound too capitalistic, but if you are going to charge anything at all for your book – which you clearly are going to do – then I suggest you can rethink the question as “what’s the maximum I can charge for my book while still producing good sales?”
Setting product price is a fundamental questions for any business. Do you want to produce lots and lots of sales at a very low price point, or do you want to have precious few sales at a very high price point? You can see the difference between these two in the publishing world by comparing research reports (that are often $5000 or more for 50-75 pages) with self-published ebooks (which can be as cheap as $9.99 for hundreds of pages). It’s a continuum, of course, and most businesses try to position their products as being somewhere in the middle.
So let’s say you want to be near the middle of this continuum too. Your first step would be to research your market segment and see how comparable books are priced. But there’s a huge caveat here because self-published or vanity published books are quite different from those produced by a traditional publishing house. To figure out your price, you need to figure out your costs and desired profit per copy.
For example, let’s consider my popular book The Complete Idiot’s Guide to Growing Your Business with Google published by mainstream press Penguin Books. The cover price of this book is $19.95 and 50% of that goes to the retailer (or about $10). That’s how Amazon, for example, can offer it at the terrific discount price of $12.97 (and, at that price, is there any excuse for you not buying a copy right now? Of course not!). They price it at $12.97 and still make a few dollars profit each time a copy is sold anyway.
Now, let’s consider the remaining $10 from the sale, because, as you’ll see, it’s quite relevant to your original question. Much of that is eaten up by production and distribution costs, and since traditional publishers don’t work with “on demand” presses, they have warehousing and eventual unsold inventory liquidation costs too.
A typical author royalty is between 10 and 20% on a book like this, so let’s pick 15% as the royalty rate (that’s 15% of the net price on most contracts, so it’s actually 15% of the price that bookstores pay for the book, not consumers). That translates to about $1.49 per copy. Now you can see why it’s pretty hard to make any meaningful money selling print books through traditional channels…
Anyway, so now we’ve established that a typical author profit on each $20 book sale is about $1.50. If you self-publish, though, then you could easily earn $10 or more from that $20 sale because then your only costs are production and shipping. Sell it through a major distributor like Amazon, however, and you’ll find they take 50% of your sale price, just as they would for a traditional publisher. Again, now that $20 book sale might net you $5 or so in profit. Better, but still a long trail to wealth.
So maybe it’s time to push up above $20. Now you can see the tension in the equation: raise the price to, say, $99, and you can make a good per-book profit, but unless it’s 600 pages of amazing content, you’ll be lucky to make a half-dozen sales a month. Probably, $99 is too high, and more likely than not $20 is too low.
How can you test it? I’d create a Web site for the book (or, ideally, a blog, something I talk about in great length in my new Blogging for Business Course, actually) and offer the book at two different prices, depending on whether the visitor sees “page A” or “page B”.
This is known as “A/B testing” and done right, you’ll quickly be able to ascertain which price is the best choice for your book, or, considered differently, how high you can raise the price before you turn off too high a percentage of your customers and stop all sales. A/B testing is a more complex topic than I can squeeze into this article, but it’s well worth researching, as is its more sophisticated brother “tagutchi testing”.
In any case, I haven’t answered your question, per se, but I hope I have given you some good food for thought.
Good luck with your book, regardless of what it’s about, and don’t forget that 600 pages of content could also power a terrific online reference site monetized by channels like Google AdSense (interested in this particularly avenue? Then please see my popular Get Started with Google AdSense article).