This is a balance, as generally speaking the lower the price of your book the more people will buy it, but the less money you will make per sale.
There can be reasons for positioning your book at both ends of the scale. A first in series when you have a long backlist can serve as an easy entry point when promoted as free, or low price, with the hope that you will hook the readers into purchasing more from you. While for a standalone you might prefer to price it higher and know that those who do buy it really want it.
Both strategies have their benefits and weaknesses, and which you choose depends on you. You also need to be aware of where what you are selling fits into the market of what is already there. Different genres have different expectations, especially when it comes to price. A non fiction coffee table book will demand a higher price than a romance novella. They are appealing to different markets. And a key to succeeding as an indie publisher is knowing who your reader is and what else they are likely to be buying. That is the comparison that your readers will be making in their minds.
Obviously it is much easier to have a loss leader when you have more books out, and the more books you have out the more books you have to potentially sell and earn you money. There are lots of people out there who search for freebies or bargains, and will download your books with no intention of buying any more.
Business side of pricing
Books are a funny business in a way, as all the costs are borne by the first copy. Then you can sell that as many times over as you are able to. Especially in this era of ebooks and print on demand there are no limits or print runs or running out of print. (Well, technically there is a limit to how many reproductions you can have of many cover art depending on the licences used. But quite frankly it is so high that if you are anywhere near approaching that then the cost of an extended licence won’t be an issue anymore.)
You can look at the costs you have to produce your book and from that calculate the number of copies you need to sell to break even. Any more than that and you are making money. And you can see how this target changes as you change the price. Most retailers and distributors tell you what your share of the price will be for any value. With Amazon you do need to take filesize into account, as they charge a distribution fee (for any book with 70% royalty) and if there are lots of images then you need to see what impact that has on your share, as that is taken out before the royalty is calculated.
Pricing is a bit of a guess, as you can’t tell what people will pay until you put the book up for sale. Once you have had your book for sale for some time then you can assess how it is doing. You don’t have to keep your price the same all the time. Put it up for a few months and see how that affects your sales. Put it down and see how it affects your income. Find the sweet spot for your books.
If you are looking for international readers then you also need to look at your international prices. It is well known that buyers prefer to buy things where the price ends in 9. Preferably 99. So look at the currency conversions for different markets and change them to prettier numbers that end in 9s. I find the trickiest thing to do with this is remembering what prices I’ve used in different places. As when you are setting the price in six currencies (or more) on a handful of different platforms, then it adds another complication every time you change the price. Personally, I make sure to set my US dollar, Euro and British pounds prices. Sometimes I do Australia, Canada and New Zealand too, though often I leave them as they are. Some retailers try to make your prices pretty and end with a 9 for you, but they don’t all. And you need to check how they include tax. Certainly with Google Play you need to specifiy that the price you are inputting is including tax, as otherwise they will add tax on top and you’ll lose your pretty number.
My pricing strategy
As I run long preorders, I start them off at 0.99 for the first month. Then I rise the price to 2.99 until about a month after launch when I make the titles their list price of 3.99. Prices the same in dollars, euros and pounds. This means that I get some sales and can promo the preorder when I first set it up, as that is a limited time price. Sales early help with ranking and means that the book starts to show up on the genre bestseller lists, especially on Amazon where there are bestseller lists for every sub sub sub genre, as well as lists for those new books in each sub sub sub genre. Then putting my price to 2.99 means that those who preorder and buy it on release get a good deal, while I still make better money. The Amazon threshold for 70% royalties is 2.99, so sales of books priced above that give the author a higher royalty rate. Then I set the list price at 3.99 so that I have some room to run promotions in the future.
Now, this is the plan I have made and I am going to stick with it for the next few book launches, to see how it works. It makes sense to me, but that is no guarantee that it is the best thing to do. And it working now does not mean that it will always continue to work. But I am committed to stick with this so that there is a measure of consistency and my readers can learn to know what to expect my book prices to do. I will, no doubt, run temporary sales on them, but I have no plan for those at the moment. Once my current series are finished I may revise my pricing strategy, but not until then.
Now, if you are a reader, and are looking to purchase one of my books then this should tell you what to expect. I currently have two books on preorder (Fae Fair and Dragon’s Heir) and they will remain 2.99 until after they publish, when the price will raise to 3.99. If you want to know about all my plans for book releases and any promotions then sign up to my newsletter.