In the previous part of this article I explained the basic elements of the 4Ps of marketing were Product - Price - Promotion - Place, and then talked about Product. Today I'm going to discuss that very thorny issue of Price.
Getting the price of your product correct, and this instance I'm referring to the product as your book, is a very careful balancing act. Over price it and sales will plummet. Under price it then the margins (royalties) may suffer. However, there are a number of other factors to take into consideration - exposure being one of the most important for a writer. Personally I'd rather sell 10,000 books at $0.99 (£0.62) each, than 5,000 books for $1.98 (£1.24) each. Technically the royalties are the same (if it's a straight percentage), but having 10,000 people talking about a book is better than 5,000, particularly if there are more books in the pipeline.
Now for the more 'technical' marketing bit - elasticity of demand. For demand to increase for a product the benefits of owning the product must out-weigh the cost of buying the product. There are certain genres of book I personally don't like - so even if they were free I wouldn't download them. On the flip side of the coin there are some books I want as soon as they are released, and then price becomes less sensitive, to a degree. Prices are always higher for products which are in demand. Take games consoles as an example. When Sony bring out a new version of the PlayStation, demand is generally so high Sony are able to 'skim' additional profits from the market by placing the initial launch price at a high level. After a few months the demand reduces, and prices slowly drop to 'lift' the demand back. Companies have to focus very carefully on the elasticity of demand. If a price of a product is increased by 10%, with a resultant drop in demand of 50%, then the product is very price sensitive. However, if the demand only drops by 5%, then the product is less sensitive. A product is said to be 'elastic' when a change in price can stretch demand disproportionately. (e.g Demand increases by 50% when the price is dropped by 10%, and demand falls by 50% when the price rises by 10%). Conversely, a certain product's price could be lowered and lowered and still the demand wouldn't increase. This product's demand would then be deemed to be 'inelastic'. Products which rise in price but the demand hardly alters are also classified as inelastic. Electricity is one example. If prices rose considerably we may get into the habit of turning off lights in unoccupied rooms, but our demand for electricity wouldn't change greatly.
So when pricing your book, you initially need to consider what the demand is for the genre, and then price it to be competitive within that specific market. Then experiment with the price to see how small changes (up and down) affect demand. In the next part of this series I'll be discussing 'Promotion'.