Short Term Profit vs Long Term Reader Base – What should indie authors go for?

For authors in general, and indie authors in particular, the pricing issue is a very big deal.

  1. A book sold at $0.99 gets an author 35% i.e. just 35 cents.
  2. A book sold at $2.99 gets an author 70% i.e. $2.

So, if we forget everything else, it seems that each $2.99 ebook sale is worth nearly 6 $0.99 ebook sales.

However, we can’t forget everything else. There’s a lot more to it than $2 Versus 35 cents.

The Cycle of Ups and Downs

An author knows that there will be ups and downs. So it’s never really clear whether –

  1. The Author should cash in now. OR
  2. Build for the long-term.

Cashing in now is particularly enticing because it means that authors can –

  1. Focus on their core competency i.e. writing books.
  2. Get a nest egg or at least some amount of financial security.
  3. Get recognition and validation.
  4. Increase their distribution channels, reach physical book stores, and sell more.
  5. Get a shot at becoming the next very big author.

How does an Author ‘cash in now’?

Sign a book deal. Raise prices from $0.99 to $2.99. Introduce follow-on novels for $0.99 or perhaps even $2.99.

My argument would be that this is the best strategy if you are thinking short-term or medium-term. It is terrible strategy if you plan on long-term success – both in terms of finances and reach and recognition amongst readers.

How could an Author build for the long-term?

First, you have to evaluate customers and profits using more accurate metrics than simply ‘the first purchase’ a reader makes.

There are some very interesting things to consider –

  1. Lifetime Customer Revenue and Number of Books you have. A reader will, if your product is good enough, buy more than one book from you. So maximizing for the short-term makes no sense if you have more than one book. It makes even less sense when you consider that you can always writes more books (create more products).
  2. Direct Channel to Customers. Do you collect reader emails and/or have a blog where users can check for new releases and/or have other means to contact customers. If you are dependent on someone else to connect you with customers you are building your own grave. Emails are best – because for every 1 person who will check your blog, there are 100 who will check their email inbox.
  3. Customer Acquisition Costs. How much time, effort, and money does it take you to add a customer? What happens when you price your books lower – Does customer acquisition become easier?
  4. Cheap and Free Books as Marketing. Can you use a cheap and/or free book as marketing. Instead of spending a ton of money trying to get customers interested in buying a book – why not let them try it out cheaply (or even free).
  5. Lifetime Customer Revenue Part 2. How much profit does a user generate for you? If a typical user buys 3 of your books in the first year and a total of 6 over lifetime, then you need to consider that. It’s not just ‘value from first purchase’ – you have to consider what the reader will do over her/his lifetime.
  6. How do you find new readers?
  7. Importance of the Bestseller Charts. The bestseller charts are a self-fulfilling prophecy. You get on to the Top 100 and just that will generate huge sales for you. You drop out of all the charts and then it’s hard to get noticed.

Basically, there are a lot of good reasons you should avoid getting trapped in short-term thinking.

Survival of the Fittest Vs Survival of the Most Patient

The first few batches of indie authors who did well fell into the traps of thinking short term.

If someone says you have two options –

  1. Option A: You have a direct relationship with readers. You make it easy for readers to take a chance on your books. Then they buy more and more of your books. The profit you get and the number of readers you get keeps increasing. You control your destiny.
  2. Option B: You hand over control to someone else. You have no direct connection with your readers. It becomes tougher for readers to get your books. It becomes tougher for your most loyal readers to get your other books. The rate at which your readership grows slows down.

Then you probably would not choose Option B.

However, short-term thinking leads to lots of indie authors choosing Option B without realizing it.

Instead of thinking that they could connect with millions of readers and build up a stable readership and make tons of money consistently (i.e. every single year) from their reader base.

They fall into the trap of thinking – ‘How much money per book can I make from the reader’s first purchase of one of my books?’

Maximizing First Book Profit is Madness

Raising the price of your books does a few things –

  1. It reduces the number of people who will try out your book.
  2. It makes it harder for your loyal readership to get your books.
  3. You go down in the sales charts which creates a vicious negative cycle of less and less awareness amongst readers that you exist.
  4. It reduces the number of people who will join your readership and it reduces the rate at which your readership grows.
  5. It gives competing authors a competitive advantage.

Yes, it seems very compelling that instead of 35 cents per book sale you can make $2 per book sale.

However, the choice you are making is actually –

  1. Instead of 35 cents per book and 4 books per reader and millions of readers.
  2. You are picking $2 per book and 2 books per reader and tens of thousands of readers.

The difference really is a factor of 100 in some cases. Yes, you might become the next Stephen King and there is a 5% chance you can get away with $3 and $5 books. However, we are moving towards a book world where even the Stephen Kings will have to go with $3 and $4. How do you compete in such a world if you aren’t willing to go with $1?

Closing Thought – Resist the Temptation of Short-Term thinking

Every generation of top indie authors before this current one has ignored what an author-reader relationship really is. It’s an exchange of value.

If you try to increase the value you get and decrease or keep stable the value readers get, then they will find someone else.

If you increase the value readers get and keep stable the value you get back, then you will find more and more readers.

Whether it’s a price hike from $1 to $3 to make more per book sold, or it’s a Publisher mandated increase to $5 to ‘protect’ physical book sales, raising ebook prices reduces the number of people who will buy your books. Depending on how many books you have available, it might even reduce the amount of money you make per reader.

35 cents per book is not bad at all when you consider that –

  1. Eventually the market will be 80% ebooks and the top authors will sell tens of millions of ebooks per month.
  2. One company or another will start offering 70% or 80% cuts even on $1 books. Most devices are WiFi now and mostly imaginary things like delivery costs will disappear.

We are going to reach such a world. In that world, it will be the authors who have built huge and loyal readerships who will really cash in. If you have the opportunity to build up a readership of millions of users, then passing on that for the lure of making $2 per book sold is a strange, self-sabotaging decision.

Readers will be loyal to authors who are focused on providing them the most value for money. That means the best writing at the most competitive prices. When millions of your ebooks are being bought by readers every month and 80% of the revenue is being paid to you – then you will be very glad that you focused on building a strong reader base.


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