everything you wanted to ask a retailer about pricing but your legal department was afraid to ask -...
TRANSCRIPT
Everything You Wanted to Ask a Retailer About eBook Pricing But Your Legal Department Was Afraid To Ask
The First and Probably Last Tech Forum Presentation by:Ryan James O’Sullivan of Rakuten Kobo
RJO rynet ryanosull
About Me Hi, I’m Ryan James O’Sullivan I work for Rakuten Kobo, your favouirte eBook retailer (RIGHT?) I’m currently the Director of Content Analytics responsible for
Pricing, Sales & Promotions Optimization and Publisher Analytics
Previously the Director of Online Supply Chain @ Indigo I’ve been selling books in some way shape or form for 18 years I’m a bit of a geek OK, I’M A LOT OF A GEEK. Like I will crush you in Mario Kart,
Settlers of Catan and League of Legends right now Also a huge sports fan! Play and watch baseball (go Jays!), and
soccer (go United!)
Goal for TodayAs we continue to transition to an agency price model I want to share Kobo’s 6 years of experience in pricing eBooks with publishers
I want you all to walk away from here today as pricing experts
Topics Microeconomics 101 Price and the Customer Bucking the Life Cycle Other Learnings
I hope you enjoyed the humour of my introduction because it was all a distraction tactic as going forward this presentation is going to be an economics primer and contain lots of graphs and stuff
But we had fun there right?
One simple questionWhat is the optimal price for my book?
Microeconomics 101*
* With apologies to any actual economists in the room
What is Price?“Price is the amount of money that has to be paid to acquire a given product. Insofar as the amount people are prepared to pay for a product represents its value.”- Encyclopedia Britannica
What is a Demand Curve?
Elasticity“Price Elasticity of Demand is a measure used in economics to the show responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price”Wikipedia
Elasticity and the Demand Curve
Elasticity and the Demand Curve
Image courtesy of Economics Tuition Singapore
Profit Motive & Profit Maximization“The Profit Motive is the motivation of firms that operate so as to maximize their profits. Mainstream microeconomic theory posits that the ultimate goal of a business is to make money”Wikipedia
“Profit Maximization is the process by which a firm determines the price and output level that returns the greatest profit”Wikipedia
Optimal Price Example
Optimal Price Example
Optimal Price Example
Opt
imal
Pro
fit
What is the Optimal Price?The Optimal Price is the price where you will make the most the most long term revenue
OR
Optimal Price is the point on the demand curve where Units * Price is greatest
Well that was easy…
But how?
That was a lot… so here’s the bat flip (my happy place)
Or maybe you like kittens…
Or my team is partial to otters
Price and the Customer
Usually We Talk About Price Like This
Or We Talk About Genres…
Price Actually Looks Like This
Jill’s Purchasing Habits
Jill’s Price Preference by Genre
Jill’s Self Pub Preference
Jill’s Publishing Age Preference
Some things we learn from Jill… She’s a value oriented customer, until she’s not She buys self pub, but only when they are cheap. Does she
have a content preference or is she being under served by traditionally published works in her preferred price point?
There are a set group of authors she will pay virtually any price for
But more importantly…The price has to be oriented to the potential customer of your book, and you need to utilize a diverse range of data points to segment your customers.
Segmenting Your Customers
Segmentation Characteristics Genre Preference Price Preference Promotional Preference Competitive Risk Publication Age Preference And on and on…
So Instead of This…
We Look at This…
* Romance Segmented Users
And we learn some interesting things…
* Romance Segmented Users
Non Existent
Self pub owns the romance value customer
Price and the CustomerWhen pricing the book do not think about your comparable book, think of your customer.
Joey Bats
Kittens
Otters
Bucking the Life Cycle
WarningThe following slides may depress you if you are in any way shape or form involved in the creation, sales or distribution of books
Books on the whole have 3 or 4 potential sales outcomes over time
Meet your book’s fate…
Slope Hill Stairs
Remember Elasticity?
Elasticity of Demand for eBooks
All things being equal eBooks are highly inelastic, even more so when in the backlist
BUT
There’s hope – Visibility & Promotions
The key is experimentation
Example 1 – Peak Attention Pop
800% Increase over First
Week$1 Price
Drop
800% increase in sales over week 1 (traditional peak)44.% increase in LTV of book vs previous book from author150% increase in readership vs previous book from author
Example 2 – Active Experimentation
16 price drop events through 52 weeks24% incremental net sales driven by those events
You want to slow the slope
>
Conversion is King
Conversion is King
Conversion =
Views /
Purchases
Views
Purchase
Bucking the Life CyclePrice is a single point in time.
A robust Pricing Strategy requires many prices with continual experimentation and adjustment
Joey Bats
Kittens
Otters
Other Learnings
Price Ceilings are Real
Retailers Discount For a Reason
Sales Data Isn’t Enough
So what is the optimal price? Maximizes long term revenue. Oriented to the potential customer segment of your book Any given Price should be part of a robust Pricing Strategy
that continually experiments and adjusts
Thank you