Wednesday, 3 April 2013

Pricing

Blog Intro
As this is my first real blog post here, a quick word of introduction.
Who: I'm Steve Wieck, CEO of OneBookShelf which operates DriveThru, RPGNow, WargameVault, etc. After working on these marketplaces for over eight years, I notice some things that might be useful to the creators and publishers who allow us to sell their content on our marketplaces. This is a blog intended for those creators and publishers.
What: I'll mostly blog about business and marketing stuff. Sometimes it will be things rather broadly useful like the post coming below about pricing. Sometimes I'll let you know what we're thinking and where we're going with deep dives into things more specific to our marketplaces (and hopefully get your feedback and comments).
I will only blog sporadically when I have something potentially useful to say, feel free to subscribe; the posts will be infrequent.

Pricing for Reach
A common question we get from publishers is "How should I price my title?" to which we reply with a most unhelpful "that depends".

Pricing makes a huge difference in the success of your title, but it depends on what success you're looking for. Usually it's either maximizing reach or maximizing income.

Maximizing reach is the easy one. The price is zero, free. Simply making your title free though does not by itself guarantee enormous reach. You still need to market the title. It helps to contact our marketing folks like Matt and Steve Smith and ask them to feature your freebie in a newsletter. They can't feature every free title, but they can feature some. Releasing a free rpg title on Wednesday evening or Thursday early morning also helps you get your free title automatically listed in the bottom portion of our rpg newsletter (for comics try Tuesday evening or early Wednesday morning).
You might also look for opportunities to include titles for free in certain bundle promotions. Charity bundles can see 10,000+ downloads.

Then what do you with that reach? Using the email customer tool to contact everyone who got your free title with an incentive to purchase another title in your line is a straightforward approach.
Kevin at Sine Nomine Publishing has success with offering a PDF version free leading to high sales of the printed version of Stars Without Number.
Top Cow makes all issue #1's free to introduce readers to a series.

Finally, there is certainly a case for using non-free prices to drive reach. Some publishers like EN Publishing and Adamant Entertainment have run 99 cent sales across their entire product range. The sale of items normally valued much higher than 99 cents drives a level of excitement that leads to word of mouth referrals and more "what the hell, I'll try it" purchases. The sale drives interest in a way that a free product could not. Free occupies a different mental space for consumers.

Pricing for Income
Maximizing income through pricing is the trickier part. Though much of what I discuss below works as well or even better on print titles as on digital download titles, I will largely be speaking to digital titles here.

First, a fascinating read. Scott Holden here at OneBookShelf referred me to an excellent summary article on various ways pricing tactics can influence consumer behavior. These are nicely summarized in a post by Peep Laja (no, I don't know if that's his real name or a gamer tag) at Conversion XL. If you're a fan of psychology or of making money, it's a good read and so well summarized there, I won't repeat it here.

Second, an experiment. Recently we worked with Monte Cook and deeply discounted his Ptolus book from $60 to $19.99 during our promotion of Geek & Sundry's International TableTop Day. I have been reading with interest some results and data that PC game download service Steam has reported about how a promoted deep discount of "75% off" drove total revenue, not units, total sales dollars, 40 times higher. I wondered if we could reproduce a similar result to what Steam has found.

We did. The one week that Ptolus was on sale generated 44 times more revenue than its prior monthly average. We got to send Monte the largest royalty payment we've ever sent him in eight years of selling Malhavoc titles - including more than when Ptolus first released.

Why did this work so well? We can theorize.
First, Ptolus is worth $60. Anyone who ever purchased Ptolus for $60 got more than their money's worth. This promotion was not some shoddy way of taking a title that has a market worth of $25, claiming it's worth $60 and then "marking it down" to $20. Ptolus is one of the best roleplaying books ever created and customers know it. It was a steep discount from the legitimate value of the product.
Second, Monte's profile hasn't exactly diminished or deteriorated in the past several months and he maintains his social media connection with fans. However, Monte admits that he didn't do a lot of promoting of this sale himself.
Third, the sale was promoted. We had good traffic to our TableTop Day landing page and the free bundle offered during the promotion.
Fourth, the pricing was presented correctly. It was clear that customers were paying $19.99 (rule of 9's), that they were saving $40, getting 66% off the normal $60 price. These things mean a lot.

There's a general rule in ecommerce web display and user interface that when in doubt about something, see how Amazon does it. I'm specifically not talking about Amazon's business practices - only their web displays and UI. You can be sure though that most every aspect of their site has been ruthlessly A/B tested, user tested, and optimized seven ways to Sunday. We're going to circle back after the success of the Ptolus sale to look again at how we display prices on our marketplaces vs. how Amazon displays them. We're going to work with publishers to identify titles which could work for deep discounts run during promotion events as Steam does. We won't see such enormous sales gains on every title, but it's definitely an experiment worth repeating.

Matthew at Mongoose has spurred us in the past to do more research on price points and pricing behavior on our sites. Certainly Matthew's price experiment of selling the Legend core book for $1 was wildly successful in maximizing the reach of that title (and even the income wasn't too bad!).
When we analyzed several years' worth of sales at DriveThruRPG and RPGNow and sliced the data several different ways, we found something a bit curious.
Sales rates of products didn't matter quite so much on their actual price - books priced at $15 generally sold as well as books priced at $12 for example. What did affect sales rates was the discount amount from the original MSRP of the title. So a book priced on site at 40% off its MSRP sold much better than a book priced 20% off its MSRP, even if both books ended up priced at $15.
If you already read the Conversion XL article linked above you'll have some ideas why - the power of "sale price markers (with the old price mentioned)".

What can you do?
1. When you enter prices on our marketplace, you have the opportunity to enter the original MSRP of the title. When you do we then display the price of the title on site like this:
$9.99 $4.99
instead of like this:
$4.99
Entering that MSRP ends up making a big difference in the effectiveness of how your prices are displayed to customers. If you haven't entered your MSRP's, edit your products and do so (just make sure the MSRP's are legit - there are rules about false advertising).

2. Experiment! I know it can be scary, but many publishers like those I've mentioned above are trying different experiments with pricing and finding success. Say "Yes!" to experiments.
We did ask a few other publishers to also try the deep discount during our TableTop Day promotion and the rest refused to discount or went halfway there and saw little lift in their sales rates. I wish they had said "yes" like Monte did with Ptolus.

3. Consider price anchoring with print options. We'd love to see experimentation with price anchoring effects using different print options. Books like Vampire 20th anniversary edition that are available in digital format and several different print formats are ideal for price anchoring experiments. Setting a premium color price high (it legitimately needs to be high anyway due to the print cost) may help sell more standard color books at a lower price point. If you are only offering one print format option, consider adding another format at a much higher or lower price point.