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Marketing Madness & The Price War of 2010

E-books have arrived.  There's no longer any doubt about that because in the wake of the plethora of e-readers, Apple's iPad is about to enter the market.  The bigs have stopped throwing down over whether e-books should exist.  Now they're throwing down over how much they should cost.  The journey from whether to how much marks the milestone of an industry change.

This week Amazon and Macmillan locked horns over price point.  At the iPad announcement, Steve Jobs indicated that Apple would only take a 30% commission off the sale of each e-book.  Under the Apple scheme, publishers would set the price.  Boy, howdy, that would suit the publishers just fine but the public - not so much.  After the iPad was out and about and had established itself with a sales history, the pricing structure would have given publishers leverage over Amazon.  Note that I said AFTER. 

One publisher didn't want to wait.  Before the stories from Job's launch announcement had gone to print, John Sergent, CEO of Macmillan, decided to go all Godfather on Amazon.  Sergent told the e-tailer giant to adopt Apple's price structure and abandon its pricing insanity ($9.99 as the max for an e-book) OR Macmillan would do "extensive and deep windowing of titles".  In other words, Macmillan said, give us control of pricing or lose the right to sell our newest and most popular books. 

Sergent made the worst of all negotiating errors - he made a threat he couldn't or shouldn't back up.  And Amazon took him at his word.  The e-tailer didn't just give a verbal response, it gave a real world response.  Amazon removed the buy button from all of Macmillan's titles, e-books and print.  Now Amazon sells a lot of e-books, but it doesn't out and out dominate the market because that market is too new, it's evolving daily.  However, no bookstore on the planet sells the number of print copies that Amazon does.

Now Macmilian is in a corner without a fallback position.  It overlooked the fact that even after the Apple launch, it will still need Amazon.  Macmillan reacted by issuing a "letter" to its authors/illustrators and the literary agent community.  As the blog Dear Author noted, the letter missed its most important audience -- the readers. Macmillan wants to make money on its product, Amazon wants to sell a lot of its product, and the readers want to buy books and e-books at a fair price. 

The delicate balancing act of marketing/price structure can't work if total control is given to the publisher.  Amazon talks about anti-trust and in response, Macmillan cites a US Supreme Court decision legalizing retail price maintenance for luxury goods.  Common sense and the free market can imagine more practical reasons for not giving a producer control of the price of its goods.  What would Wal Mart or Dollar General have to charge for goods if the manufacturer set the price? 

If Amazon wants to make money on volume instead of price margin, that helps the consumer.  If Macmillan weren't so short sighted, it would realize that it helps the publisher and its authors too.  People all over America (like me) are caught like rats in the trap of the economic crunch and we can't afford to pay big prices for books.  But the crunch won't last forever (please God) and when it passes, readers will be able to pay more for books. 

Macmillan forgot the most important lesson of the Godfather - if you're making the other party an offer it can't refuse, first you better be sure it can't refuse.  Amazon could and it did.  Be careful what you ask for publishers, because you might get it. 

The whole price point battle hit home to me in a personal way because I've been struggling with my pricing on Amazon's Kindle.  My books (Email Enticement, Brotherly Love, A Faerie Fated Forever, A Golden Forever and A Sixth Sense of Forever) had been selling fairly well on Kindle at a price of $5.99, but sales could have been stronger.  How to achieve that?  Well, there are lots of folks like my family waiting out the time when the family income returns to pre-depression levels.  (Coping with that stress keeps silencing my muse) But there are other families, too many other families, like mine out there. Wouldn't more people buy the books if they cost less? 

Yes, Virginia,  I decided that I too could become a wholesaler.  I could make a little money on a lot of sales instead of making more money on each sale.  So at the first of January I dropped my price across the board - not just on Kindle - to $4.00.  And I waited for the sales to start rolling in.  You know what?  By and large, I'm still waiting. 

Smashwords direct (sales on the site) has never been a big seller, but the site is now distributing to Barnes and Noble, Kobo, Amazon and Sony (my work hasn't gone to Sony yet and it's already on Amazon).  I've had a few sales on a couple of titles at B&N.  But on Kindle, nada, zip, zilch, nothing.  Yet so many other voices on the site say that they price around the $4.00 level and sell lots and lots.  They say that volume more than makes up for margin.  Apparently, what's true for them is not true for me.  As usual, for me, the world is backwards.

Maybe it's a case of my boss being right - but for the love of all that's holy, don't tell him I said so.  My boss, the owner and senior partner at our law firm, says that if you charge less for something then people see it as cheap and worth less.  Ye Olde Boss says that people would rather pay more to get something because then it has more value.  Yeah, he says that people believe you get what you pay for. 

'Course, my boss also refuses to step foot into Wal Mart.  If I mentioned Dollar General, he'd act as stumped as he did the other night when he called and I told him I was watching House.  He'd never heard of the show and says he hasn't watched much TV in decades.  So you'd think he was out of touch and about some things, he is - but business ain't one of those things.  The instincts that helped him build a practice and that have helped him keep it going when around us so many others have floundered (2 firms went under in our area just last week)  may mean that he's right about this. 

My hubby cautions me against playing around with the price on Amazon too much because he says their computer equipment may get confused, and I'm sure he's right about that.  But zero sales are zero sales.  And any part of our income that we be bolstered right now has to be bolstered (I hear our creditors saying Amen in the background).  So Monday, I'm going to play with prices again - on Amazon, Smashwords, and the yet to be launched Google Books.  I'm going to hike the price a bit, but not all the way up to $5.99.   I'm going to split the difference and price at $4.99.

Why that price?  It's less than $5.00 but not so much less that the reader might think that the book is one of those very short novels, based on the price.  Hubby warned me about that problem and he's likely right about that too (He's right a lot, isn't he?  Except when he's wrong of course.  Once in a while - when the moon is full and the seventh son of a seventh son rides by the house in a black car at the stroke of midnight [meaning, almost never] - I get to be right too) 

So, my new price structure will try to balance my concern about charging a price people can afford with my boss's belief that people think they get what they pay for, AND with my hubby's belief that the price should reflect that people are getting a 100K-word manuscript instead of one of the shorter books for which a $4.00 price is more the norm.  WHEW!!!  That's a lot for any price to try to balance.

How will the new price work out?  Sales will tell and in the final analysis, readers will get the last word.  That's the biggest thing Macmillan forgot - its audience. 

I'm trying not to forget mine.