When last we met, I had figured out how to use Twitter Ads to provide a steady stream of visitors to my book’s page on Amazon. To summarize the math: If I spend $10 and bid $0.10 per click, I’ll get 100 visitors to my page. If 5% of those people buy my book, that’s 5 sales. I make about $2 per sale in royalties, so that’s $10. So if I spend $10, I earn $10. Why do that? Because some portion of those people will go on to buy the sequel to my book, and those royalties won’t cost me anything to acquire. Also, I can actually bid $0.08 per click and still get impressions, so I do a tiny bit better than break even.
Now that I have a click engine that reliably delivers eyeballs to my page, the obvious next question was what price my book should be. Of course, that’s a question every author has, but I’m in a unique position where I can actually find out the answer.
If I raise my price, we would expect my conversion rate to go down. That is, fewer people will be willing to pay $3.99 than were willing to pay $2.99. But I’ll make more royalty at the higher price. So we can define an optimization metric: ( royalty x conversion rate ). The value at which that number is largest is the best price for my book. So what I’ve been doing for the past couple weeks is testing different prices in the US/Canada and UK markets, to figure out what’s optimal.
If you look at the circles, that’s the conversion rate at different prices. I’ve normalized everything to dollars (excluding any taxes). UK prices are a little lower, because when I made them tidy numbers with the VAT included, it just worked out that way. The green circles are the US conversion rate, and the blue circles are the UK conversion rate. Within the experimental noise, I’d say the circles are all lined up.
So that confirms the first hypothesis, which is that higher prices yield fewer sales. That’s common sense, but it’s good to test these things to be sure.
The crosses show the royalty I earned multiplied by the conversion rate. Our optimization metric. Now this is a little complicated, because there are Kindle Unlimited read-throughs mixed with outright book sales. And while I can change the book price, I don’t have any control over the page rate KU borrows pay. So what I actually did to get this metric is take the total royalties I earned (book sales plus KU), divided by the number of clicks that I bought with the Twitter Ads. (If KU wasn’t in there, that would give exactly the same number as the royalty on a single book times the conversion rate. If you don’t believe me, ask in the comments and I can do a mathematical proof. I double dog dare you.)
I should set my price to the place where the cross is the highest. And clearly, that is the lowest price. What this tells us is that the increase in royalties does not compensate for the loss of buyers at a higher price. Note that Amazon has been trying to tell authors this forever. They say very clearly on the KDP setup page that the biggest earnings will come if you set your price to $2.99. My experiment shows that their average for all books perfectly matches my experience with one book.
This raises an obvious question: should my sequel also be $2.99? Right now it’s $4.99. The customer acquisition process is completely different for the sequel. The only people who buy it are going to be people who read the first book and want to know what’s next. My gut says that these people are less price sensitive. On the other hand, now that I’ve fixed my first book price at $2.99, I’ve set a price expectation. A 66% increase in price on a book that, for all intents and purposes, looks exactly the same (same page count, similar cover, same author, same characters!)… yeah, that’s not right. So I’m going to loose some portion of those people, who probably would have paid $2.99 but will not pay $4.99.
I could run an experiment, but that’s a much tougher one to run, because the volume of people is so much smaller. It would take months to get numbers I could trust. Deep down, I know the answer. The sequel should be $2.99 also. It’s only a question of how long it takes me to bite the bullet and change it.