What's the most profitable price for an ebook?

Rachel Willmer, who runs the excellent ebook price-comparison site Luzme, summarizes the price-preference data she's captured from her customers. By measuring the point at which readers are willing to buy ebooks (whose prices are variable) and the volumes generated at each price-point, her findings suggest the optimal price for ebooks in different territories. This is important work: because ebooks have almost no marginal cost (that is, all their costs are fixed through production, so each copy sold adds almost nothing to the publisher's cost), there's lots more flexibility pricing strategies. If you make more by pricing your book at $0.01 than you do at $10, the right thing to do is price it at a penny and rake it in -- a rational business wants to maximize its profits, not the amount that each customer spends (I wrote about this at length in 2010).

One of the most interesting findings in Willmer's work is that British readers spend more overall when books are priced around 99p, while sales to Americans are maximized when the books cost about $10. Willmer segments her customers into two groups: people who want a specific book right now, and people with a long list of books they prefer equally and who will buy whichever book is cheap at the moment (Luzme lets you make a wishlist of books and alerts you if the price for any of the books you're monitoring goes down). It would be very interesting to see this data further segmented by genre (as Willmer points out, one of her customers spent $134.84 on a technical reference book). "Books" are not a monolithic category (the Bible, the phone book, my novels and a med-school textbook are all "books") and ebooks are even more varied, as they are freed from length constraints -- it's possible to have an ebook that is 5 "pages" long, or 50,000.

But this is a fascinating first look at this kind of publisher- and platform-agnostic pricing information, and the specific insights about the difference between the British and American markets are especially interesting.

In the USA:
* In the USA, ebooks sell at all prices from $1 up to $10.
* The most popular price range was $1-2.
* The most revenue was earned between in the $9-10 price range.
* Specialised ebooks sell at high prices, over $100.

In the UK:
* It’s completely different!
* Ebooks don’t sell well above £5.
* The most popular price range was <= £1.
* The most revenue was earned in the <= £1 price range.
* There is less evidence of specialised ebooks selling at high prices.

10 Things You May Not Know About Ebook Prices