99¢ or $99?

These two ebook prices seem to live on different planets.

Because they do

In the era of Amazon, there are thousands of ebooks available for dirt cheap prices. Everywhere. All the time.

On marketplaces like Amazon, competition is fierce and brand loyalty is low, which drives prices into the ground.

But there is another realm of pricing for those that want to take things into their own hands and make serious money: independent selling.

Independent sellers tend to be online entrepreneurs with their own sites selling well-designed PDFs using their own sales funnels.

This article is written for those intrepid individuals. We work with a lot of them here at Magnnetic, so we know what we’re talking about.

We know first hand the huge amount of effort required to create an ebook that enriches the lives of your readers. So, it’s only fair to want to profit from your hard work.

And this article will show you how to do just that by optimally pricing your ebook.

But learning how to price an ebook requires a different mindset than that of traditional books. Physical books have fixed costs, which makes calculating their price easy. Simply combine the cost to make the book, the margins needed to make up for that cost, and the desired profit, and boom!—you’ve got a price.

But pricing an ebook is a different beast. Sometimes figuring out how to price ebooks feels like you’re choosing a number out of thin air.

However, there is a strategy behind how to price your ebook, too. We like to call it The 5 Pillars of Ebook Pricing:

The 5 Pillars of Ebook Pricing

Using The 5 Pillars, you can strategically craft the perfect price for your ebook. One that will help you support your online business for years to come.

So, let’s get started.

1. Understand Your Sales Funnel

To master the pricing of ebooks, you must master the sales funnel.

A sales funnel is a marketing concept that describes the journey a person takes as they go from  being a stranger to a loyal customer. This journey usually involves buying multiple products along the way.

The further along a person is in your sales funnel, the more they know, like, and trust you, and so the more they are willing to spend on your products. Conversely, people who are just beginning their journey with you are less likely to buy more expensive products.

This is why it’s important to understand where your ebook will fall in the sales funnel.

Will it be near the beginning of the funnel, targeting people who don’t know you very well?

Will it be in the middle, targeting people who know you and have bought a low-priced product?

Will it be toward the end of the funnel, targeting people who are fans that trust in your products?

Each tier can command a (significantly) higher price. To figure out the appropriate tier, you need to define the goal of your ebook and the target audience.

Is your goal to generate lots of sales and bring as many customers into your sales funnel as possible? Then go with a lower-priced ebook.

Are you trying to generate a substantial profit selling fans a flagship ebook? Then go with a high-end, premium price.

Something in between? Go middle of the road on pricing.

Understanding the role of your ebook in your sales funnel is a fundamental step to mastering your ebook pricing.

2. Study The Competition

If you’re selling something, anything, knowing the competitive landscape gives you a leg up.

And when it comes to determining how to price an ebook, this knowledge is crucial. So, you’ll want to spend some time studying similar ebooks from competitors that target your ideal customers.

However, don’t just review the pricing of a handful of your closest competitors. Check out a few indirect competitors, too. Indirect competitors are those companies who target your ideal customers with products/services that don’t directly compete with your own.

By studying both direct and indirect competitors, you form a better idea of what kind of prices your market can tolerate and what kind of features drive those prices.

The point of this exercise is to establish a market baseline—the average price of your kind of ebook for your kind of audience.

A lot of people use this as an opportunity to undercut the competition. This is the result of a lack of confidence. They believe they’re not as good as the competition or don’t deserve to charge the same prices.

Not only is this untrue, it can be fatal for an online entrepreneur. Pricing your ebook as the lowest in the market causes three problems:

  • it creates the same kind of race to the bottom seen on major marketplaces.
  • it devalues your ebook.
  • it makes your ebook seem to be of a lower quality than your competitors.

Instead, use the market baseline to ensure your price is higher than your competition. Pricing higher than the market baseline communicates to potential customers that you bring more to the table.

Of course, you’ll need to justify this. To begin, use your research of the market to identify differentiators for your ebook and company/brand that makes what you offer unique in the marketplace.

We’ll look at the best ways to justify your ebook’s price in the next pillar. 

3. Know The Perceived Value

Perceived value is the biggest factor in pricing an ebook.

Whereas the price of physical books is determined by the costs from development to delivery, ebook prices are often determined by the value they provide to the reader. And since every reader is different, the perceived value will differ from person to person.

In this way, an ebook’s price is completely divorced from the realities of what it costs to make. Whether you’ve spent hours, weeks, or months making your ebook—nobody cares. People buy only with themselves in mind. They are buying something that will save them time, effort, money, or will otherwise improve their lives in some way. The better fit an ebook is for your audience’s specific needs, the more they’ll be willing to pay.

There are three main levers you can pull to manipulate perceived value:

A. Positioning

Product positioning refers to how customers see a product in their mind. Strong positioning is what made companies like Apple and Tesla famous and allows them to charge more than their competitors for similar products.

Positioning happens largely at a brand level. If you want to charge higher prices for your ebooks, you need to make sure your branding is in alignment. Premium prices require premium-feeling branding. Look at how high-priced competitors in your market brand themselves to get an idea of what’s required.

However, positioning can also happen at the product level. Think about when an ebook is more than ‘just an ebook’. A ‘course’ or ‘program’ sounds a lot more valuable than an ebook, even if the delivered product is the same. Think about how you can reframe your ebook in the minds of your readers. 

B. Design

As we’ve also seen from Apple and Tesla, the design of a product can be as important as its function. Some say design is function. And so it is critically important to your products if you want to charge a good price.

This is where a lot of online entrepreneurs fumble. They might have good branding on their website and social media, yet their ebooks fall short. Usually this is the result of a do-it-themselves mentality. But unless they’ve also hand-designed their whole website and the rest of their online branding, it doesn’t make much sense.

A lack of polish in your ebook affects the perceived value of not only your ebook, but your entire brand.

So, don’t skimp on design in a misguided attempt to save money. The higher perceived value will often make up for the higher up-front costs.

While we are the leading ebook design pros, you can also find independent graphic designers to work with to give your ebook a professional polish. Check out our article about ebook design pricing for more info on your options.

C. Equivalent Value

The equivalent value brings a concrete figure to the value of your ebook.

See, your ebook is an investment for your customers. Like any other investment, the higher the anticipated return, the more they are willing to pay.

For example, let’s say the price of your ebook is $100, but the customer can expect to increase their income by 10%. Well, for anyone making more than $1k, your ebook is a no-brainer. In fact, someone making $1k per month would make an extra $1,200 per year, which is an ROI of 1100%!

Compared to the reward of $1,200 extra per year, an investment of $100 seems like nothing. That’s the power of equivalent value and why you must establish it in the minds of your audience.

So, spend time thinking about the equivalent value of your own ebook. There are various ways to relate your equivalent value, but almost all have to do with money or time.

4. Leave Room For Deals

When thinking about how much should you sell your ebook for, this is the pillar that most often gets overlooked.

The lower your price, the less room you have for discounts and sales, which can be a major boost to your bottom line. After all, regardless of what your price is, there will always be people who will only buy when they see a deal. It’s human nature.

Another thing to consider is potential deals with affiliates. Affiliates are people who promote your products to their audience in exchange for a percentage of the sale price. Typical affiliate cuts for ebooks range from about 20%-60%. Affiliates can be immensely valuable as they expose you to new audiences and generate sales you would have never made by yourself.

So, you want to give your ebook price at least a 20% buffer that you would be comfortable losing in order to offer deals or affiliate partnerships.

5. Test Different Prices

Always remember: the price you launch your ebook at isn’t set in stone. This should relieve the pressure of trying to get your price ‘just right’ when pricing an ebook.

The only truly accurate way to find the best possible price for your ebook is by actually testing different prices in the marketplace. Each price will generate a certain number of sales, resulting in a certain revenue. The trick is to find the sweet spot that maximizes your revenue.

For example, which is better:

Price A is $50, which gets 10 sales, resulting in $500 of revenue.

Price B is $150, which gets 4 sales, resulting in $600 of revenue.

Obviously, Price B wins, despite getting less than half as many sales.

Newbie online entrepreneurs and veterans alike tend to overlook the importance of testing pricing, to their detriment. It’s hard to explain what a huge difference seemingly small price changes can make to your bottom line.

case study from VWO shows that increasing the price of a fitness ebook from $19.95 to $29.95 barely made any difference to the number of sales, but boosted revenue by a huge 61.67%.

Big wins like that are lurking all around, yet hardly anyone ever tests their pricing to find them. That makes it a great opportunity for you, who now knows better.

When testing pricing, there are also tons of pricing psychology hacks you can try. Pricing psychology is huge topic in itself, so check out this article by Nick Kolenda for a breakdown of all the different strategies.

Now You Know How To Price An Ebook

When selling ebooks, there is almost no limit to how many you can sell. You have none of the physical limitations of a hard/soft cover book. Instead, you will be limited by your ability to effectively price your ebooks in the marketplace.

If you stick closely to The 5 Pillars, however, the question of how to price your ebook will be much simpler. Using these guidelines you can develop realistic, attractive, and highly profitable ebook pricing.

But more than that, you’ll gain a powerful confidence in your pricing that will take your business and brand to new heights.

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