Pricing Ebooks: Art or Science?

This morning I read an interesting article by Richard Curtis about how much it costs to produce an ebook. Okay, I think his estimation of the costs of labor are a tad on the high side, but he made some excellent points and I am pretty much in agreement with his breakdown. Where I heartily disagree is in his closing line:

But hopefully, some consumers who complain about e-book prices will take a more benign view of the challenges confronting publishers.

Um, no. Not even a little bit. Mr. Curtis makes an elemental mistake. You see, producers care about costs. The only thing consumers care about is value.

Value is a perception.

Take Starbucks, for instance. I can make a cup of coffee at home for about .15 cents a cup. A cup of coffee at Starbucks costs around $2. Why? Is it better coffee? It costs Starbucks more to produce one cup of coffee than it costs me. They have stores and supplies and advertising and employees to pay for. So it’s no surprise they charge two bucks. The surprising part is that people pay it.

Why?

Answer that and you’ll know how to price your ebooks.

When it comes to ebooks, as with anything sold in the free market, value is in the eye of the beholder. It only makes sense to me that to establish the optimum price of YOUR ebook is to know what YOUR readers value.

That means knowing who your readers are.

When you figure that out you can determine your ebook’s value and the highest price your market will bear.