I know quite a few authors, including myself, who've had similar experiences. It's not the fault of Smashwords, but the bookstores who discount so severely. Mark Coker, the Smashwords dude, suggested to price the book slightly higher on SW to take into account the discounting that some bookstores do. Or, you could opt out of listing your books in the stores that are notorious for deep discounts (Kobo).
I upped the SW price on my book to $3.99 so that a 25% discount would bring the price down to where I wanted it in the first place: $2.99. If anyone discounts more than that, I'll yank the book from their store.
Now that we have PubIt as an option to get books into B&N, SW is most useful for authors who want their books in multiple formats. For my next book, I will publish at Amazon's DTP, PubIt and Smashwords, but @ SW I will opt out of distribution. I'd rather not have to worry about price juggling.
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