Quote:
Originally Posted by Kali Yuga
They might, but in doing so you're making a basic error in terms of the economics. Lower price may mean higher volume, but it also means lower revenues.
For example, let's say that Book X sells 1,000 copies per month. If it's an agency book selling for $12.50, that is $12,500 that is split between retailer (30%) and publisher (70%). The cover price also sets the royalty rate, let's say 20%, which comes out of the publisher's cut. So the publisher is getting $6.25 per book, or $6250.
Now they cut the price of the book to $10. To match the same revenues, they now need to sell 25% more just to break even. The publisher's cut drops from $6.50 to $5 per book, and the author is getting $2 instead of $2.50. (How many authors will be happy with a 20% cut in their royalties, by the way?  )
There are numerous other factors, but the reality is that none of us here can definitively state that cutting the cover price by 20% will automatically generate a 25% or greater increase in sales. |
Actually, the author comes out flat since he gets $2 on 1,250 sales instead of $2.50 on 1,000 sales.
The rest of that math is irrelevant since all of the equations involved boil down to identity (ie: "a=a"). Obviously, lower price is going to mean lower revenues and profits if the sales volume don't go up enough to compensate.
The theory is about lowering the price is that the sales will go up more than than the price goes down. There seems to be something to that. $10 might be a psychological barrier, get below that and sales might skyrocket.