Paulo Coelho is tremendously talented as an author. In fact, I consider him my favorite fiction writer. Each time I read one of his novels I feel a little bit closer to myself, or at least understanding a certain component of myself better than I did before.
It all started in 2008 with The Witch of Portobello, my first Coelho novel, which I devoured in a day’s worth of travel from Avignon to Zurich. This novel hooked me on his themes and writing style thereafter. I bought the book at cover price in the train station and I had no regrets doing so. I owned the book in paperback, but I wanted to share it with someone else because I enjoyed it so much. So it’s on indefinite leave from my personal library.
I then read Brida in paperback and plowed through it in short order. Next came The Pilgrimage, which I borrowed from my aunt and failed to return. Then The Alchemist, which I finished in two days, borrowed in paperback from my father. The next two were The Fifth Mountain (paperback) and The Devil and Miss Prym (hardcover) both borrowed copies from my sister. The last Coelho novel I read was Veronika Decides to Die, which I purchased in digital format on April 23 for $9.99. From a business standpoint I didn’t offer Mr. Coelho a huge amount of revenue because I borrowed more titles than I bought, but at least I was a loyal advocate of the brand and would recommend his novels when I got the chance.
On May 1, 2012 Paulo Coelho wrote on his blog about how he had worked out a deal with his publisher to lower the price of his ebooks to $0.99. After I found this out, I proceeded to buy all of the books I didn’t have to add to my digital library. Tech Dirt shows how sales of his books skyrocketed on the Amazon bestsellers list.
In the post, he also shares his view that all ebooks should follow this trend, but I don’t agree with this sentiment. I feel his opinion is biased to his own experience with publishing and sales, and I think pricing strategy is something that requires a great deal of planning and thought. I do agree with the idea that the author should have full control over the pricing of his or her own work, a benefit that we offer here at Kbuuk. I do not however agree that all ebooks should follow the trend of being priced at $0.99. Here are my reasons why this strategy will not work for everyone.
A book is not a song
A book and a song are inherently different. Although they are both a creative labor of love, the final result is something completely different. At least in the most basic sense for fiction, it gets a little different for non-fiction, but you’re not comparing apples to apples if you think that a book and a single song should be sold for the same price. On most albums a song can be enjoyed on its own as a separate entity from the rest of the album, but sometimes it cannot. A specific example of this sentiment is the rock band Tool.
Tool is one of the few bands that refuses to sell their albums on iTunes. While many speculate the reason why, I believe they designed their music to be consumed in album form, and not piecemeal. Indeed, to truly understand and appreciate the gravity and complexity of the album, you have to listen to it in its entirety. This theory also makes sense because you can buy A Perfect Circle and Puscifer albums on iTunes, both bands for which Maynard James Keenan, frontman for Tool, is also frontman. Therefore, Tool’s avoidance of iTunes is clearly not founded in ideological reasons. Aside, I have to throw Mr. Keenan some love here because he was featured on CBS this week for his winemaking, another art form in which he is completely invested and receiving critical acclaim.
The degree of brand equity
Paulo Coelho has a tremendous amount of brand equity. Yes, an author’s name is the brand. Brand equity is the sum of all of the things that go along with his name, everything that contributes to Paulo Coelho being Paulo Coelho. As far as what he has going for him, his name and works are recognized among literary circles around the world. He has over 8 million likes on Facebook and over 4 million followers on Twitter. I might even go so far as to call him a Lovemark because of the intense emotional connection his work inspires.
Coelho has a large and loyal fan base that supports and champions him. If you read the comments in Coelho’s blog, most come from individuals who are already familiar with his work. In the Ansoff Matrix, this is a classic case of generating profit by encouraging existing customers to purchase existing products through price promotion. However, this also reminds me of a laundry detergent case I studied in graduate school for my pricing and analytics class. A large packaged goods conglomerate suffered revenue losses after running a price promotion for a specific laundry detergent. With temporary price reductions they could not induce switching behavior; customers were too loyal to their own detergents and price was an inconsequential factor. The price promotion incurred revenue losses because sales came from extremely loyal product users who would stock up on detergent when it went on sale, and then simply wait for the next price promotion to stock up again. This is food for thought, something to chew on when thinking about pricing. He made approximately $6 from me, but honestly I probably would have eventually bought all of the titles for full price, now I’ve just stocked up. I wonder how many others there are like me? Is the temporary boost in sales worth the lost revenues in the future? Maybe for Señor Coelho, he’s enjoyed a long and prosperous career in writing, and he’s getting up in age and maybe close to retirement (no offense if you happen to read this). So the real question is, does your pricing strategy align with your goals?
The first book to be published on the list of $0.99 books, The Pilgrimage, was originally published in 1988. The latest book to be published, The Winner Stands Alone, was published in 2008. However, Aleph, published in 2010 and The Alchemist, his best selling title, are not offered for the $0.99 low price. That is not a coincidence or a mistake. The publisher can still make normal profits on the sales of Aleph and The Alchemist without dropping the price because of the individual titles’ equity. So why would they discount it if demand is still strong?
Availability of format
There is a great deal of capital outlay required to get a book published in print format. Some writers because of the nature of their content or because of their limited scope of work do not have the luxury of having a print publisher to back them. Thanks to technology and services such as ours, the undiscovered author no longer has to rely on a publishing house to enjoy a wide reach of distribution. Mr. Coelho has enjoyed years of all of his works being in both print and digital format. But just because it’s not available in print does not detract from the time spent and the amount of work that was involved in the creative and refining process of putting the story together, so to put a blanket price on all ebooks detracts from the value the author can provide.
Perceived Value vs. Actual Value
I know the value that Paulo Coelho’s work offers me. Every time I read one of his books I feel edified. Therefore, I wasn’t upset that I had just spent $9.99 on Veronika Decides to Die even though one week later it was on sale for $0.99. For me it was worth it. I can’t say the same for everyone, but that’s why navigating the brave new world of publishing is so difficult and confusing. As writers, publishers and marketers we are tasked with the difficult decision of assigning value to something that can be quite invaluable based on the personal preferences of the individual reader. How do you assign a price to the way a book makes you feel? How it opens your eyes to new worlds? How it lets you live an experience that is not your own, but teaches you about yourself? It’s more of a philosophical dilemma then people give it credit for.
As far as consumer behavior goes, consumers definitely value something they pay for. Consequently, the higher something is priced, the higher the perceived value. For example, luxury goods. What value do luxury goods offer to the consumer? The true benefits of luxury goods have nothing to do with the quality of the features so much as it has to do with (and most consumers may never admit this) the feelings of validation and perception to their peers. You also can’t know the value of something to you until you experience it for yourself. In the case of an ebook are your readers going to read the one they paid $0.99 for the unknown author they’ve never read, or are they going to give more time and attention to the one for which they paid $2.99, $3.99, or $4.99?
Please share your thoughts on the subject of ebook pricing strategy in the comments below, or connect with us on Twitter, Facebook, and Google+ we’re curious to know your thoughts on the issue. We will be writing more on this topic… eventually, so stay tuned.
And don’t forget to sign up for your Kbuuk account! The first 1000 accounts get to enjoy the benefits of being an early adopter.
P.S. You can always get a cup of coffee at IKEA for $0.75 +free refills