I'm pointing out that statistic because it's what makes Smashwords a case study for ebook pricing which cannot be duplicated elsewhere (outside of Amazon). The vast number of independent actors and their offerings gives Smashwords to mimic a pint-sized version of the ebook market as a whole.
It's been quite some time since Smashwords last released data on how prices drive sales (2010, I think), but it was well worth the wait. Mark Coker, founder of Smashwords, gave a talk at a romance conference a few weeks back this specific issue. The slides are available online, and I've been taking looking them over this afternoon.
There's an awful lot of useful info in the slides, but here is the money shot. The following chart shows the average number of sales per title based on the price point. Example: An ebook priced below a buck will sell 5.9 times as many copies as one price at $10 or above.
Note the second spike at the $2.99 price point. Interesting, no?
Consider what happens if you take one of those $10 ebooks that the major publishers fear so much and mark it down to $2.99. It will sell more than 6 times as many copies and make 86% more per title.
But there's a lot more to the slides. For example, Mark also plotted the average length of ebooks vs the number of copies sold. Smashwords' bestsellers (the top 50) generally averaged a length that was over 100, 000 words.
What's even more interesting was that the top 40 bestsellers in the romance category averaged less than 65 thousand words. Clearly romance readers like their ebooks short and sweet.
I'd like to share one last detail with you before kicking off. A later slide had data which showed was that the $5.99 price point might generate the most income. The following chart shows the relative yield per title for each price point. Not where the spike is.
While I would still prefer to see a $3 ebook, clearly there's another sweet spot higher up the price chart.