Amazon Adds Pricing Suggestions to KDP
Earlier this month Amazon added a new beta program to their ebook publishing platform. KDP Pricing Support takes the guess work out of pricing a new ebook by offering authors and publishers predictions on how many copies would be sold at a given price.
The service draws on Amazon’s vast database of past sales data and analyzes the relationship between price changes and number of copies sold. KDP Pricing Support factors in each title’s length, category, rank, reviews, price history, and its author’s related sales in order to provide a suggested price range for a newly listed ebook.
The price suggestion is shown as a graph which reflects how many sales would be made at each price point, and will look something like this (Thanks, Steve!):
The service is still in beta, but a number of authors have already tried it and posted their experiences on the KDP support forums. Not all of the authors are pleased with the pricing suggestions; while one noted that "I don’t know what all it uses to determine this, but it suggested that I price my book at $6.99. With a projected +5% earnings and -25% sales", others noted that they were told they were underpricing their ebooks:
I have two books in a series. The first one is .99 at the moment and for the past two months, (89,000 words) and the second is 2.99 (85,000 words). They suggest I price them at 6.99 each, and the other book, not in a series, I have at 2.99, (85,000 words). They suggest 4.99.
The pricing beta suggested that I increase my book from $2.99 to $5.99. I don’t think anyone will buy a new author’s book at that price, but I am willing to give it a try based on feedback.
And one author reported that their book was marked as part of a series, leading KDP Price Support to suggest that the price be reduced (the first title in a series is often cheap or free to attract readers).
KDP Pricing Support is available to all authors and can be found in the Rights and Pricing tab for each title. It works with both existing and newly published ebooks, and is available to all authors during the beta. Amazon wants everyone to try it so they can see which features are used the most.
You can find more details on the KDP Support Page.
Greg Strandberg July 24, 2014 um 5:30 pm
What is the rationale behind this? Is Amazon trying to make it easier for authors to make more money, and thus themselves more as well? You can see that a higher price often equals 50% fewer sales by their algorithms.
Is this somehow tied up in their dispute with traditional publishing? I don’t know, but like many I’m seeing higher price recommendations and I have a gut feeling that putting all my books at those prices would hurt me.
Maybe one or two is worth a try, but what about new authors that might not know a whole lot about eBook pricing and sales and all the rest of it? This could really hurt them. Maybe I’m completely wrong and it’ll help them immensely, however.
William D. O’Neil July 25, 2014 um 1:07 am
Thanks for the item — I’d overlooked the service.
The illustration probably represents an unusual case — if most recommendations fell at a boundary the service would scarcely be worth offering. I’ll send in one for one of my books to use if Nate chooses.
My recommendation shows a broad hump, which makes sense to me. My experiments with pricing both for KDP and CreateSpace editions have shown results generally consistent with low price elasticity. It’s difficult to estimate price elasticities for individual titles with any accuracy due to high day-to-day variation. It would be necessary to accumulate ~100 days of data at each price level, I’d guess. Amazon’s data are probably better, despite lower specificity.
Hopefully, they’ll expand it to cover CreateSpace editions as well.
I plan to reprice in response to their information when my current experiment in promotion ends.
What would happen if every author repriced to the Amazon-calculated value for optimum returns? Undoubtedly the price elasticities would change and everyone would be off optimum. But probably not by a great deal.
We have hints that Amazon has long offered similar information to tradpubs, who have for the most part not followed Amazon’s suggestions. It is possible that they have very good reasons for this, if only because they must consider channels other than Amazon. (As a professional student of organizational folly, however, I am skeptical of the rationality of tradpub decision-making in general.) In any event, most indie authors sell overwhelmingly through Amazon and will probably do well to give very serious consideration to Amazon’s pricing advice. You may know more about your market than Amazon, but you may be wrong in believing that you do.
Marion Gropen July 26, 2014 um 2:00 pm
As someone who ran the finance side of a traditional publisher for many years, I can tell you that they do demand curves based upon their own experience and predict where their books will have the highest likelihood of making the most profit based upon their cost structure and distribution model.
Amazon’s numbers are far less likely to be accurate, because they’re far less specific to the publisher and its marketing chops, and far more specific to the Amazon channel.
Felipe Adan Lerma July 25, 2014 um 7:22 am
The price point for my 8900 short was too high for me and I stuck with 1.99 vs 2.99.
My feeling is higher prices points (I’m so suspicious of everything) is those would look better, bargain wise, to a reader in the subscription program, that they were getting a deal, even thought authors (well, most indies anyway) would only be getting a non-set flat rate from a pool.
And since authors can’t price lower on other platforms (assuming one wasn’t in Select) this would drive prices higher on competing subscription platforms, causing them to pay out higher royalties – since Scribd and Oyster don’t pay floating flat fees when a book is read.
Like I say, I’m naturally suspicious of the over-all strategy of not just Amazon, but any large corp, in a field like this. And I say suspicious, but it’s more like curious, what the combined strategy and objective might be, like for "free" checking or such.
There’s some super smart thinking going on (always) at Amazon, and this would be no exception.
I’m waiting for when they either go non-exclusive, or offer a bundle discount for a customer combining Kindle Unlimited with Prime.
Michael W. Perry July 25, 2014 um 10:26 am
How typically Amazon: "We’re smart. You’re stupid. Now we’ll tell you what you must do."
I ran into that madness with CreateSpace and my latest book, Lily’s Ride. Create Space is sloppy about spine alignment, so I deliberately made the spine a bit large to hide their blunders. A deliberately dark spine that intrudes slightly onto the front or back cover doesn’t look nearly as bad as a cover intruding onto the spine.
So what did 'we know better than you' Amazon do? They told me–note 'told' not 'asked'–that they’d contrived a way to shrink down that spine to meet their specs.
And what’s the result? I’ve gotten two shipments from them. In both about half the copies printed have the front cover intruding uglily onto the spine–just what I was trying to avoid.
Oh how a loath that company! Amazon’s Kindle not only pays half as much as Apple for titles outside the narrow $2.99-9.99 price range, they want to suggest-tell-dictate each and every aspect of publishing including pricing. Sorry, but I’m not a member of AmazonKult. For me, they’re just one book retailer among many. They need to learn a bit of humility.
And they want to control even when their cluelessness is obvious. Pricing a book, for instance, isn’t just a matter of maximizing profits like Amazon’s bean-counters think.
For instance, I want people in medicine and nursing along with the parents of kids with cancer to read My Nights with Leukemia. It’s about what it is like to care for children battling cancer. I’m willing to give it a better price so more will do that. Unlike Jeff Bezos, I’m not interested in piling billions of dollars on top of billions.
In short, Amazon seems to forget that all of us aren’t money-obsessed control freaks or, in the peculiar way authors must deal with Amazon, all of use aren’t the passive, want-to-be-controlled sort who want The Great Amazon (think Wizard of Oz) to tell us how to publish our books and what to price them.
Felipe Adan Lerma July 25, 2014 um 12:46 pm
Michael, just a suggestion (I have a book, Nice Thing 'Bout Getting Old(er), I offer free) –
You could offer your book free.
But if you can’t, maybe take a small sampling portion of it, add something new to it – list of helpful links, a thought piece (even your own), etc; then offer it free with a promo in it to the larger more complete work.
Amazon won’t let you price free, but will sometimes price match.
If you distribute to B&N and iTunes and Kobo through Smashwords or D2D, you can price those free.
In addition, you can price free to Scribd, and I think Oyster.
The advantage (also if you list on Smashwords) and through either channel, distribute to Scribd, a reader does not need an account to read your free book on Scribd.
And don’t forget libraries.
The Digital Reader has several good library posts with lots of links. The latest is :
Best wishes on your book, children and cancer and parenting. Strong stuff.
William D. O’Neil July 25, 2014 um 5:40 pm
As Amazon says explicitly, "You should not solely rely on the information to predict future results for your book. … You should decide what the right price for your book is, considering this and other factors."
They describe their model several times as representing average price elasticities of other books that are categorically comparable. Having said so much there is no possibility that they could somehow be slipping in a nefarious fudge factor without exposing themselves to serious liabilities when this fact were exposed (as would inevitably be).
We are told that, "The data shows that customer reaction to price changes is often similar for books with similar values for attributes like category, customer reviews and ratings, author’s past sales, best seller rank and page count. As the price elasticity model evolves over time, you may see some of the attributes replaced, removed, added, or weighted differently."
Category and page count are unvarying. Customer reviews and ratings, and author past sales, can change quickly at first but soon acquire an inertia that limits the rate of overall change. But best seller rank is quite volatile. My most recent book just had a very nice day in that regard, and just picked up its 13th review (five stars). And of course it’s possible that the model has been updated this morning. So I ran it again to compare the results with yesterday’s.
Where the calculated optimum price point was $4.49 yesterday, today it’s $7.99!
So while I find the model and its information very interesting indeed, I think I’ll wait a while to make any repricing decisions. 😉
Nate Hoffelder July 25, 2014 um 5:58 pm
That is a little too volatile, yes.
William D. O’Neil August 1, 2014 um 1:14 pm
And more recently the recommended optimum pricing point moved to $3.49!
I decided to ask Amazon what was going on and after a runaround got a modestly informative answer:
"Please know that the pricing recommendations are updated on a hourly basis and the recommendations may vary drastically in comparison with other books that have similar attribute values i.e. based on category, customer reviews and ratings, book’s bestseller rank, author’s past sales and page count.
"The Pricing Support system suggests how your book is likely to sell if you choose a particular price and this differs on a day to day or weekly basis. For instance, in a particular genre books with similar value attributes are compared and a price is recommended to you.
"To explain more, the price may vary as there could be more books that are added to that genre and authors may have done promotions for their book which may boost their sales. This will result in projection of a higher price.
"However, in cases, where books in that genre are not doing well or the sales have gone done or other authors have reduced the prices of their books, the tool may show a lower price recommendations.
"Per our pricing policy, you are free to change the price of your books as it pleases you. You may make use the Pricing Support system to make the pricing more competitive with other others to sell more."
I don’t see this as adequate to explain swings of greater than 2:1, but I expect it’s the best I’m likely to get. It leaves me with the conclusion that KDP Pricing Support is an interesting toy, but not suitable for serious purposes.
The whole thing raises some interesting questions. Presumably, the estimator they use to produce the estimated elasticities for KDP Pricing Support is related to that they use for their own internal pricing decisions. Does this sort of statistical jitter lie at the heart of the pricing volatility we can see in most of the products Amazon sells (not just books)? Are Amazon’s pricing decisions less optimal than we tend to assume, due to statistical problems?