Reader-Sets-the-Price Pricing

I am publishing a collection of short stories as an e-book. In this week’s blog posts I’m trying to work through the relevant pricing issues and set a price for that content.

One way to get around the problem of choosing between giving your stuff away (which theoretically induces the greatest demand) and the unseemly desire to make money by selling your work, is to hand that problem to your customers. Instead of setting your price at zero and accepting the fact that you’re going to make no money no matter how much demand you have, the set-your-own-price option (or Radiohead model, as it’s often called) leaves the door open for various levels of economic gain.

If you’re really lucky Bill Gates will drop by, sample a few paragraphs of your latest flash, and be so moved as to drop $500,000 on you via PayPal. Or, maybe a class of third-graders will save up their quarters and buy a copy of your book, even though they could have had it for free, giving you one of those life-affirming moments to cling to when events turn life-denying. Or maybe you’ll connect with a number of readers who genuinely love your content, who truly get you and your business philosophy, and who honestly want to put their e-wallets where their e-reader are.

Believe me: I love a feel-good story as much as the next person (okay, maybe a little less). At the end of the day, however, Radiohead pricing still means setting your price at zero, then brandishing an emotional crowbar at anyone attracted by your sweet deal. In effect, the set-your-own-price option says, “Yes, it’s yours free…but if you really wanted to…if you believed in what I’m doing…you could send me a few dollars…although any guilt you feel about being put in this position is obviously your own problem.”

Believe me, I support the co-op model of business. But even your average co-op doesn’t leave it to individual members to show up and get to work every once in a while. Normally there’s a minimum number of hours to be worked (a price) in order to gain the benefits of the co-op, because if there was no minimum all those socially-conscious consumers would take the benefits and run.  

So: reader-sets-the-price pricing feels like seller-sets-the-price-at-zero-but-adds-an-implicit-guilt-trip pricing. Which makes me wonder how many customers actually end up thinking something like this: “Great….instead of putting a price on your product and making it easy for me to make a decision on that basis, you’re playing me emotionally. On that basis alone I am going to take your product not for free, but as compensation for the emotional abuse you just put me through.” Not that I personally know anyone who feels that way.

I get the idea of being generous. I get the idea of good karma. I get the idea of being part of a anti-capitalist movement in the midst of the most egregious capitalist debauchery. I even get the idea of giving people a way to pay you back for your effort if they’re so moved, above and beyond writing you and saying something trite like, “Your book literally saved my life.”

Despite all that, however, allowing the reader to set the price means you are still setting the price at zero. As discussed previously this is a good idea if you’re interested in the free/freemium model of celebrity success, or if your overriding concern is reaching the greatest number of readers — but if those are your goals, why saddle your free content with emotional baggage that puts your most well-intentioned readers on the spot?

Think about it. The thieves are going to steal your stuff anyway. Your backdoor appeal for money will rest most heavily on the heads of your nicest customers — some of whom may actually elect not to take your free content because they cannot or do not want to pay, but feel they should. (In effect, the more conscientious a reader is, the more likely they are to be conflicted by the set-your-price option.)

As noted in an earlier post, I’ll be putting my short story collection up first on Smashwords, then looking at other options. Recently Mark Coker (CEO of Smashwords) published data from his site on the set-your-own-price option:

We looked at a small sample of 353 recent “purchases” under this pricing option at Smashwords. Of the 353 purchases, 299 customers selected to take the book for free and 54 paid money.

Next, we looked at the breakdown of the voluntary payments. The payments ranged from the lowest minimum of $.99 to a high of $12.42. The average price paid was $3.20, and the median price (for you statistic geeks out there) was $3.20.

Of the 353 ‘purchases’ studied, 85% chose the free option, while 15% paid an average price of $3.20. As Coker also noted, there are potential benefits to driving demand by keeping prices low (including free):

Not captured in this data is any other ancillary benefit received by the author/publisher. Possible author benefits might include:

• * customer goodwill
• * purchases of print versions
• * free author and book publicity from satisfied readers on blogs and social networks
• * increased fan base to which to market other titles by the same author/publisher

I agree with that assessment. What I still wonder, though, is whether leaving the door open for 15% of your customers to give you $3.20 each is a better profit model than simply setting a price on your content. Would pricing the same content at $1 produce the same amount of cash? And if so, how much would demand fall of as a result of setting a price? By the same token, how much does demand fall off because of the set-your-own-price option as compared with content that is entirely free?

Again, one of the fundamental question that every independent author needs to confront is whether they are trying to drive the greatest demand or the greatest profit from their work. I’m aiming at profit — both now and long-term — and for a variety of reasons I think setting a price helps me reach that goal. (I could be easily be wrong.) Then again I can also see why the free/freemium approach might be the right choice for some people, again for a variety of reasons.

What I can’t get past is the feeling that the set-your-own-price option is an abdication of authorial responsibility to make this basic choice. At first blush it does seem like an almost magnanimous gesture, but the more I think about the effect on the consumer the more I question the premise that the effect is benign.

To be fair, I applauded when Radiohead launched the set-your-own-price gambit for In Raindbows, but not so much for economic reasons. I liked the idea that they were willing to make music without maximizing and merchandising every aspect of their craft (yes, I’m talking to you, Gene Simmons), and I liked the idea that they were cutting out the middlemen in the music business — which, with apologies to the many good people in the music business, seems tantamount to cutting out the harmful bacteria in one’s own digestive tract. Then again, Radiohead already had a massive platform to exploit, and they did make available a number of upscale/high-def versions of the downloadable you-set-the-price MP3’s.

Maybe even more to the point, I love Radiohead but I still haven’t bought or downloaded In Rainbows. Why? I have no idea.

But I haven’t.

— Mark Barrett