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Valuing Yourself and Your Work

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On the heels of the previous post about money junkies it’s worth taking a moment to think about self-worth. The reason it’s an important topic is that if you’re not willing to set the floor on your own value, you can assume everyone else will set it at zero. In fact, only a few years ago there was a theory being floated that the smart play in the internet age was to give yourself away in every respect, including work you created.

Called the freemium pricing strategy, the idea — much like the overriding ethos of web development in general — was that eyeballs, marketing and branding are more important than anything else. Gather enough attention and you can cash in by monetizing your online celebrity. Now, if your product is celebrity that might be true, just as it’s probably true if you’re a money junkie and have lots of cash and employees to burn through. Likewise, if you have no compunction about abusing your own customer base, and in particular children and young adults, making free-to-play games can be profitable. Like street-savvy drug dealers, the makers of free-to-play games give their products away until users are hooked, then stick them with carefully engineered pricing strategies and deceptive promises that all but compel players to pony up real cash if they want to stay competitive.

Unfortunately, if you are an unknown, do not have a round of funding you can torch in order to attract your next round of funding, or you have a conscience, giving yourself and your work away will always yield exactly no money, which is problematic if you also like to eat and don’t want to live under a bridge. If you aspire to make a living doing something you love, or even doing something you hate, you’re going to have to give some consideration to your worth as a worker and as a human being. Depending on the state of the economy it’s entirely possible that the world will laugh in your face, particularly if the money junkies on Wall St. have blown the earning power of the average consumer to to smithereens and unemployment is through the roof, but still — at some point you have to draw a line in the sand.

Speaking of which, when you’re just starting out in your chosen field — or playing around until you figure out what you want to be when you grow up — it’s probably a good thing to be humble. Nobody likes a know-it-all or someone who is overly confident. If you’ve written a book and you’re sure it’s going to sell a million copies at $100 a piece — well, you get points for valuing yourself, but many more points off for being an idiot. By the same token, however, if you have zero confidence, even if only in your ability to bounce back from what will almost certainly be setbacks, you’re probably going to fail.  [ Read more ]

The Information-Age Myth

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I went into a large, nationally-known chain store last night to buy a few things. When I what I wanted I went to the check-out lines. Because the store had too few employees handling too many customers I elected to take my five items to the twelve-items-or-less line, on the assumption that fewer items would mean a faster checkout.

Confirming the wisdom of my choice, the customer two places ahead of me breezed through checkout. Because the three women ahead of me were only buying two items as a group, I felt confident that I would be on my way in short order. (In the fable business, this is known as counting your chickens before they hatch.)  [ Read more ]

$4.99 and the Pipeline Pricing Problem

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I am publishing a collection of short stories as an e-book. Concluding a series of posts on that subject, I’m setting a price for that content today, subject to further modifications, complications, frustrations and disturbances in the time-space pricing continuum, as prophesied below.

$4.99. That will be the price of my short story collection on Smashwords*, where I’ll be making the work available as an e-book. To the extent that I have now answered this vexing question, I am relieved. To the extent that I have unwittingly uncovered a new and nightmarish parallel problem, I wish I had been born with no curiosity and wealthy parents.

Why $4.99? Well, I can’t point to any single determining factor. Rather, I took everything I learned over the past few weeks (and months) and tried to find a price that met the evolving criteria without contravening my basic assumptions, which included:

Particularly helpful was data from Smashwords CEO Mark Coker, which pegged pricing sweet spots at the $5 and $9 price points. Following the maxim that a lower price is better when profit is the same, I chose the $5 price point over the $9 price point because I thought it would spur demand, and because I thought $9 for an e-book was simply too close to the low end of current print-book and print-on-demand (POD) pricing.  [ Read more ]

Price, Relativity and Quantum Mechanics

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I am publishing a collection of short stories as an e-book. Continuing a series of posts on that subject, I’m trying to work through the relevant pricing issues and set a price for that content.

Months ago, when I began idly wondering what my short story collection should sell for, I repeatedly found myself thinking in relative terms. In hindsight that approach seems to make sense given the rampant uncertainty in the e-book market , but it was more coincidence than prescience. I didn’t know how much I didn’t know, and I certainly didn’t know how much the industry didn’t know.

The comparison that popped up the most was what I took to calling hamburger pricing. Invariably this analogy would present itself while I was driving, because it’s impossible to travel anywhere in the United States for more than fourteen minutes without passing a hamburger stand. (I made that statistic up, but please feel free to quote me. The world can always use more urban myths.)

What I kept thinking at the time was that whatever my short story collection was worth, it had to at least be worth the average cost of an average hamburger at an average drive-up window. Without doing any research I pegged that number around $4, and in a lot of ways I felt like the idea made sense.

Which of course it doesn’t.  [ Read more ]

Quality, Fairness and Promise as Price

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I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

Coming up on the end of a second week of thinking about how to price an e-book, I feel as if I finally understand the problem. I don’t have a final number yet for my short story collection, but I genuinely feel as if I have the tools to make that decision. (I know this kind of analytical obsessing isn’t as fun to read as gossip or flippant analysis, but if you’ve been reading along I hope you’ve gained some insight into these issues as well.)

Today and tomorrow I’m going to run down two perspectives I haven’t yet talked about. After that I’ll wrestle with the fact that setting a price in one place has an inevitable domino-effect along the pricing pipeline, and why I think that’s an indicator of problems to come. After that, I’ll pick my number and get back to the (relative) sanity of regular posting.

Fairness
Despite everything I’ve learned about the haphazard nature of pricing in general, and of e-book pricing in particular, I still retain a belief that there is some sort of fair value that can be applied to digital content. I know rationally that the marketplace will eventually come to define fairness as any stabilized price, but absent that stability I still find myself asking: what’s fair?

In the hard-bitten world of business this is obviously a naive view. What’s fair to most people is whatever they can get away with. If selling people into a mortgage or cell phone plan means using legalese to obscure relevant costs and fees, you do not hesitate to screw your customer. (To paraphrase Raymond Chandler, nobody ever made a hundred million dollars being a nice person — and that includes the messianic Mr. Jobs.)

Complicating things further, fairness is always a relative concept. Trying to be fair means trying to balance all factors involved, yet there’s no way to control for or even anticipate all of the variables. If I say a price is fair, who am I being fair to? A kid in Haiti who just lost his whole family? The rich, degenerate housewives on Bravo that are laughing all the way to your bank? Being fair in an absolute sense in any transaction seems a theoretical impossibility. In practice we rely on orderly (and regulated) markets to quantify fairness as a floating point between supply and demand, and that’s probably the best we can hope to do.  [ Read more ]

Consumer Expectations and Price

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I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

We all have expectations. Sometimes, particularly when we’re young or old, our expectations can be out of step with reality. When we’re young we don’t have the cognitive ability to understand the world as it is, so we fantasize. When we’re old we may have trouble keeping up with the pace of change, and the world may move on without us.

Perhaps no other aspect of daily life in America defines our expectations more than the price of goods. We are a consumer society, and as such we gauge our worth and meaning by what we have and what we can afford. Goods that are priced out of reach make us feel poor. Goods that are within reach make us feel wealthy — or at least as if we have options.

Everyone has heard a child request a new car or new house in the same way that they ask for a piece of candy or scoop of ice cream. To a child price is no object because money has no meaning. And who hasn’t heard an elderly person comment that a candy bar used to be nickel or a gallon of milk a dime? To an elderly person prices may mark the zenith of their life experience, while also serving as a reminder of the threat posed by inflation and rising prices.

People in the prime of their working lives generally have more realistic expectations about prices, but they can still experience dissonance when the cost of goods change. Gas at $4.00 a gallon is an outrage. Gas falling back to $2.50 is a windfall. But note: these emotions and responses are usually relative, not based on an actual understanding of the costs of production. Because we live lives abstracted from our own survival needs, and because our economic lives are abstracted through bank accounts, direct-deposit paychecks and credit cards, there is often no contextual reality to the prices we pay. We pay what we pay because that’s what an item costs, not because we know that’s what an item is worth.  [ Read more ]

Louie DePalma Pricing

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I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

Think about any subject long enough and you’re bound to end up in the weeds…

The title of this post refers to a deservedly famous Taxi episode in which Jim burns Louie’s apartment to a cinder, presenting Louie with the opportunity to quantify the practical limits of greed.

The problem with this approach in my case is that the DePalma price for an e-book is probably one dollar over the high end of the acceptable range — meaning something like eleven or twelve dollars. And I would only be able to get that price if the customer borrowed my car and wrapped it around a tree prior to making a purchase.

As much as I would like to embrace my inner greed, I just don’t see a useful lever. To my chagrin, market forces seem determined to have their way with me.

— Mark Barrett

Price, Profit and Market Size

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I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

Assume for the moment you know beyond a shadow of a doubt that at least one person will buy your book no matter what the price is. What price would you set?

Obviously, $AllTheMoneyInTheWorld.

Unfortunately, history suggests a shifting relationship between price and demand (sales), meaning you may not always be able to employ this pricing strategy. As a fallback, it can help to imagine how the relationship between price and sales might play out for your product, given multiple variables. Unfortunately, doing so usually involves a great deal of market research, lots of wild guessing, and facility with a spreadsheet that I don’t have.

One thing I can say about the relationship between the price of my short story collection and sales of my short story collection is that my ability to maximize profit is not a pressing concern. To whatever extent I might be able to squeeze a few more dollars out of the market by endlessly worrying about price, I’m confident the variance between that maximum profit and the average profit is going to be fairly small, simply because the total number of people interested in the product will be small.

Thus liberated by my own limited appeal, it still seems valid to assume that setting a lower price will move more copies, while pricing the content at higher levels will decrease the number of people who buy the e-book. This is obviously why people advocate for the free/freemium pricing model: it promises that the price of your product will not negatively affect demand.  [ Read more ]

Paying a Psychological Price

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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.

When the stock market (meaning of course the industrial segment of the Dow Jones averages) passes through a big round number like 1,000 points, or 5,000 points, or, more recently (and repeatedly, in both directions) 10,000 points, everybody pays close attention. Why? Because people are stupid.

Okay…maybe that’s a little harsh. Better would be to say that people are conditioned to pay attention to such numbers. For example:

  • 4,294? That’s just a number.
  • 4,444? Wow!
  • 9,303? Nothing.
  • 9,000? Wow!
  • 10,605? ZZZZzzzzzzz…..
  • 10101? Spooky! Digital! Buy tech!!!

Numbers in and of themselves usually have no meaning. They quantify, but they do not evoke. Precisely because of the abstract relationship between our numbering system and the way we usually employ it (to count things) the door is left wide open for extraneous associations to creep in, even if we are guarded against them.

As you can see from the above examples, our psychological make-up affects how we view numbers in a variety of ways. Some of these misplaced associations may be obvious, some may be obscure, but it should be quite clear that none of them have anything to do with what the numbers actually mean.

The people who sell you products know all about these extraneous associations and routinely use them to advantage. Some of this is simple deception. When you buy gas at $2.82 per gallon, you do know from previous experience that there’s an itty-bitty, ninety-nine-hundredths-of-one-cent hiding at the end of that price, but because it’s such a pitifully small number it doesn’t seem important. Which is why the gas industry adds that almost-penny. The big sign says $2.82 per gallon, but the other signs at the pump remind you that the actual price is $2.8299, meaning the seller is making almost a full cent more than the stated price. Why do gas sellers do this? Because it works.

But it’s not just the fact that the amount is small that convinces you it isn’t important. It’s the number itself. Anything ending in ’99’ is considered a de facto savings, because ’99’ so immediately evokes ‘100’. Not only is that ‘100’ a big round number, but it include an entirely new digit. ’99’ is a miserly two-digit number, whereas ‘100’ is a budget-wrecking three-digit number. The actual difference between the two numbers for any unit is 1%, but the psychological difference is closer to 100%.

And you know this. It’s why the couch you just bought was selling for $999 instead of $1,002. It’s why the car you’re thinking of buying costs #29,860, instead of $30,081. It’s why the bottled water you grabbed is selling for $0.99 — even though it’s going over $1.00 with tax. As a consumer you see these numbers everywhere, you figured them out a long time ago, you know what the pricing elves are up to, and yet it still works.  [ Read more ]

Reader-Sets-the-Price Pricing

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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.  [ Read more ]