An eBook pricing model that resulted in $100,000 in sales

This is a guest post by Nathan Barry, in response to two other posts that previously appeared on this blog.

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Nathan is the author of Designing Web Applications, The App Design Handbook, and Authority: A Step-By-Step Guide to Self-Publishing. His most recent company, ConvertKit, makes email marketing suck less.

How you price a product can have a radical impact on the revenue you make from it. My search for the perfect pricing model resulted in an additional $50,000 (a 170% increase) in revenue. Here’s how.

 

The Backstory

In March 2012 two designers, Sacha Greif and Jarrod Drysdale both released design ebooks on the same day (purely by chance). Sacha’s was a short step-by-step guide he was selling for $3 and $6 (he later doubled those prices) and Jarrod’s is a full-length book he is still selling for $39.

Because of their different pricing approaches Jason Cohen invited them to each write posts explaining their pricing strategies. Jarrod and Sacha each made their case for why their method was better and let the readers decide:

Reading those two posts is actually what inspired me to buckle down and finish my own design ebook. I’d heard about other successful self-publishing endeavors, but they had always been from popular bloggers who were achieving millions in sales. These were numbers I couldn’t relate to.

So, Sacha and Jarrod, thank you so much for sharing your story and your numbers. But I think both of you are wrong when it comes to pricing.

 

They both are wrong.

My approach actually uses a combination of both of their methods to create what I consider to be perfect pricing.

 

Price high

The first lesson, that I think Jarrod got right, is to price high. If you are trying to maximize revenue from a small audience, you need to get the most possible out of each customer, even if that means losing sales. When I consider the price on one of my iPhone applications, I always ask myself, “If I were to double the price (from $0.99 to $1.99), would I lose more than half the sales?”

If the answer is no, then I double the price. Fewer customers can often be a good thing, especially when it comes to fewer support requests. Also, a higher price tends to attract a higher quality customer.

Jarrod’s price of $39 fit perfectly for his content. I actually used that as a starting point for the price on my first book, The App Design Handbook.

 

Multiple Packages

While Sacha left a lot of money on the table with his low price, he did get one very important thing right: multiple packages. Sacha offered just the book for $3 or the book + PSD files for $6. I remember reading through Hacker News comments from the launch announcement from people who loved that. They were thinking that $3 was an impulse buy, and as soon as they had their credit card out there was no reason to not increase to the $6 package. After all, it was such a small difference.

That small difference to the customer makes a huge difference to the seller over the total revenue. By adding the second package Sacha made an additional $2,235.

 

A combination

My approach was to start with a reasonably high price of $39. After all, this is content (design tutorials) that my readers will use to learn valuable skills that can help them charge more for their time and products.

But then I added additional packages at higher price points, each one with more content and resources. This included sample code, Photoshop files, video tutorials, and other content.

The middle package was priced at $79 and the highest package at $169. At the very least these packages make $39 seem inexpensive. People will always compare to something else, so you want to control what that comparison is made against. After all, the last thing you want is a potential customer comparing your valuable content to the average $9 ebook. Instead, getting the visitor to compare between versions of your own product makes them more likely to purchase.

1-App-Design-Handbook

Here is how the sales broke down for each package over the first 48 hours:

  • The Book ($39) Units: 151; Revenue: $4,448
  • The Book + Videos ($79) Units: 104; Revenue: $6,296
  • The Complete Package ($169) Units: 67; Revenue: $8,803

Note: those numbers don’t quite add up because I had sale prices (about 20% off) running for most of that time. The sale prices were ($29, $69, and $129). It doesn’t change the point of the story, but it makes the math confusing.

The 48-hour sales total was $19,547 from 322 sales.

As you can see, I handily beat both Jarrod ($8,753) and Sacha’s ($6,663) 48-hour totals. All while making fewer sales from a smaller audience.

 

Getting it perfect

For Designing Web Applications, my next book, I wanted to see if I could make additional changes to further perfect my pricing model. So I consulted Patrick McKenzie. Can you guess what he said?

“Charge more.”

That’s right. Patrick told me what he tells everyone selling a product online. If you are selling to businesses and people will make money off of what they learn from you, charge based on that.

Based on his advice I set the prices for my new book at $39 (unchanged), $99, and $249. All still had a 25% discount for the first day. The results? A huge increase in revenue.

Over the 48-hour launch period, Designing Web Applications sold 404 units for $34,605 in total revenue. Sales were up 25% from the previous book (a result of more traffic and a better launch), but revenue was up 77%. Clearly the increased prices didn’t affect sales.

 

Flipping the packages

The change that I believe had an even bigger impact on revenue was how I positioned the sales packages for Designing Web Applications. The most common practice is to start with the lowest offering, then show the visitor more expensive options later.

I did this for The App Design Handbook. The packages were listed vertically, least expensive to most expensive. I added more color to the middle package in an attempt to push purchases that direction.

Sales percentages per package for The App Design Handbook were as follows:

  • The Book: 49%
  • The Book + Videos: 32%
  • The Complete Package: 19%

What if we flipped that entirely? Instead of selling the book as the primary purchase, I said the complete package should be the default.

For Designing Web Applications I gave it a try. The packages started out with the $250 complete package, listed as the default purchase. Then if you continued down the page the middle package would be listed, followed by just the book at the end.

2-Designing-Web-Applications

Based on comments I received the message was clear: the complete package is the product. But if that is too expensive, you may consider the middle package. If that is still too much for you, pick up just the book at a very affordable price.

Curious to see the results?

Here’s the breakdown by package for Designing Web Applications:

  • The Book: 50%
  • The Book + Videos: 21%
  • The Complete Package: 28%

Sales of just the book stayed fairly constant, but purchases of the middle package decreased, and purchases of the highest package increased. Keep in mind that I made an extra $150 from every customer I convinced to move from the middle package to the highest.

 

Excluding Customers

It’s important to point out that by offering multiple packages you aren’t excluding customers. Had I just raised the price of every package, that would have excluded plenty of people who weren’t willing or able to pay more than $39 for the book. But by leaving that package alone and just adding more prices for those who can pay more, there is something for everyone.

That said, when I flipped the package order and put the most expensive first I think I did lose out on some sales. Visitors from sites like Hacker News reported scrolling down till they saw a price, then leaving because it was too high for them, never reading on to find the smaller (cheaper) packages further down the page.

If it only happens to a few visitors, this is an acceptable tradeoff. If they didn’t even go through the package contents in detail, they probably didn’t have plans to purchase in the first place. But on your sales pages you may want to experiment with design methods to let the visitor know there are other, less expensive options.

 

Increase Revenue

I estimate that I have made an extra $76,000 (over 2x) over what I would have made from both my books in less than a year with the methods outlined above. So Jarrod is right that you should use a higher price to drive more revenue and Sacha is right to have multiple packages. By combining those two lessons you can radically increase your profit.

  • http://www.pilanites.com/ Shobhit Bakliwal

    Great post Nathan. I have been following you since the second book launch. I love it when people share real numbers instead of pulling it out of thin air!

  • http://bootstrappingdesign.com/ Jarrod Drysdale

    This is an excellent post. Nathan has significantly improved upon what Sacha and I were exploring.

    I eventually recognized evidence in the value of tiers/packages for my own ebook. Quite a few readers got in touch asking for more–these are the people who would have appreciated a larger bundle, like what Nathan offers.

    Thanks for one-upping us! I’ll be following this advice with future projects.

    • Nathan Barry

      Thanks Jarrod! But especially thank you for writing your post initially. I wouldn’t have pursued ebooks if it wasn’t for you and Sacha being so open about your launches.

      • http://suitcaseentrepreneur.com/ Natalie Sisson

        This is a great post and it would be good to know your baseline costs and expenses as well as time invested to produce these books and bundles. Also whether your expenses and costs increased with the second book you launched or not to give it some baseline

  • Caleb Chamberlain

    Great post!

    I’ve been wrestling with a pricing model for a new product we are about to release, and I’ve had similar thoughts. The nearest competing product sells for well over $1500, but we can sell ours for $400 and still have fantastic margins.

    On one hand, we’d like to make our product available to new, cost-sensitive markets. On the other, people expect to pay a lot for what we are selling, and a low price might actually scare customers away.

    I imagine that there is a sweet spot – a price high enough to attract high-end customers, but low enough that the cost-sensitive customers aren’t scared away.

    The solution may very well be to introduce pricing tiers like this post describes.

    • asaasfsdf

      so he write that he charged 39$ when evey one elese 9$

      and you are happy for 400$ when every one else 1500$

      you must be sick man

  • Abe

    One thing which is essential to charging higher prices and offering a relatively high low price, and a relatively high high price is offering clear value. Even though I face a very tight budget constraint, your packages clearly offer a TON of value. And so even though you charge a hefty price for them, I’m still interested. I haven’t purchased yet, but I might. Keep it up, and thank you for sharing your model and results. You’ve earned your success!

  • Dale Foerster

    Nathan- your 3 tier pricing model can be tweaked to drive even more sales to the top tier, the “Complete Package”. All you need to do is incorporate Dan Ariely’s decoy pricing strategy; Price the mid tier package just below the top tier. In doing so not only will you get the mid tier customers to buy up to the top tier package. Why wouldn’t they, it’s only a few dollars more. But an odd and irrational thing happens, about half of the low tier customers buy up to the top tier. In a decoy pricing strategy, customer purchase behavior is driven by thought of; too good of a deal to pass on… and jump on this pricing mistake before they figure it out.
    If you want to learn more about Dan Ariely, the blog link below does a nice job of summarizing decoy pricing and has a link to Dan’s TED talk.
    http://conversionxl.com/pricing-experiments-you-might-not-know-but-can-learn-from/

    • latj

      It is amazing the psychological tricks we can play on consumers to avoid getting the plain old market value of our products.

      • Tras

        > plain old market value of our products.

        Yes, please everything everyone makes is a commodity.

      • http://www.decalmarketing.com/adwords-book/ Iain Dooley

        Actually the main thesis of Dan’s book Predictably Irrational (and of William Poundstone’s Priceless) is that there is really no such thing as “market value” in the first place. Because our decisions about value are affected so strongly by anchoring and relativity, the economic model of “market value” being a combination of what people will pay and what businesses will sell at are not independent factors. They’re both very interesting books.

    • James Cook

      Dale – was thinking the same thing. I read (listened to) Ariely’s book “Predictably Irrational!” a must read for business and marketing people.

    • http://hoodasaurabh.blogspot.com/ Saurabh Hooda

      Awesome article @e1a7ac8fa23ddc8710dbe37ebd905c80:disqus

      Thanks for sharing this perspective @8e45d1b9c37f0184d2d6bc600396ff18:disqus

    • BeeWorks

      Nice share Dale! I am actually reading about the decoy pricing strategy. Very helpful!

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  • http://twitter.com/newdesignideas Robert Jakobson

    Congrats for selling your work.

    That being said, the internet is changing all pricing into a trend, the rules and laws squeezed out of studies done in the 80s or 90s do not work as a rule but more as an exception that one finds about when testing with one’s audience.

    Some audiences have grown “saturated” with these tricks, some have not. Eventually, all will be. I think Ron Johnson at JC Penney was very close to understanding that. I think he was a year ahead of his time, though. We are just reaching this point where gimmicks are becoming transparent.

    Sad that he did not get more time to implement his vision and new style of pricing.

    The Economist examples of decoy pricing that Dale Foerster mentioned are incomplete because it leaves out people like myself who avoid subscribing to the Economist or the FT because we find the decoy pricing model in bad taste or confusing. That might be actually a very large group of people.

    Secondly, decoy pricing and other similar “bullet-proof” tricks are something that works on a given person for the first couple of times. But as everyone starts to implement this on the internet and in retail — the individual will see through the “trap” and will stop subscribing. Eventually, you will run out of people to trick.

    As far as pricing all the products to end with “.99″ or “9” — just test this with “.77″ or “7” / “.33″ or “3”. You will see surprising results. 7 or 3 might be even better numbers because they appear simpler to the unreasoning minds.

    The real unmentioned trend is the relentless drive and pressure towards simplicity in both online and offline retail or commerce. If you offer something simple enough people will respond. That is why we are having a great comeback of e-mail, newsletters and offers in the age of supposed social media dominance.

    The other trend is to design the commercial experience thus that people actually use what you sell (either out of sincerity or out of greed to up-sell later). How many people who buy your book actually get what they need out of it? Design for that.

    • http://jasonpockrandt.com/ Jason Pockrandt

      I agree most with your comments about the Decoy Strategy being a little in bad taste. Well very bad taste. We all should be striving to serve our audiences not trick them into buying the “highest” package just because you make the other one a few bucks cheaper. I would think folks that could create a product of value, true value, find a simple enough pricing structure that doesn’t gouge everyone and is making $70,000 in two days should have a bit more consideration of the PEOPLE who buy from you not merely “customers” who will have problems to solve later. Not pointing out Nathan in particular either just making a point that a good price structure can serve you well on both ends without the need to be greedy to manipulate more mass sales just to make more money, Perhaps you use some of the massive wealth you earn in 2 days to give back to some customers or audiences who are strapped for cash and only making $40,000 a year working by making something next to give away for free. It’s not about the money. Too many online “Big names” think it is. or others say they don’t but still play the games. Create value and give it away. Simple.

  • Doc

    Take a look at Joel Spolsky’s post on market segmentation: http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html

  • http://www.mimiran.com/ Reuben

    Great post, great examples, great building on other smart work. All too often, sellers compare their offerings to whatever cheaper potential substitutes they can imagine (like other books), instead of to even higher priced, higher values alternatives (like having Nathan come in and consult with you on web design).

    Try to help the customer as much as you can. Then charge for it. Give different kinds of customers different options. Great stuff.

  • Robert

    Here’s a fascinating video case study about pricing structure and people’s reaction to it: digitalmarketer.com/access/pricing-enigma/

    He said he might also release the results the results of his latest test, but I haven’t been able to find it.

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  • Grant Deken

    How did you market this to drive the sales? Which channels were the most effective? What was your strategy there?

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  • MattMoo

    OK, you’ve established how best to monetise your content and you’ve worked out a pricing-promo strategy that maximises profit. The question is this: conversion rates? Page design split testing? Whilst i enjoyed reading about your pricing tests, it isn’t the end of the story, is it?

  • Marco

    Very good suggestions, except when you say: “If I were to double the price, would I lose more than half the sales?
    If the answer is no, then I double the price ”

    Well, but how do you know the answer???

    • http://yaq.es Steve (Y Ahora Qué)

      Go with your gut, or if you want to be sure and can generate enough traffic, A/B testing will give you the answer.

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  • Ted Cory

    You did not include conversion rates, which would have allowed for comparison of old pricing model vs. new pricing model. That will tell you how much money you really left on the table. It’s reasonable to assume you’d have more traffic for your second book if the first one did well and you built up a list.

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  • Naomi Kuttner

    Hi Nathan,

    Just wondering what revenue model you used to compensate the experts who contributed to your packages?(And if you’ve got time, how you approached them to collaborate.)

    Thanks

  • dave

    solution for listing the higher priced item first, add an exit popup with a time limit on it. if the userexits within 45 seconds a window pops up with the lower priced items

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  • http://elitesecurity.ie/ Larry Maguire

    Great article. Can anyone recommend a good resource for cretaing an ebook? I want to do my first and not sure where to start. I’ve buckets of blog posts I want to convert into an ebook.
    Cheers dudes!

    • http://www.unpluggedrecreated.com/ Justin Harmon

      Scrivener. There is a free trial period. Plenty of time to add your content and get it formatted correctly.

  • Pygmalion

    Wonder how this would work for fiction? Say an author of 2-3 books is about to publish a book a fourth one. Let’s say the one he WANTS you to buy is the new one (but it would be OK if you bought any of the old ones, too). Trying to figure how the info in this post could be applicable at say, Amazon–seems impossible, but if not there, then on one’s own website…any thoughts?

  • http://www.fspina.com/ Fspina

    Awesome! I have tried with my ebooks: http://www.ebookfacebookmarketing.com and http://www.techmarketing.me

  • http://missbusinessblog.com/ Miss Business

    Thanks for sharing! Definitely has my wheels turning!

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  • GHarkness

    To me, the most obvious solution to having your customers run away when they see the highest price is to have the prices/packages displayed side by side, rather than top down (in any order). That way they can easily see that even if the highest price is too much, there are other options available.

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  • cynthia kocialski

    This is very useful information. It goes to show a pricing model can have a great impact on the bottom line and shouldn’t be treated as an afterthought. It also demonstrates the importance of not just picking a single price, but multiple price structures and experimenting to see which works best.

  • nomadcapitalist

    This is excellent stuff; thanks!

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  • http://systemato.com/ Mark Debono

    Thanks so much for this article. It neatly summarizes what I’ve read in countless other places and is definitely worth keeping in mind!

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  • me d

    If you are selling *a book* and not a front end to a training course, this pricing model is inapplicable.

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  • http://about.me/ryanjrhoades Ryan Rhoades

    Thanks for sharing – this is really solid.

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  • Gaurav

    To sell the ebook is a very good and money making work. These days peoples are crazy to read and see the ebook on their favorite topics. So to see this thing we are offers ebook conversion services for all kind of the books like children, science fiction etc…

    Great job…..

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