My second book in a series was offered at $3.99 (the first book is at $2.99). The book has done well since its release almost a month ago, but not as well as the first (despite getting better reviews). I decided to knock down the price to $2.99 to see if the sales jump up at all. After only one day, the sales in that book have fallen by 10%, which is well within normal variance, but certainly not the 30% increase in sales I needed to bring in the same revenue.
How long should I try this experiment? One day does not a trend make, but so far, this little experiment has cost me $100 assuming sales would have been the same at $3.99. Should I even bother to keep going?
While one day isn't statistically significant, the longer your book is at $2.99, the more people will see this price, the more people who recommend your book to others may also mention the price, such that if you do raise the price back to $3.99, these little things can have a little impact, too.
I left my recent third book in series up ten days at 3.99 before dropping back to 2.99 due to lack of enthusiasm . The book instantly took off to it's current #2 in category and #1 in Hot New Releases, which it has now maintained for over a week. Maybe it would have done that anyway... or maybe not. I may increase it again after the "new" wears off. Go figure!
As you correctly pointed out, it's all a matter of variance. This is like experimenting with a new treatment on patients. First you give them treatment A (in your case, the 3.99 treatment). Then you give them a new treatment. The 2.99 treatment. And you measure the results. You know what your income was with treatment A (for this, take the average daily income over a month). That's your reference level. Let's say you set the variance at 10%. Everyday you note your income (price*sales) with the new treatment. Statistically speaking , if the point is within the variance levels, it means that the point is not significant. Or in other words, you cannot conclude that the new treatment is better or worse than the previous treatment. And this can go on forever. But in practice, for every point under the reference level , you're losing money. So you might decide to stop it after a couple of days.
Every point that is outside the variance levels is statistically significant. Which means that you can use these to draw reliable conclusions. Now how should you set your variance level? That's a bit more complicated, because that level depends on the price of your book and the conversion rate. (How many viewers will actually buy). You can do this with a chi-suare test. But I wont bother you with annoying statistics stuff. For a 3.99 book, the variance is, depending on the conversion rate
Another more simplistic way to do this, is to draw one line at your reference level. Then take all the points that are above the line and calculate their average. That will be your upper variance level. The same for the lower variance level.
But if your selling thousands of books a day I think you can throw in $500 for this experiment
My take, on the surface, is a bit different from others. Timo's logical and scientific approach is always interesting and usually quite accurate. My own research is more intuitive and "gut" biased. Oddly enough we are often very close in our conclusions.
Here is my take: every book and certainly every category has it's sweet spot regarding price. The reading public is a fickle beast but often quite predictable once a market is identified. There is a certain segment of the buying public that simply will not pay more than 2.99 for a book (other segments will pay no more than .99 or in some cases are only interested in FREE). Many of us who "grew up" in libraries have a tiny internal alarm against paying anything at all for a book. We have grown up thinking books, like air, should be available to everyone at no cost...and so it was (and long before Kindle). Each and every book has an interested audience out there (somewhere) and the bulk of that particular audience will pay only a certain amount for a book of the type they are looking for. The great masses seem to think 2.99 is the proper price for a digital book and will pay no more regardless of length or quality. It will take some hunting about to hit your sweet spot, price wise, but it is usually well worth the effort.
Raising one's price may often make the author more money initially, but sometimes at the cost of rank and thus sales... and eventually less money. All this just my own ramblings and indicative of nothing other than a bored writer currently between books.
I need to be outside my variance levels in order to justify lowering the price. I make $2.05 for a $2.99 book and $2.74 for a book at $3.99. So I need to see a significant jump in sales in order just to maintain revenue. So far, I am not seeing it. My sales are within expected variances. I haven't gotten to my stubby pencil drills to figure out standard deviations and the like, but I can pretty much see it from my graphs.
Of course, as you point out, I need to see conversion rates, but as I only know sales and not how many people actually looked at the book page, I am not sure how I can do that.