PDF Pricing Experiment – Why Price Does Not Matter (Much)

Over the last two days we have looked at the headline figures and a detailed breakdown of the Pay-What-You-Want experiment but what conclusions can we draw?

Pay-What-You-Want

The Pay-What-You-Want model is not a valid way to build a substantial PDF publishing business.

It is a publicity stunt, a novelty that will wear thin very quickly and sales will drop. Imagine if 6d6 had a back-catalog of 10 titles, all of which were Pay-What-You-Want. I suspect people would pay about the same as they did in the experiment but spread that money over an entire shopping basket-full of PDFs rather than a single title.

The other down side is reputation and branding. If 6d6 kept releasing our products using Pay-What-You-Want we would end up being known as the company that does Pay-What-You-Want. What 6d6 wants to be known as is as a company that produces innovative, high quality RPG products.

Why App Pricing Is A Bad Idea

There is a trend, lead by Adamant Entertainment to sell PDF products at an ‘app price’ level of $2. Postmortem Studios is also experimenting with the model.

The logic seems to be that by reducing price, sales will not only increase but increase significantly because when the price is so cheap it becomes a disposable item. At this price point, people will buy it without a second thought just like a can of pop or cup of coffee. After all, its only $1.99, if the PDF turns out to be rubbish, who cares?

However, for most people, most of the time, this is a bad idea.

Price is Elastic

The principal is known by economists as Price Elasticity of Demand.

In English it means that if you drop your price by 10%, you won’t see a 10% increase in sales. The reverse is also true. A 10% increase in price will not cause a 10% decrease in sales. Each product in each market place has its own elasticity and it is impossible to predict how any product will behave.

This is a critical point of sellers of all goods because if you can raise your price by 10% but only lose 1% of the sales, you generate a lot more revenue.

Why You Cannot Make Money with App-Priced PDFs

According to Google Analytics, the 6d6 RPG page received 507 Absolute Unique Visitors during the experiment which converted into 10 sales. A conversion rate of visitors to sales of 2%. This small figure is very high. Much higher than most web retailers see, much higher than we see with our range of 28mm miniatures and higher than we saw on RPGNow (currently 0.2%).

To sell 100 copies 6d6 would of needed ten times more traffic, or about 5000 unique visitors. As any blogger or small publisher will tell you, this is not easy but it is possible. With an average sales price of £4.46 per copy that would of earned me £446 before costs. Assuming I was paid Minimum Wage (£5.93) that works out at the equivalent of 75 hours work. Which is around about how much time I put directly into that PDF.

To make the same amount with App-Priced PDFs for £1 we would need to sell 446 copies which requires 22300 visitors. Getting that number of unique people onto a single page is really difficult for anyone other than a large company with an established brand.

But this assumes a sales rate of 2%. What if it was the same rate as we saw on RPG Now (0.2%)?

At the average price of £4.46 I would need 50000 visitors to earn myself the bare minimum of livings. At £1 we would need 223000 visitors. Not far off a quarter of a million visitors!

Even if Wizards put the Players Handbook for sale for £1 they could not get that level of traffic.

When To Use App-Pricing or Pay-What-You-Want

There are times when dirt cheap or novelty charging schemes may be effective.

  • For small, cheap to make products – e.g. single encounters – products that only take a few hours to create and cannot command a larger price.
  • Special Editions – If you have an old product then wrap it up in new packaging and ship it at a lower price. This is what Postmortem Studio has done with their Invaderz product and I suspect this will be cost effective.
  • Charity and other special events – When the normal rules don’t or you need the extra publicity.

The Price Is Not Important

What matters is the price in context to how you market and sell a product.

It is possible to make a profit by selling things very cheaply – just look at Poundland. It is also possible to make a profit selling very expensive goods – e.g. Rolls Royce motors.

What isn’t obvious is that it is no harder to sell expensive goods than it is to sell cheap goods. Both approaches to pricing need to fit into the broader marketing, branding and product development strategies.

Getting this mix of price, brand and product quality right is difficult which is why so many businesses fail.

10 comments

  1. Thank you for posting about this. An informative read.

    Out of interest when you refer to “Unique Visitor” numbers is that per day/week/month or total during “x” days of experiment?

  2. Insightful, as ever.

    I think the error that too many people make is to think you can sit back and relax when the finished pdf is uploaded for sale. If anything, that’s when the hard work really begins. It doesn’t matter whether you’re selling something for $1 or $1,000, convincing people to part with their hard earned cash takes effort.

    If publishers think they can just put something online for a couple of dollars and rake in the cash, they’re mistaken.

    On the bright side, if you do manage the “brand” well and consistently deliver quality, customers come to will buy based on the strength of your name alone. That’s where Adamant are right now, and I wish them well with it.

  3. @Paul,

    The Unique Visitors was the total during the experiment, about 9 – 10 days.

    @Greywulf

    Thanks.

    You are spot on. The real work of being a publisher is selling the product.

    I’ve never read any Adamant’s products but if they do have a good brand amongst their buyers, they don’t need to drop the price for new products.

  4. Whoa. Major flaw. Even bigger and more basic than the elastic demand curve oversight by an order of magnitude. You have not calculated future sales into your figures above. This is known as the net present value. Your hourly rate has to include the fact that you will continue to produce sales of that 75 hours of work long into the future, probably along a flattening slope after the initial 10 days or so (when it is teh shiny).

    -Nunya

    P.S. – So make it cheap and also, stop being so gay.

    :p

  5. Great experiment and interesting blog series, Chris.

    I agree with you and Greywolf: it’s marketing that makes the difference. If you build it, they will not come. You have to post signs. Lots of ’em.

  6. @NunyaBidness –

    Future sales are irrelevant as this is a question of price.

    The 75 hours @ UK minimum wage of £5.93 is just a marker to indicate how much effort is required to produce the PDF and how much revenue is needed to earn the barest of livings.

    What the article is about is how many sales are needed to generate that modest income.

    With a consistent price, whether 100 PDF are sold in one day or over five years doesn’t matter, the gross revenue remains the same.

    Chris

    p.s. Please keep your juvenile, homophobic slurs to yourself.

  7. Hi Chris et al.

    I tend to agree with the “fixed price” approach – call it that rather than the “app priicing” – mainly because you need to be able to market the material effectively Advertising something like a full game for £5 or even £9.99, I think would be acceptable to most gamers as a reasonable punt to try something out (I don’t have expert evidence for this, but as a long time gamer it’d be a price point I would just accept and buy). I can’t think of any instances where “pay what you think it’s worth” has worked well – it also presents real marketing challenges – obviously many of your readers will know more than I, but I think this would be something to avoid.

    You could consider app level pricing for modules / adventures etc.. priced at £2 or $3 for example – and as pointed out no one will bat an eyelid at those price levels. You could even consider subscription pricing plans (pay for 10 get 12). This would also vreate an additional income stream on an ongoing basis – a module might take you – 7 hours (?) at £5.93 ph – meaning that you’d only need to sell 21 units to break even. If you have a player base of 200 sold rule sets, they are likely to be running games – you’d only need 10% to run those modules to get pay back. Given they are short games (for £2 that’s what you’d expect) you should get repeat custom for future installments, and also a back catalogue for future punters, which will generate future income as well.

    I do think the point about future revenues is important – you rightly point out that your model only goes into the break-even point for the product, valuing your time at NMW – fair enough. However, your income in total will depend upon a range of factors.

    I think you ought to look at your web-site too. I know every sector is different, but sales rates of 0.2% on RPGNow is very low. 2% is at the lower end of what you should expect from a normal e-commerce site. I’ve had three different niche e-commerce sites in the past, and on all three (with different services / products and markets) we achieved regularly 4% to 6% visitor to purchase conversions. Might be time to look at your e-commerce / marketing / targetting and think that through – it really can make a difference (even if it is booooorrrrriiiiinnnnngggg).

  8. Hi Jim,

    Having a range of goods at a variety of prices is important to your overall sales, including logical price differences between rulebooks and modules. Its marketing 101 and something that the app-pricing or pay-what-you-want models don’t allow for.

    Modules (or at least modules longer than a single encounter) unfortunately take a lot long than 7 hours to create. It is a week minimum. A price of £2 is just not a viable price for this amount of work except in sales and promotional goods.

    I’d be interested in seeing what sort of products / sites you are getting 4% – 6% conversion rates. My experience of conversion rates put those as much higher than the norm.

    Sometimes, if you are doing well on Google with the search phrase “Where can I buy XYZ?” and your website is called “Buy XYZ Here”, you can get really good conversion rates because your traffic is highly focused on buying what you are selling.

    It also depends how you measure the conversion rate. Both my examples above are based on visitors to the sales page versus number sold. RPG now probably sees a higher ratio of visitors to sale than that but the site has a wide range of products. This is very different from the conversion rate of a specific product on a web site.

    I don’t find marketing boring. It is one of the more interesting sides of the business. Converting marketing theory into practice is taking some practice but we are getting there. Mince Pies & Murder was an deliberate experiment and our next round of releases will be much improved because of it.

    Thanks for dropping by and I hope to see you soon.

    Chris

  9. Hi Chris

    The pricing I put in up there was just punt in the dark style…. More importantly is to get your planning right so you recover your investment (time, effort and creativity) properly. If it works out that you think you’ll be able to sell a regular 100, 150 or 200 units of a module (say – and that would be as a rule substantially less than the initial game sales) then you need to price accordingly.

    I’ve no idea how long it takes you to write up a module – I assume over time that once you have a “house style” developed for different module types the production time would reduce (much as with a regular layout in a magazine etc..). I guess you can’t very well legislate for standard times for a creative process!

    4% – 6% – you are correct that these are for niche and therefore specialised sites, with a high propensity to purchase. One of the more obvious ones was for examination dancewear – people searching for it are likely to want to buy it hence their search. Another was for a specific service – again with a high propensity to purchase.

    The closest corollary is someone searching for “mince pies & murder” might be the most likely to buy, followed by someone searching for “6D6”, followed by someone searching for “RPG’s” and then a distant prospect of someone searching for “games”. The idea is to focus your marketing to build awareness – simple conversion rates are only a small part of the story although they can tell you how “casual visitor” friendly your site is, and how well it guides people through the funnel to spend money…

    Anyway – I hope to get a go at “Mince Pies & Murder” soon – having completely missed it. I’ll happily pay for it as well…

    Cheers
    Jim

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