1. Instant gratification (it’s the same reason you pay a lot more at a convenience store than a grocery store for the same item). People know they can get the information free elsewhere, but they want it pre-assembled and organized for them, and available right now (why a lot of people “write” e-books by simply compiling PLR articles).

2. “Junk e-books” often fall in the “$7 e-book” lump. If you charge too little, you actually can lose credibility. Most of the e-books written by experts and heavily promoted are significantly more than that ($27, $37, $47, etc. up to well over $100 in some cases, although not too often).

3. E-books are very often sold through personal referrals by people who have built trust with their audience. That’s why in many cases the best selling e-books are the ones being pushed with a large affiliate program. You’re more likely to buy and pay more if someone you trust in the niche tells you it’s worth it, and the good affiliates know to only push products they really do recommend for that very reason.

So compared to traditional books, yes, they can look over-priced. But this is actually one case where lowering the price a few dollars won’t necessarily bring in more sales (and much less likely to bring in more revenue). Here’s how it often works, and why that idea doesn’t fly in most e-book sales:

1. It’s a known fact that prices ending in 7 can perform much better than other price points. So for me to lower the price from $37, and still take advantage of that psychological sales draw, I’d have to lower the price a full $10, which is nearly 25% of the price.

2. As I mentioned, the sales model very often revolves around affiliates pushing the product to their own audience. Affiliates choose products often based on how much they pay – they may have three products in mind that they like enough to promote, but they’ll take the time to do that with the one paying them the most. If you drop your price, you’ll very likely have to drop your affiliate payments. You’ll lose affiliates, and therefore the sales they drive (which can be a huge chunk of sales). You would also have to invest more time into marketing independently, and more money into other marketing efforts just hoping to meet those old sales numbers (unlikely as you’re losing a direct route to your target market through those affiliates).

Let’s look at a potential example:

Let’s say I have an e-book priced at $37, and I’m offering a 50% affiliate payout ($18.50 per sale). I’m making an average of 100 sales per month, and about 75% of those sales come from affiliates (I believe ClickBank gives you some of those numbers for different products, so you can take a look there to see how some are performing).

I decide that I want to lower the price to try to drive more sales. Because I understand basic e-book pricing, I’d take it to $27.

In the worst case scenario, let’s say half of my affiliates leave to promote other products. That would knock out 37.5% of my sales (assuming all affiliates are equal just for easier calculations in the example). I’d now not only have to come up with other means of making up those sales, but still increasing the total sales enough to equal the profit or exceed it. So if I were hoping for a 20% increase in sales by lowering the price, I’d now have to come up with 58 extra sales per month instead of 20… more than a 50% increase, and not necessarily an easy feat.

In a better case scenario, I’d keep my affiliates by paying the same amount per sale, and taking the cut on my end so I don’t lose the marketing vehicle. I’d now make $8.50 per sale instead of $18.50. Let’s say I now easily make that 20% sale increase by lowering the price. A true 20% increase in revenue would mean I’d be going from earning $1850 / month (100 sales at $18.50) to $2220.

A 20% increase in the number sold under the new model would only make me $1020 ($8.50 x 120 copies). It’s far less than what I was making before the sales increase. To come out ahead, 20% increase just wouldn’t cut it anymore. To keep the affiliates to push the product, I’d now need to pick it up to selling 218 copies per month (much less realistic, and that’s barely coming out over the original figures – if I wanted to make the actual revenue goal of $2220 / month, I’d need to now sell a little over 260 copies per month).

You could try to balance it out by decreasing affiliate payouts only a little, to increase your profit margin and hopefully not lose too many affiliates, but you run into a combination of the problems though. And if you lose your regular affiliates, it probably won’t be easy to get them back.

The real key with e-books is understanding the different sales process when compared with books, and understanding the buyers’ motivation for being willing to pay more. I made the mistake of not using affiliates for my first e-book. It only took me 5 hours to write it, so it’s not as though I invested a lot into it where I’d need to make several thousand dollars to make it worth my effort to promote. With my new e-book, it’s taken months of planning and writing. Considering what I charge clients for a unique product of the same length – assuming 80 finished pages, and charging around $100 per hour for most of my writing – I need to be able to account for that time in my sales figures.

So what looks like a really high profit margin to a buyer is really just a normal writing fee having to be covered, split between multiple buyers. If it weren’t worth it financially, I’d not write them… I’d stick to press releases and reports.

So hopefully that clears up why a lot of e-book authors charge what they charge, why it looks high to a buyer, and why people still buy them regardless (in my own case, my current e-book may be $17 only, but it’s nearly $1 per page – the new one will be considerably less expensive if you look at it that way). ;)

I’m pretty sure I’m going to stick with $37 for this author-targeted one. I look at it this way… if it’s not selling in the first few months, there’s nothing stopping me from lowering the price later, and it gives me room to offer occasional sales to drive buyers if I need to. :)

I’d actually recommend e-book writing to any writer with a real expertise in their specialty. You may actually be able to earn significantly more than you would with more unreliable client work that can fluctuate. :)