In the business world, value can be defined many ways. But let’s face it, it usually includes money. And while Maryam and I had many reasons to write this book, we wanted to run an experiment to better understand our pricing strategy. Price a book too low and you risk undervaluing its content. But price it too high, and you risk affecting too small a market.
It’s an art and a science, and there are people that are experts in pricing books. But we’re not those experts, and didn’t want to let our lack of expertise hold us up in our quest to write and release a book in just two months. So we started learning the lean way. From what we read, there are many dimensions that affect book pricing, with two main ones being the format (paper copies tend to be priced higher than ebooks) and the length (longer books tend to be priced higher than shorter books).
Uh oh. By design, our book is mainly in the ebook format and quite short at just 68 pages. So would this mean our book would need to be priced very cheaply in order to sell?
It was time to craft a quick lean experiment plan.
Experiment plan | Pricing test 1 for Lean Experimentation in Action
If we introduce our 68-page ebook to our target audience,
Then they will assume its price will be around $15.
- Print the draft cover and abstract of the book (with page number) and take it into a software delivery consultancy.
- Identify a professional experience designer, product strategist, developer, project manager, or business analyst as a participant (we had an easy time doing this because we used our own office — more on caveats later).
- Tell the participant that we’d like to show them some information about a new book, and will ask them a couple of questions afterwards. Allow them a moment to look over the cover and read the abstract.
- Ask the participant 2 questions and note their responses: 1) Let’s say you saw this book in the Kindle or another online bookstore. How much do you assume it would be listed as as a digital book? 2) How much would you assume it would be listed for as a physical book?
- Repeat with about 10 participants.
Metric you’ll use to determine results:
- Median assumed price for digital and physical copies to be evaluated and potentially used as minimum and suggested prices. We’re interested int he median and not mean prices because we don’t want the results to be swayed too much by outliers.
How you’ll know it’s validated:
- If the median price is above $15, we’ll feel really good with that price. Anything lower and we’ll consider lowering our price.
How you’ll know it’s invalidated:
- If the median price is on the low end, at around $5, we’ll know that we were likely too aggressive with our $15 price.
How you’ll know you still need to learn more:
- If prices are so varied that there is no consensus, or if no one has a clear idea how much they would be priced for.
Note: Our participants for this experiment were colleagues at our company. Many readers will say, “But that means your sample was biased! Your colleagues know the authors and that likely that influenced their answers!”. And they’d be right. But we weren’t looking for exact numbers; we were looking to see if our $15 hypothesis was in the right ballpark or not. That’s what lean experimentation is all about, especially in the early days of a product. Additionally, past experiences with our colleagues told us that they are NOT the type to sugarcoat the truth. And we had no reason to believe that their bias would change their answers factorially. That is, we assumed they might pad their answers by a dollar or two, but we did not believe that they would double or triple their assumed price to make us happy. As you’ll see from the results, their answers were lower than we anticipated.
What did we find? Well, the median price for digital came in at $7.75 (we counted dollars as equivalent to pounds for ease of analysis — As with anything in lean experimentation, the goal is not to get an exact answer, but to validate that it’s not factorially off). The median hard copy price came in at $12.99. We were disappointed (but not surprised) that the ebook and hardcopy prices both came in below $15. But that’s alright; it’s all about learning, and nothing is permanent. What’s important is using signals from the real world to temper your expectations.
Leanpub lets authors choose both a minimum and a suggested price, so we took our experiment results as our lower and upper bounds: For now we’ve chosen $7.99 as the minimum and $12.99 as the suggested price. Luckily since Leanpub also lets people pay more if they’d like, we can continue learning in these first few months as we observe what people are willing and able to pay.
So there you have it. A 20 minute test short-circuited what could have been an agonizing decision that might have taken days or even weeks. We took our pricing answer and ran with it!
To see our prices in action, check out the book.