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There are self-publishers earning six and in some cases seven figures in their self-publishing business just from their royalty earnings. And if you don't have an effective pricing strategy for your books, you could be leaving thousands of dollars on the table.
Today, I'm going to explain Amazon KDP's royalty payments for paperback and hard cover books and how to maximize your royalty earnings so that you can extract the most amount of profit in your self-publishing business.
If you're new here, I'm Rachel Harrison Sun, and I've published over a thousand fiction, non-fiction, and low content books under various brand names. And I've helped over 5,000 people start generating passive income publishing low and medium content books. If you want to find out more about that, download my free guide, "Three Steps to Publishing Your First Low Content Book in Less Than a Day." I've left a link to that down in the description below.
So, in order to maximize your royalties, you've got to first understand how KDP calculates its royalties to begin with. So, for paperback and hard cover books, Amazon KDP offers a 60% fixed royalty. So that's 60% of the list price minus the printing cost. And printing cost is going to depend on things like trim size, page count, ink type, and the marketplace that you intend on selling your book in. Now, the formula for this is: royalty rate times list price minus printing cost equals your royalty. So, for example, if your list price is $15 and your book is a 333-page regular trim size paperback with black ink sold in the US marketplace, this would be 60% times $15 minus $5, and you wind up with a royalty of $4.
Now, important to note here, if you decide to enroll your book in expanded distribution, that 60% royalty drops down to 40%. But if you are a low content publisher, this is kind of a moot point for you because low content books are not eligible for expanded distribution.
Now, you might not think adding an amount as small as just $1 will make much of a difference in your overall royalty earnings, but let's take a look at an example. So, let's say you're charging $7.99 for a 120-page, 6x9 paperback. In that case, you're going to earn $2.35 on 100 units sold. But if you bump up your price by just $1, you'll earn $2.95 on that same 100 sales, a difference of $60. Now, if your book sells 100 units per month, at the end of the year, you'll generate an extra $720 with that $1 difference. Now, that is just one book. If you're pursuing fiction, non-fiction, or even low content publishing as a business model, meaning you're publishing books at scale, this can mean a difference of thousands and thousands of extra dollars per year across 10, 20, 50, or more titles.
When I had a catalog of about 400 books all generating royalties, this actually ended up making me an extra several thousand per month, not just over the course of the year. Now, really important to remember here, for the average customer, $1 extra really isn't going to make much of a difference to them. It's probably not going to break the bank, but it can make a tremendous difference for you.
So, knowing this, how do we price our book? Now, the strategy for many self-publishers out there is to find a book that's generating a lot of sales, create basically a ripoff of that book, and then charge less for it. This truly is a race to the bottom, and you are going to make no meaningful income if you employ this strategy. Again, as another example, if you take a 150-page, 6x9 paperback priced at $5.99, this is going to generate a $0.79 royalty. That means you'll generate $79 for 100 units sold. Now, how many thousands of units are you going to have to sell at that price point to make it worthwhile? The same book priced at $8.99 generates a $2.59 royalty. That equals $259 for 100 units. You end up earning three times more with the higher royalty. And if you're producing high-value, high-quality books, your customer will pay that extra $3. Remember, people are generally willing to pay more for higher perceived value, and people will often avoid buying something that's cheaper because it comes across as cheap. Pricing your book at a low price point actually devalues your product.
So, your new strategy should be to generate the highest possible royalty by producing the highest quality books in your niche. So, here are the things to consider when you're pricing your book.
Number one is to start off with some market research of your competitors. Who are your competitors? What are they charging? What's the quality of their books? Can you reasonably expect to create something that's of higher value and higher quality than what's already out there?
Next is to know your ideal customer avatar. This is the exact person that you're creating your books for. Once you know exactly who you're targeting, that's going to inform what you include in the book. It's going to inform your design choices. You get to create something that speaks exactly to that one target audience. And remember, you can usually charge more for more niche audiences and interests. For example, if you're a homeschooling parent, you're probably not going to balk at spending, say, $12.99 on a daily planner that is geared specifically towards homeschooling parents, even though that same person could probably get something similar in a totally generic planner that's $8.99. People will spend more for something when it feels like that thing was created specifically for them.
Now, another general tip here is to always try and target people who actually have money. Your ideal customer must be willing and able to pay, otherwise it's going to be really hard to sell your product to that person.
Next is to factor in your print cost. So, print cost determines your minimum list price, and your list price determines your royalties. Amazon's got a royalty calculator online that you can access. So, it's really important that you use that calculator so that you can determine what you want your royalty to be and then adjust your list price accordingly depending on what the print cost is. And when you're using that calculator, you always want to have a predetermined royalty threshold in mind. In other words, what's the lowest amount of royalty that you are willing to accept when you're creating your list price? Personally, I've always aimed for a minimum royalty of $2 per unit sold. Now, yours could be higher, yours could be lower, but the lower and lower you go from $2, the less and less royalties you're going to earn, making the whole a lot less worthwhile. If you price all of your books at $5.99, it's going to be really, really difficult to earn any sort of a livable income. And if you want to amplify any of the results you're getting with ads, it's going to make it really, really hard to make your ad spend profitable.
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Now, the most important tip here is to create a premium product that you can charge premium prices for. Because remember, when you charge premium prices, you must deliver premium value. So, this means high-quality, high-value content that specifically addresses the needs of your ideal customer. It means premium cover design. It means a professional-looking description that includes the features and the benefits and is completely free from grammatical and spelling errors. It means creating premium-looking A+ content that showcases the interior of your book. And when you do those things, you can quite confidently charge $1 or $2 or even more than the average list price for the books in your niche. I've always charged at least one, often times $2 more than all of the other books in my niche because I'm confident that I'm delivering a high-quality product.
Another little tip is to manually adjust all of those regional prices. When you set that initial price for your primary marketplace that you're targeting, so Amazon will do this for you automatically, but it usually ends up creating kind of weird, awkward-looking prices. Psychologically, most people are just used to seeing prices that end in 99 cents. So, I usually just go down the line and I adjust everything, either up or down accordingly, so that all of the prices end in 99 cents.
The final tip is to test and track. So, don't be afraid to either raise your price or lower your price and see how that affects your overall sales. One main recommendation here, though, is to just test one book at a time. I do remember a few years back, I think I changed the price on about 15 books at a time. I raised the price on all of them, and it really had a negative impact on my sales. And when I changed them all back, I could never quite get back that momentum that the books had started off with. So, in hindsight, I really should have only tested out one book at a time, so I wouldn't have had such a detrimental effect on so many books.
Now, again, if you want to learn how to create passive income creating and selling low or medium content books through KDP, please download my free guide, "Three Steps to Publishing Your First Low Content Book in Less Than a Day." And if you're interested in learning about some book marketing strategies, ones that don't include ads, check out this video here. And thanks so much for watching. I will see you next week.