There are four pricing methods: 1) Cost-plus pricing; 2) Target-return pricing; 3) Value-based pricing; and 4) Psychological pricing. These are not exclusive; use of one does not preclude you from using another.
Which of these methods do the TradPubs use?
Cost-plus pricing?
It is doubtful that the Trad Pubs use cost-plus pricing, because cost-plus pricing implies that they have a firm grasp of their costs. I don't believe they do. There are more WAGs* in a TradPub accounting division than in a puppy kennel.
Target-return pricing?
The evidence says the TradPubs use target-return pricing. How else can Sentinel HC justify $36 for Donald Rumsfeld's book unless they figure on it selling X number of copies and they divide the advance they paid Rumsfeld by X and add their WAG at unit cost to come up with the unit price?
Value-based pricing?
I have seen no evidence that the TradPubs use value-based pricing. Second-hand sales on Amazon and eBay aside, in no instance does the reader set the price.
If Scholastic used value-based pricing, then Harry Potter and the Sorcerer's Stone in hardcover would sell for more than $30.00 (discounted to $19.80).
Psychological pricing?
The evidence that TradPubs use psychological pricing is clear and convincing. Have you noticed how many hardcovers are priced $24.99? How many mass-market paperbacks are $7.99? Why?
Price points.
The odd thing is that the TradPubs price against each other. They do not appear to consider what price point will garner the greatest number of readers but rather they appear to price their products based on their competitors' pricings.
In short, TradPus appear to use target-return pricing and psychological pricing. There is no evidence that they use cost-plus pricing or value-based pricing.
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* Wild Ass Guesses.
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