The Business of Editing: Discounting Rates

It has been asked: Is discounting your rate ever justified? The answer is “yes, but not usually.” We have all been faced with the dilemma: Should we offer a discount in order to get the job? Or because the potential client is a student? Or [fill in the blank]? The answer is not easy. I begin where I always begin when it comes to rates — with the effective hourly rate (EHR). Discounting a rate is like setting a rate in that you must first know how much you have to earn to keep yourself afloat. It is neither very smart nor does you any good to earn less than your required EHR.

Many years ago I would have said that it is better to have some income than no income. That was in my days of not applying business practices to my business and not realizing the potential of my business. The truth is that it is not better to have some income than no income. It is only better if that income meets your required EHR. Note that I am speaking of required, not desired, EHR. I learned quickly that rather than take on work that was below my required EHR I was better served spending my time marketing myself, trying to find work that would meet my required EHR. This is also true when it comes to discounting my rate.

I never discount to a rate that is below my required EHR; I want to be able to pay my bills, which is something I will not be able to do if I do not meet my required EHR. There are several factors at play. First, before discounting my rate, I need to be earning overall more than my required EHR, and preferably close to my desired EHR. It is that difference — the difference between my earned EHR and my required EHR — that is the negotiable area.

Second, the client needs to be a repeating client. It does me no good financially to provide a discount to a one-off client, even if I think that client will tell friends and neighbors how great I am. The reason is that the one-off client will also tell friends and neighbors what he paid and the friends and neighbors will be expecting a similar discount. For repeat clients, especially institutional clients, I am willing to consider a discount because I know I can make up for the loss on the particular project on future projects or because it is worth my while to charge a little less in exchange for a larger volume of work. Which brings me to the third point.

Third, volume discounting is reasonable as long as the discount does not go below my required EHR. In the case of a volume client, I always keep in mind my Rule of Three (see “The Business of Editing: The Rule of Three“) as it will do me no particular good to have a lot of business that I am losing money on. But volume clients are what I want because such clients assure me year-round profitable work. In a sense we have gone full circle. Discounting one’s rate is acceptable in the circumstance that doing so does not bring the rate below one’s required EHR.

Where most of us part ways is with the other requirements. Usually the argument is that

• it is a new subject area for me that I want to explore
• the client is poor
• the subject matter of the project is one that I am very interested in

and other similar “reasons.”

The first question to ask yourself is this: Are you a business or a charity? If you are a charity, then these reasons have some merit; if you are a business, these reasons have no merit. As a business, you need to earn enough to stay in business and even to earn a profit. Why remain in a business that cannot provide income sufficient for your needs?

The second question to ask yourself is this: If I undertake this project, will it preclude me from taking on a higher-paying project? If it will, then it should be avoided. Why take on a project that costs you both money and opportunity?

The third question to ask yourself is this: If I take on this project will I have the time and money and energy to market myself to better-paying potential clients? If no, then don’t take on this discounted project. Discounting is fine when you are in a position to do so, when your business is such that whatever loss you will take can be made up for. It is also fine when it is connected to volume. But under no circumstance is it fine to discount below your required EHR, which means you must have calculated your required EHR beforehand. (To calculate your required EHR, see the five-part series “Business of Editing: What to Charge.”)

One thing we haven’t considered is the worth/value of your editing. I consider myself a highly skilled professional. My services can make a difference. How valuable are those services? The more valuable they are, the less willingly they should be discounted. I differentiate my services by the price I charge and the quality I provide; discounting takes away that differentiation. And it becomes a slippery slope: If I discounted today, why not tomorrow? The consumer will neither understand nor accept the fine differences we use to distinguish among projects and clients; if my price was $x yesterday, the consumer expects it to be $x today and on both days expects high-quality service.

Are there times you can discount? Yes. Are there times when you should discount? Yes. The way your  recognize those times begins with knowing your required EHR and evaluating whether giving the discount will further a legitimate business interest. In the absence of either, no discounting should be given, and under no circumstance should a discount result in an EHR below your required EHR.

Richard Adin, An American Editor

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Ripping Off is Soooo Easy to Do: The Charade of Pricing

This past week the New York Times reported that two Amazon Kindle ebooks, Ken Follett’s Fall of Giants and James Patterson’s Don’t Blink, are priced higher than their hardcover counterparts. This is the result of the Agency 5 pricing scheme for the ebooks (for some background, see Agency in eBooks: Just the Start? and The Decline & Fall of the Agency 5) that allows the publisher to set the ebook price and the ebookseller to set the pbook price.

I hadn’t planned to note this “event” as it has been noted numerous times since its discovery, and I considered it just another rip off of consumers by publishers. I suppose the biggest fools in the unfolding of this event are us commentators who cry about the high price of the ebook in comparison to the pbook. Why are we made to look so foolish? Because thousands of the ebooks are being sold despite our negativism. So perhaps the publishers are a bit smarter than us in terms of sales, even if dumber than us in terms of actual revenue.

(In terms of revenue, booksellers pay 50% or more of the suggested retail price as the wholesale price on a pbook. Consequently, the publisher receives more per-unit-sold revenue on the sale of a heavily discounted pbook than it does on an agency price ebook. I know, the logic of that situation escapes me as well, but the chiefs at the Agency 5 get much bigger salaries and bonuses than I do and have the pleasure of telling shareholders how they are cutting costs by laying off the grunt workers.)

But I was finally agitated enough by the ripping off scenario to write today. The rip off today is a Barnes & Noble masterpiece of legerdemain. I am a B&N member whose membership “privileges” have been steadily eroded by B&N since the advent of ebooks. Yet today’s legerdemain is the best yet. Granted we aren’t talking big bucks on an individual purchase, but in the corporate world, pennies add up to dollars, and I’ve now gotten a glimpse into how Leonard Riggio plans to save his world.

Like all B&N members I received an e-mail touting new publications with offers of discount coupons — either for the store or online. First clue: I received 2 separate e-mails — one offering me a 30% discount (members save 40%) coupon and the second offering me a 40% discount (again, members save 40%). Apparently the offers have changed so that even nonmembers get these coupon offers. I do concede, however, that B&N can legitimately offer the discount to both members and nonmembers (but why would you want to kick your members, your most loyal customers, in both the stomach and the head?).

Clue 2: To take advantage of the online coupon discount, you need to click the Get BN.com Coupon button, which takes you to a special offer page at the website where you get the book of your choice (from among those being offered with the coupon) at the discount.

I am interested in buying Chernow’s George Washington. So the first thing I did was go to B&N’s online store to see what the price is. If I just buy it at its regular discount price, the hardcover cost is $23.40 — a 41% discount — and this price is available to everyone, member or nonmember. If I click the coupon for my special discount price, the price is $24.00, the member’s price. So for being a member of B&N, I get the privilege of paying 60¢ more than the price everyone who isn’t sucker enough to use the coupon pays.

Is this a rip off or not?

Of course, in B&N’s case they aren’t even matching Amazon’s current hardcover price of $21.60, which makes one wonder what life after death there will be for B&N. But Amazon doesn’t sit pretty here either. Just 3 days ago, as the New York Times reported, the Follett book was being sold by Amazon for $19.39. What happened in 3 days to cause the price to rise by $2.21? The need to make the Kindle edition, which is still $19.99, appear to be a bargain compared to the pbook?

Why shouldn’t an Amazon customer who wants to buy the Chernow pbook be angry today that the price has been raised? Especially when there is no assurance that it won’t rise or fall tomorrow. There is no logic to the changing prices other than to extract the most possible from consumers. We aren’t talking about precious metals that are traded on commodities exchanges that have price fluctuations based on availability. There is no shortage of pbook copies.

Bottom line really is that both B&N and Amazon (and probably other ebooksellers as well) are simply playing their customers for suckers — B&N by the coupon legerdemain and by offering all comers the same buy price at the expense of members and Amazon by shifting the price up or down as it sees the interest in a book wax and wane.

It’s a war of nerves for book buyers, because one has to guess when to jump on the offer and when to hold steady. Who ever thought buying a book would be a high-stakes poker game?

Gift Cards in the Agency Age

As most ebookers know, the big 5 publishers, conspiring with the consumer’s “best friend” Apple, have instituted the agency pricing model — they now set the selling price to which all retailers must adhere. Why did they jump at this pricing scheme? Because they thought their ebooks were being devalued when they were sold at $9.99. I wonder what the big 5 think now.

So, how do you buy agencied books at a discount? U.S. Sony users have the answer this week: buy $25 Sony eBookstore Gift Cards at Target stores for $15 — a 40% discount. How does this thwart agency pricing? Well, if the agencied ebook price is $14.99 at every ebookstore, using the Sony Bookstore Gift Card reduces the effective price to $9.00 — even less than the dreaded $9.99.

I don’t know who is absorbing the loss on the gift card, whether it is Sony, Target, or a combination of the two, but I do know that the deal is great for anyone whose ebook reading device can handle ePub with the Adobe DRM, which is most devices. I bought 10 of the gift cards and am thinking of buying another 10 before the end of the sale.

If this works as well as I think it will, Sony should see a significant increase in sales. I know it will see a significant increase in purchases made by me. A 40% discount is mighty enticing, especially when it is on any ebook, not just New York Times bestsellers that I don’t read. But more importantly, this could turn into a wave of me-toos from other ebooksellers.

How can they get away with this? Well, I admit I’m just speculating, but here are my thoughts. First, the agency publishers cannot control the price that an independent retailer like Target can sell a gift card for; similarly, they can’t control the price that Amazon can discount gift cards.

Second, gift cards represent cash — unspent cash. So a $25 gift card, whether it cost $5 or $50 to buy, was bought with cash and represents $25 cash and can be used to purchase $25 worth of goods. State and federal regulations govern this.

Third, the ebooks are being sold at the agency price; they are not being discounted. When the ebooker buys that $14.99 agency priced ebook, $14.99 is deducted from the $25 credit that the gift card represents. The agency publishers have nothing to complain about and no agreements (to the extent I have knowledge of them, which is to the extent of what I read in the press) are violated.

So who wins with the discount gift cards? The gift card ebookstore who gets my money in advance and who now knows that I will buy at least $X worth of ebooks from it because the gift cards aren’t usable elsewhere. Plus I am now encouraged to look at, in this instance, the Sony Bookstore whereas before I only occasionally looked for a book there. In addition, because people who own ereading devices other than Sony but that are ePub-with-Adobe-DRM capable can also buy books at the Sony Bookstore, Sony gains access to more ebookers.

The gift card seller (i.e., in my case Target) who lured me into its store, a store I rarely go to, to buy the gift cards and hopefully something else.

eBook authors and publishers because I have now committed to buying ebooks that I would not otherwise have bought. The Sony gift cards I bought are not redeemable for anything but ebooks at the Sony Bookstore.

With only the Sony Bookstore gift cards currently available at such a discount, ePub and Adobe are winners, too, because devices that aren’t hampered by being unable to read (without stripping DRM, which most ebookers either cannot or will not do) ebooks in ePub with Adobe DRM can make use of these gift cards — that’s a lot of ebookers.

And me, the ebooker, who is able to buy ebooks at a discount. In this case, I am the big winner because a 40% discount is a bigger discount on an ebook than usually offered once you look past the New York Times bestsellers.

The only losers today are the international ebookers who live outside the United States who do not have access to the gift cards; they need to be bought in person at Target. But this might be the first breath of wind in a brewing storm where the ebookstores begin competing by discounting gift cards. Will Amazon and Barnes & Noble join the fray?