Pricing ebooks

I joined a loop dedicated to indie publishing recently, and I am amazed by the members' wealth of knowledge and their generosity of sharing.

One aspect that is constantly debated is pricing. Should first-time authors price their book at 99 cents to break in? Does giving a book away free build a fan base? Is is better to price your book within a long term business strategy--that is price at $4.99 or $6.99 and reserve some margin for promotional sales?

I have downloaded free e-books which, in my opinion, would have benefited from more editing.  Would I buy a second book from this author? I'm not sure. My first impression is set, even though I know writers improve with practice.

The golden rule of business is: 80% of your sales come from 20% of your customers.

Getting that 20% fan base takes time and a well-crafted book.
If you are self-publishing, it also takes a eye-catching cover and proper formatting.