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Pricing a Software Product
prostoalex writes "Eric Sink from SourceGear shares his experience on software pricing. Whether you're developing open-source or proprietary software, the money has to come into the business in some form, and the article suggests several strategies as well as the pitfalls for managing software pricing. Sink claims it's tough to compete on price, dangerous to run seasonal promotions and almost impossible to avoid criticism on being over-priced."
Volume Pricing has its snag in how you handle customer Support. I didn't see that addressed (other than lightly under Tech Support), the higher the volume of sales the more need for customer support. Only so much can be down with a website FAQ. (Personally, I'm wary of products which don't come with printed manuals or a pdf with only a light treatment of the subject matter, back in the day manuals were your saviours, now they're some kind of afterthought that vendors seem uninterested in putting effort into.)
With inexpensive stuff you may lose all your profit on customer support, with pricing of support and/or a higher price nd lower volume there's less need for a large customer support team, or it grows as needed.
Granted, I've worked for people whe shelled big really big zorkmids on stuff and when it turned out to be crap, it wasn't the vendor to blame but headcount.
There's some discomforting truth to many of those Dilbert strips.
A feeling of having made the same mistake before: Deja Foobar
Sometimes I place more value on the service I get that on the product itself (software or not). A lot of software is moving to a hosted environment, and a lot of companies are starting to like the idea. Now you can use your service from your mobile device as well as at the office. So, instead of charging for the software, charge for the hosting. Develop and open source the product, then charge people to use the service in your hosted environment.
So how should I price Hello World? I just wrote it in C.
Hmm, competition? No competition! You can find some software books that show you how to make your OWN Hello World, but who has time for that?
Some of those books cost 100 Dollars or more... So that I dont look like an "underdog" im gonna charge $250 dollars. Even better, I could convert Hello World, into Hello World for Workgroups, change the font to something a little more professional, and sell it for $325 plus maintenance and security fees.
Uh, for Windows you are correct. For office, you're partially correct. But for all of their other programs, Microsoft has direct competition from many sides. Sink even gives an example...where an ISV has created a product that competes with Access built on Open Source technologies.
"So what is the right price range?
This question is the point where most small ISVs will wimp out. "We don't have the Microsoft name." "Our product is less mature." "We feel inferior, so obviously our price has to be lower than theirs."
Bzzzt! Wrong answer. The right answer is: "A lot more than $229."
Basically, Sink is telling ISVs to grow a backbone and realize that the first step isn't competing with Microsoft on price (mostly for the reason you're talking about, MS can just drop the price and thus drop the usefulness of your software) but finding the area in which their product is SUPERIOR to Access and leveraging that.
It's good advice. Because by doing this, you encourage people to move away from Access while at the same time increasing itnerest in your product.
We have a local car dealer who did a commercial claiming that the Hyundai luxury sedan looks "just like" the Jaguar only it costs much less. Needless to say, we laugh our ass off at that commercial. A Hyundai is not a Jaguar only cheaper...it's a Hyundai attempting to LOOK like a Jaguar. Too many low-cost programs suffer from trying to look like a Jaguar, when what they really need to do is analyze what it is about the Jaguar that makes it attractive and what can be gleamed from that and added to that to approach the market from a different direction.
Our company writes software for a saturated niche, but does alright because we look at things from a different perspective. Rather than just allowing our customers to enter and store data with a weak search engine, we allow them to enter it quickly, search it powerfully and associate it meaningfully. Our price is higher for that reason -- and yet we have more customers.
Hey freaks: now you're ju
Your thinking is flawed.
Let's take an analogy. I have a valuable rare coin worth $1,000. It is taking up space in my house, and I simply found it lying around.
You are a coin collector. Not only do you know it is worth $1,000 on the open market, but you have a particular affinity for it. You would easily pay $2,000 to get your hands on it.
So, if I sell it for $1, are you ripping me off? If I sell it to you for $2,000 (it cost me nothing), am I ripping you off?
You might be tempted to refer to the "market" as the fair price. The market price is nothing more than a value at which you are pretty sure to find a buyer. Higher than that price, you will have to spend time seeking a buyer who places greater than normal value on the thing. Lower than that price and you are basically cheating yourself.
The beauty of capitalism is that it recognizes the basic fact that every person values things uniquely. When we engage in a transaction, we are both more wealthy... even with demand-side pricing. You will never pay more for something than it is worth to you. Anything you pay less means you are wealthier.
Let's take that coin. To you, it is worth $2,000. I sell it to you for $1,500 (above the market value). Before the transaction, you had $1,500 that was worth exactly $1,500 to you. After the transaction, you are down the $1,500. But now you have a coin that is worth $2,000 to you!
As for me, I had a coin that was basically worth nothing to me without knowledge of the market (or worth $1,000 with knowledge of the market). After the transaction, I have $1,500 in cash! BOTH OF US make a profit.
Another flaw in your question is that costs are easy to quantify. In fact, in software development, they are hard to quantify. How much, exactly, does a download of Photoshop from the Adobe web site cost Adobe?
I thought the colors were in support of our troops in Iraq? They seem to be of the same desert cammo. Other wise they'd be just plain annoying.
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Those who can, do
Those who can't, teach
Those who don't know how, supervise
being a subscriber might give the complaint more weight, as well.
Well, my other account is a subscriber. But considering that when I posted a complaint about it both the IP's I post from (home and work) were banned from posting anything and my karma quickly going from the good/excellent threshold to terrible, I'd say that it doesn't carry any extra weight at all. I had been a constant subscriber since subscription had become available too.
Thank goodness for proxies, I guess.
I've just signed legislation that'll outlaw Russia forever. We'll begin bombing in five minutes.