How to Price Software - Economics vs. Pyschology

http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html

by mv1 • 15 years ago

50 6 15 years ago

Killah911• 15 years ago

While it didn't spoon feed pearls of wisdom as on pricing strategies, it was a fun read, and at the end I was saying something to the effect of... ditto! Pricing's more of an art, as are many things when it comes to running your own shop. Hindsight is always 20/20 and I'm sure for every art, someone's written a book on the scientific approach to it. Ultimately, think, decide & accept your decision. Learn from the past & be happy in knowing that at least you decided for yourself, and then look to the future with optimism!

davidedicillo• 15 years ago

Great read if you are in the business of making money. Since we launched SyncPad, pricing (for enterprises) has been the most difficult thing to decide.

One thing not mentioned is that, even before pricing, is important to define what are you charging for. While in some cases it's easy (Photoshop charge per seat), in other it isn't because there are several variables in the application usage. In our case there are several thing we can charge for: users, concurrent users, concurrent rooms, and length of the meeting. Focusing your pricing on one thing instead of the other could radically change the amount of revenues as well as the perception users have about the price.

mv1• 15 years ago

I think this last point is a really good one and is something that people who haven't been on the selling side don't really appreciate - it is often difficult to decide what to charge for and how much since different customers derive different amounts of value from a product in different ways.

Roboprog• 15 years ago

What you are selling? Indeed. If you are selling to large businesses, you are to some extent selling checklist functionality (even if the UI / responsiveness / workflow is an instrument of torture to the poor dumb bastards having to use your Enterprise nightmare), AND (!!!) absolution of responsibility.

You are selling reputation, support, and a willingness to hold the customer's hand in the middle of the night, and possibly anywhere in the world. You are selling the assurance that your product is safe and reliable, and that selecting your competitor's product would be madness, folly & death, leaving your client out of a job, and his children disgraced and homeless.

This also contributes to the $75K entry level price tag for business software that Joel mentioned. It doesn't all go to "sales porn" -- some of it has to go into at least the appearance of support.

rmccue• 15 years ago

Regarding the sneaker example, this is an example of a Veblen good, which are bought specifically for the status given to the brand or product:

http://en.wikipedia.org/wiki/Veblen_good

(There's also Giffen goods, which are similar, but where the lower priced product is inferior. This means that consumers will substitute the product for another if they have the money to do so.)

statictype• 15 years ago

An oldie (but goodie) that has been referenced many times on HN. Probably one of Joel's best pieces.

How to Price Software - Economics vs. Pyschology

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