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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Pricing at $299 or $900?

I have a product that is priced at $299. The competitor's is priced at $900+.

Do you think I am at loss or gain with this much price difference? I basically think mine is the correct price though its just my gut feeling.

Do you think enterprise users also think that cheaper price means lower quality?

Tuesday, April 18, 2006
Release an "Enterprise" version or an "Enterprise Deluxe" version, or whatever. Include a few extra super-bonus features. Price it at $799 or $899 and see how well it sells.
BenjiSmith Send private email
Tuesday, April 18, 2006
My gut response is "yes, judging only by the price, I assume your product is not as good", but if you raise your price, you need to justify it somehow.  It could be more features, better usability, better support, or any number of positions  that set your product apart from the competitions. 

Whatever you do, don't make "cheap price" your only selling point.
Jesse Smith Send private email
Tuesday, April 18, 2006
How are the competitor's sales compared to yours? If you don't know that explicitly, look at how long they've been in business, their advertising/other marketing, word of mouth in the industry, etc.

If they've been around for 10 years, advertise in all the glossy magazines, drive expensive cars and are moving to  a larger building, etc, then *their* price is more likely the "right" one.
lw Send private email
Tuesday, April 18, 2006
+1 for the "Enterprise Deluxe" version.

dave wanta Send private email
Tuesday, April 18, 2006
Well if you follow some of the advice out there, you might be better off pricing the Advanced Deluxe version at $1599... expensive says "better quality".
Phil Send private email
Tuesday, April 18, 2006
+1 for making your price higher than theirs, but only if you're actually bringing value. If your product is miles behind them then I wouldn't do it, but if it's close and has some unique advantages then I'd go with a higher price.
Ian L Send private email
Tuesday, April 18, 2006
Ask you customers.

Market research can really help in understanding pricing sensitivity. Ask people who already paid you what they would have been willing to pay.

Ask potential customers what is the maximum they would be willing to pay.

You want to get the most amount of money you can from those willing to write you cheques. Differentiating a product only on price is really not very benefitial to your bottom line. Figure out how your customers VALUE your product, and associate price there.

Let me give you a practical example from my own business that can illustrate how this can be helpful. I recently released a product which I was originally going to sell for around $50. I surveyed over 150 of my beta testers and asked what would be the most they would be willing to pay, giving them 5 choices ranging for $50 to $150. In the end, I found out that 37% of my sampling market were willing to pay me $100, and that 15% were willing to pay me $150. I did a bit of math and quickly realized although 35% of the sample market would only pay $50... by increasing the price to $100 I would make MORE money that hit the bottom line. My cutsomers' associated more value to the product then I original thought... and I couldn't be happier.

YMMV. Good luck.
Dana Epp Send private email
Tuesday, April 18, 2006
+1 for asking the customer.
Robert Reeves Send private email
Tuesday, April 18, 2006
Don't ask the customer. They will say they want it cheap and then buy the more expensive product anyway.

It's a quirk of human nature.
son of parnas
Tuesday, April 18, 2006
Perception is everything in the market place.  Your product will be percieved to be inferior if its cheaper. Cheaper labour, cheaper materials. Why would anyone want that.

You will need to have some way of indicating cleary why your product is cheaper - perhaps it only does 50% of what your competitor's product does.  That way anyone making comparisons would be able to work out the reason for the differential.  With no explanation, the consumer is confused.  This must have happened to you in a shop before.

All the best.
Tuesday, April 18, 2006
You won't find an answer here because people's experiences are so different. The only way you will find out is to test different prices.
Tuesday, April 18, 2006
> Don't ask the customer. They will say they want it cheap and then buy the more expensive product anyway.

>It's a quirk of human nature.

When began talking with our customers, we detailed the cost savings they would get by using our software. Then, we asked them what they would be willing to spend for the product. Everyone of them split the cost savings with us. This resulted in a considerable jump in what we thought the price should be.

Without a doubt, the first thing you should do is ask the customer. Whether it is a feature, bug fix, price change, whatever -- engage the customer first.

Robert Reeves Send private email
Tuesday, April 18, 2006
> . Everyone of them split the cost savings with us.

Because splitting is the default allocation method for allocating a shared reward.

A product price is not reward and there's no reason to split evenly. You are leaving money on the table and/or neglecting your brand.
son of parnas
Tuesday, April 18, 2006
Do most of your customers actually know about the $900 solution?

It's easy to assume our customers have perfect knowledge. I wish ours did. We'd kill our competition ;-).
Mr. Analogy {Shrinkwrap µISV since 1995} Send private email
Tuesday, April 18, 2006
+1000 for not asking the customer. Your goal isn't to give them the price they want. It's to get them to pay as much as they can without going over the price that's too much.

If I asked 5 people what's the most they'd pay for a pound of bananas I'd get 5 different answers. That's a simple grocery store purchase, trying to do that with a several hundred dollar piece of software won't work.

You should talk to your customers of course, but not to ask them what price they want to pay. What you need to find out is what features they desperately need and hence are most valuable to them.
Ian L Send private email
Tuesday, April 18, 2006
Price yours at $895 or $995

You need fewer sales to maintain the same profit. Plus your product will not look inferior to the competitors.

Your gut feeling is skewed due to the Dollar-Rupee difference.
Tuesday, April 18, 2006
How did you arrive at your existing price?

Is there some methodology involved, or did you just take a guess (inspired or otherwise)?
Craig Welch Send private email
Wednesday, April 19, 2006
I feel that the information you had provided here is insufficient to have an idea if you are at a loss or a gain because of the low price you are offering.

It depends on who the competitor is and how he is perceived by the market both of you are targeting. In niche markets companies have an image for them.

Low price in itself doesn't mean low quality. If a well known company prices a product low, then people may think that they will be offered a good product but since they are cash rich can afford to price it so. Or may be they are new to the market and trying to get into more of it. If they price it high, people would reason that the support will be good and that is part of the price paid. Comparing it to a low priced product from a relatively unknown company, they would reason that the cost is low but that they need to have their own programmers and spend the difference in cost by themselves as the support they would get wouldn't be as good. How your company is seen determines what people would think about the price.

If both you and your competitor are seen to be in the same league in all other ways, it means that you need to have the price on the same lines as your competitor. If you have very similar products, your competitor should be giving a lot of leeway than you do when customers negotiate with them. They must surely be selling for less than what they quote and this will help them form good relations with the customers who would recommend them to others. So if both of you are on par, you should, I think, be losing a lot.
Senthilnathan N.S. Send private email
Wednesday, April 19, 2006
Instead of asking what price to sell, look at your entire pricing model versus your competitors. Assuming the competitor you are talking about is Spb Software House, your models, and not only your price, differ dramatically.

1. They sell runtime licenses; your software is royalty-free.
2. They sell two additional limited functionality versions: one for Internet Explorer and one for Terminal Server, in addition to a generic engine; you sell only the generic engine.

Based on this, look at the total cost for your target customer. If your target customer is deploying to 1,000's of runtimes, you can easily go to $2,000 or $3,000 with a royalty-free license and still be less than your competitor when it comes to total cost. However, if your target customer generally uses less than 100 runtime licenses, then you need to be around or less than your competitor's pricing.


 - Sell at $295 for a limited number of runtime licenses (say 20 or 50), then sell at $895 for a royalty-free license
 - Sell a limited functionality (either generic with less features, or application-specific like your competitor's one) for the lower price.
 - Raise your prices gradually every three months until you hit your target price ($295 -> $495 -> $695 -> $895). Watch the impact on your sales revenue (not # of sales), and adjust accordingly.
 - Raise your price to $895, but provide a 2 month discount period to existing prospects.

Finally, one last thing you need to do if you want to sell at $895, redesign your web site. Looking at your web site, you LOOK like a small company that sells low-end products, while your competitor's web site is clean, slick and LOOKS like they are a large company that sells high-end products.
Trevor Lohrbeer Send private email
Wednesday, April 19, 2006
> Don't ask the customer. They will say they want it cheap and then buy the more expensive product anyway.

Don't ask the customer by spamming everyone who's ever looked at your website.

"Ask the customer" by building a genuine relationship, and then be able to talk to your friends about the business. You'll get a more honest view of their real feelings, which is more useful than asking strangers if they want to pay more than you originally charged them.

Also, ask *potential* customers rather than existing customers - you may have some cheapskates who'll be non-representative of your actual best target market.

"Ask the customer" is a phrase that needs to be implemented with a small degree of intelligence and sophistication.

Wednesday, April 19, 2006
Just remember the pricing wisdom - don't price over what a middle manager can sign off for in the budget. Once a product is more expensive than the sign off threshhold, it's likely to require two+ C-level signatures - then you need a dedicated salesman, and price above the 70k range!
royalblue_tom Send private email
Friday, April 21, 2006
Getting below the middle manager sign off range is good (I am guessing this is around $300-400).

You can ask customers "what would you pay for this", but don't expect an honest answer. What people say and what they do, can differ wildly.
Andy Brice Send private email
Friday, April 21, 2006

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