The Business of Software

Hiya guys.  Long time lurker, first time caller.  While I've still got a day job paying the bills I've decided to take the plunge and open a uISV, partially for fun, partially for resume-building, and partly for having a little spending cash.

I'm going to describe what I'm doing rather ellipticly because I don't want this to be an advertising post.  Sorry in advance if its unclear.

My program has a couple of markets but the big one, at least to my mind, is K-8 education.  It automates a task that a teacher will probably want to perform on the order of once every two to three months per class.  This task results directly in a fun classroom activity which takes a class period -- the task, on the other hand, is boring as dirt and requires a lot of manual labor if you do it the old fashioned way.  With my program, you cut down the time it takes from ~45 minutes per class to ~5 minutes, once.

I'm currently thinking of three price points: $15, $20, and $25.  A couple hours on the Internet show that my competition is one service that charges $36 per year, one shareware program of negligible reach for $20 which is too buggy to be usable, one shareware program of unknown reach (can't Google it for the obvious search terms but I found it on Download.com) for $15, and two pieces of professional software which sell for $60+ and/or site licenses (they do other stuff as well).  You can get a close substitute for this outside of software from a number of specialist publishers but it costs in excess of $10 per class.

I'm using eSellerate for payment processing, so I will make between 85% and 90% of the purchase price regardless of which price point I go with.  My marketing costs are likewise constant per click. 

So, anyone have any advice on how I can go picking from those three numbers?

Go with $25 and see what happens.

QUESTIONS:
Have you talked to any prospective customers ("your market") ?

Have you done any "keyword mining" to see what those customers would search on?  (This can be tricky to do. Sometimes they don't even know, or you have to talk to a LOT of them to start seeing a pattern).

If you find good representative keywords, I'd base "competitor visibility" on how they come up for those search terms.

It sounds like you can just ignore the prices for the shareware options.  I'd ignore prices for anything that your prospective customers haven't heard of.

Do you think it's likely that your customers have heard about the other options?
What do they think of these other options?

How many hours do you think you save them over the life of the software?
I'd price that at something like $3/hour saved. (They are probably spending thier own money and may not value thier time).

Also, you might consider an intitial low price and perhaps a lease option as this could get you market share faster.  Then, as you build market share and improve the product, you can raise the price.


I suspect:

Teachers will give and seek word-of-mouth recommendations.
Teachers may be a bit more likely to pirate software (if it's easy) because they see themselves (rightly so) as doing valuable work and not having enough resources, so it's easy to rationalize piracy. (We see that in our market as well. The good news is thier computer illiteracy means preventing piracy is pretty easy.)

Why not make it open source and have customers pay just if they need support? You might want to look into the GPL for this.

Thanks for suggestions.

Regarding talking: In a previous lifetime ( ;) ), I was a teacher.  I've got some friends left in the field who needed something like this whipped up about a year ago, and I did a slap-dash job (bare minimal functionality, user experience which I would charitably describe as "painful") and sent it around to an email distribution list with ~60 K-8 teachers on it.  I got 10 thank you letters for the effort, which tells me that the demand is there but that doesn't quite address price.  Unfortunately all the teachers I know know me, and its impossible to get an unbiased evaluation from them ("Well, thats wonderful you'd pay $100 for this... but are you sure you're not letting the fact that you're my mother influence your decision?")

Keyword mining: I think I've got this one down pat.  My software has a really obvious keyword set.  I've verified that there exists a market for that keyword set using Overture (five digits worth of searches per month in the main two word phrase, four digits each in 8 variations).  I can quote the targettable submarkets, especially education-facing, off the top of my head.  And my initial "customer request" for the above-mentioned slapdash effort was something along the lines of "Hey guys, I'm searching for software to do <two keywords> but can't find anything.  Anyone know of any software that meets this need?"

Competitor visibility: I've mentioned the competitors above.  You really have to go digging to find them.  Of the top page of search results, roughly four results are guides on how to do-it-yourself either with the old-fashioned way or Excel macros (I'm not worried) and six are to web services which are missing what I pray are my two key selling points.

Piracy: I have a day job so this isn't an "am I going to be able to pay the rent next month" question for me.  Nevertheless, I would like to make money from this little endeavor.  I've got a trial version available which is the same distribution as the full-featured version, unlockable by input code.  I don't phone home so if a key makes it out into the wild well then thats all she wrote.  My CD keys are 10 digits long and are generated in a pretty pathetically easy to crack manner if you have a copy of my code in front of you.  I expect that anyone who even knows what the word "disassembly" means could turn my trial version into the full version in five minutes.  But I've put a bit of thought into which features to disable (with the eye towards making the program usable enough to see "Wow, this would save me so much time" but force an upgrade before you actually get to the lesson) and its not easy to circumvent via techniques external to the code (i.e. the workarounds are out of the reach of my target purchaser).  Casual piracy within an office may be a problem, but I'll never know either way.  Does that sound sufficient to you?  (With regard to downloading cracks: My program is so utterly uncool that I think your typical warez kiddie would sooner stab his eyes out than spending two minutes of his life downloading my program and opening it -- even the title screams "There is no rep to be found here").

Sorry, didn't see the GPL bit.  I've contributed to OSS in the past, but I wanted to try my hand at running a business.  I don't see selling support as viable for this piece of software.  I coded it in the anticipation of an audience which is, well, not known for their computer ability.  It has roughly the complexity of Notepad.  I expect to get a question or two regarding installation and the odd "I bought this once and moved computers, now its in demo mode again, fix please!" but there is just not enough here to motivate someone to purchase a support contract.  And "pay per incident" on this product would be, umm, a very difficult selling proposition to say the least.

It's OK, I was just joking around really.

It sounds like you have a great plan worked out. I'd go with the higher price initially. $25 is not a whole lot, that's much less than a textbook and about the price of a nice set of pens.

$24.95