* The Business of Software

A former community discussing the business of software, from the smallest shareware operation to Microsoft. A part of Joel on Software.

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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

Man, pricing is hard!

I'm about to release a product for business and I was thinking around $99 to maybe $199.  I just thought of a well known competitor and they're at $599!  Wish there was a proven formula somewhere... :(
anon for this
Monday, September 04, 2006
 
 
Price high; you can always discount later.
Kyralessa Send private email
Monday, September 04, 2006
 
 
$549
Ed
Monday, September 04, 2006
 
 
Or price low, show your regular price of $599 and indicate that the current pricing is introductory.

Or price low and increase with each version.

Or price higher than the competition and create perceived value.

Or show a competitive price of $399 and offer support for $299.

Or give it away for free and only sell a support contract.

Or put a high price tag on it per user and then give it away for $5 through a social bookmarking campaign.

Or... have I covered them all yet?  I'm just playing around, but this discussion has been had over and over again, just thought I'd do some summing up.
whoever
Monday, September 04, 2006
 
 
> Or... have I covered them all yet?

Also, offering several prices for several feature-sets, e.g. Enterprise, Professional, and Lite.
Christopher Wells Send private email
Monday, September 04, 2006
 
 
549 is a bad price point.
499 is far better.
Why?
500$ is one of the points where purchase orders start get complicated. Below that there is far greater number of people  capable of making a purchase decision for business. Over that, those people need to file forms and ask manager to decide.
Jouni Osmala Send private email
Tuesday, September 05, 2006
 
 
+47 for "Don't do anything to break the $500 limit on the business credit card".  Incidentally, if you're absolutely, positively sure that $199 is a price only the most insane people would pay... I'd bite the bullet, price it at $199, and discount later only if appropriate.
Patrick McKenzie Send private email
Tuesday, September 05, 2006
 
 
Hey,

Price near your competition, not way down your competition.

When we first started, we priced way down our competition, and it didn't help with sales at all.

Price can also be a gauge of quality. I'm paying $199, but the other shop is $599. What am I missing here? Sounds too good to be true?

Don't put that thought in your potential customer's mind.

If you're pricing less than your competition, be sure to tell why you're pricing less, that you can price less because...

But for me, I'd always price the highest we can. Because 100 units of $25 sure beats a lot more than 100 units of $8.50.

Rachel
Rachel
Tuesday, September 05, 2006
 
 
+1 on prices for different types e.g. lite, standard, professional, and enterprise. I'm doing this type of pricing for my shareware application especially when I release the pro version within this month.

You just have to make sure that the pricing for the different types is justified by the absence or presence of features.
Phillip Flores Send private email
Tuesday, September 05, 2006
 
 
If the competitor is at 599  price your product at 499 to keep it under the corporate credit card limit for those who would measure quality with price of the product.

Then discount it for those who don't want to pay more than $99 - by giving a lease to own option, which will allow them to own the product in 3 years - i.e. $14.99 per month lease for 36 months.
i think i will price something like this Send private email
Tuesday, September 05, 2006
 
 
$473 - too keep it under 500 and 7 & 3 make it look less. :)

Before that, maybe you should consider if there is any features in the competitor's product to make it worth that much more?
Orick of Toronto Send private email
Tuesday, September 05, 2006
 
 
I am not from the US but do sell to small business in the US using a higher price than $500 so:

Does the $500 limit is a credit card limit?

Does it a common used level that make things more complicated in enterprises?

Does it common that small businesses (say 1-5 employees) have this $500 limit and actually have problems purchasing our software?
Annon
Tuesday, September 05, 2006
 
 
$500 is the maximum limit for a single purchase from a corporate credit card (sometimes its also the total limit, although that would be more common at small businesses).  Many businesses use these to simplify cash flow issues and record transactions in a traceable manner. 

Some US small businesses extensively comingle the owner's finances and the businesses.  In this case, your product will likely be purchased on his personal credit card (hello, self!).  Others which have a separate business account will likely have a $500 limit on their credit card since this option is used as a "sensible default" by most issuing banks.  They could theoretically authorize a higher purchase with a phone call, but do you want to require an extra step?
Patrick McKenzie Send private email
Tuesday, September 05, 2006
 
 
One place I worked the secretary could just automatically sign off on things up to $500 so that I would not need to justify things to the boss.  Just suckup to her and things would be bought.  Where I an now for my "day job" my manager has a $500 limit and anything higher needs to get additional signoffs.
SteveM Send private email
Tuesday, September 05, 2006
 
 
Just because they have a $500+ price doesn't mean that it's working! Focus on YOUR immediate target customers to set pricing. Understand better the market that you are after and derive features/pricing, rather than model after a competititor. You want to be different than your competitor, not the same.
Stacy Murray Send private email
Tuesday, September 05, 2006
 
 
+1 for "tiered pricing" (Home, Pro, Enterprise) and put some REAL thought into how to differentiate those versions.

Are you certain that most of your customers are looking at your competitor as well? Is price the only way to differentiate yourself from them?

It's usually better to price relative to the VALUE. Your competition may be over or underpricing thier service. (We've had competitors do both.Sometimes it's the same competitor doing both.)
Mr. Analogy {Shrinkwrap µISV since 1995} Send private email
Tuesday, September 05, 2006
 
 
One thing to consider is that while Joe Bob who is buying your software from home doesn't want to spend more then $50 for your software.. Bill Smith at X company is not going to want to buy your software when it is obviously so inferior to it's competition (otherwise why would you be charging so little for it?).  While it's true that you want to price yourself properly you also should be wary of being extremely cheaper then your competition.

Are there other competitors you can investigate?  You've mentioned one competitor but what about the others?  Are there even any others?
Shane Courtrille Send private email
Thursday, September 07, 2006
 
 

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