The Price Is Wrong

August 3rd, 2006

Pricing software is one of the toughest jobs facing independent developers. We’re stuck in this awkward position where we don’t necessarily have the name recognition to demand the highest prices, but we also can’t afford to “give away” the hard-earned fruits of our labor.

On one side of the argument we hear the endless feedback from the “Cult of Too Expensive.” These are the seemingly endless supply of irrationally whiny “potential users” who insist that a product is “good, but too expensive.” They would buy our products if only they were $5 cheaper. Who are these people, and who gave them access to the internet? They wouldn’t be nearly so annoying if their price wasn’t always ridiculously low. It’s not uncommon to hear people disparaging $15 products (mine among them) as “too expensive.” At some point, you have to wonder whether these people eat out of a dumpster or live out of the back of their truck. Not that there’s anything wrong with those lifestyle choices, but it has little to do with what represents “good value” to ordinary people. In many cases, I get the sense that people got an idea in their head about how much software should cost in 1983 and haven’t adjusted for inflation since.

Another line of thinking suggests that a product must be priced high enough to demand the respect it deserves. This makes common sense, and resonates with many an aphorism: you get what you pay for, etc. In a recent email thread, Brent Simmons (of NetNewsWire and MarsEdit fame) summarized the problem of underpricing software as a matter of perception:

“Anything under $19.95 sounds like a hobbyist or teenager trying to subsidize their iTMS habit. Anything $19.95 or higher sounds like a professionally-made and supported product.”

Surely there is some wiggle room in the exact price, but the logic is compelling. At what point does “bargain pricing” hurt your sales more than it helps them? And how much does this value perception depend on the context the product is stuck in? I think most would agree that the price $1 is too high for a candy bar, too low for a bottle of wine, and just about right for an mp3. The travesty is you wont’ even try the $1 bottle of wine, despite the low investment. “It can’t be good!” The magic number for “palatable” wine is between $6-$12, depending on who you ask. Is $19.95 that magic number for palatable consumer-oriented software?

Tom Harrington of Atomic Bird doesn’t seem to think so. His system maintenance utility, Macaroni, costs just $8.99. The company’s flagship product is decidedly not a hobbyist project, and sees substantial sales to both individual and institutional buyers. But even at its low price, he gets hecklers. “I had people who complained Macaroni was too expensive when it was $7.99,” he told me. Is nobody safe from the insane Cult of Too Expensive? Is Macaroni a success because of its reasonable price, or in spite of it? One nice side-effect of such a low price is that a modest rise in price, such as the one from $7.99 to $8.99 should produce a massive %12 increase in revenue. But now that he’s set the pattern of a low price point, is he stuck there?

There is a prevailing wisdom in marketing that “prices should only come down.” This would suggest that developers should “aim high” and then correct when nobody buys the product. This is how a computer would solve the pricing problem: start high and iterate until condition “good sales” is met. But such a strategy in real life could be a public-image nightmare. We hope to hit “pretty much on target” from the start, to avoid embarrassment and second-guessing. If you price too low, you’ll have a hard time imposing a major increase. If Atomic Bird raises the price of Macaroni to $25, there will undoubtedly be squawks of “but my friend bought it for $9 last week!” Most developers who raise prices tend to do it gradually, and in conjunction with feature upgrades. The price remains static between 1.0 and 1.2, but when some major changes happen for 2.0, the price might get bumped by $5 or $10. This makes for something of a “stealth increase” that can really add up over the years.

But sometimes drastic actions are called for. The price can be simply too low. Whether it’s a question of perception or practicality (income not matching expenditures), the price of some products needs to be seriously corrected in order to set things right. Chris Liscio has been struggling for months to find the right price for his professional acoustic measurement software, FuzzMeasure Pro. Catering to a specialized audience where competitors are often priced in the $500-and-up range, his pricing conundrum was tougher than most. For this product, $19.95 was certainly not the magic number. But what was? Just getting his new company off the ground, Chris wanted to make sure his pricing was competitive, but his experience was educational. He told me that he originally intended to charge $125 for FuzzMeasure 1.2, with an introductory “sale” for $85. This is how he released the product: on sale for $85 but making no secrets about the forthcoming increase to $125. What happened when he raised the price? In his own words:

“On August 1, I released FuzzMeasure 1.3 at the full price of $125 and expected sales to drop drastically. Quite the opposite occurred — my license sales doubled, and total sales dollars went up by nearly 200%.”

Hello! Sign me up for developing niche audio software! Charge more, sell more, everybody’s happy (especially the developer). Today FuzzMeasure retails for $250, almost 3-times its original price, yet it still undercuts the competition by hundreds of dollars.

At the extreme end of pricing corrections are movements from and to “Free.” People hate it when things stop being free, and love it when things become free. Unless they just bought it. Then they’re angry because they got “ripped off,” even though it was a good deal before it was free. An application that recently went from $25 to Free is Don Briggs’s Suite Modeler. It’s hard to tell what the motivation was for this move. Probably the market was never particularly lucrative, and to be honest things are moving pretty steadily towards a newer dictionary format (sdef) that sort of obsoletes the application. But it was $25, and now it’s free. Somebody’s probably stinging.

Kevin Callahan’s Accessorizer has been a life-saver for many Cocoa developers over the past several years. Roughly in conjunction with its 2.0 release, its price jumped from Free to $20. Now this is a perfect example of something that people love to get upset about, even if it makes no sense at all. “Because you let me use your software for free for several years, you have no right charging for it now!” This seems to be a common sentiment. Ironically, if Kevin’s app had been $30 from the start, a reduction to $20 would have been met with cheers. I’ve even heard tell of some people describing the sudden shift in strategy as a “greedy move” on his part. And what precisely was selfless about their years of freeloading off of his hard work?

Another product to go from Free to $20-ish is Fraser Speirs’s FlickrExport. This product used to be so free you could download the source code (still can for the 1.x version). Now it’s closed-source and costs money. Not free as in beer. Not free as in speech. Free as in demo. Yet somehow I don’t hear the same amount of outrage in this case. Perhaps it’s because Fraser eased customers into the idea over a period of time. Over a period of months he hinted at the transition to a for-profit enterprise, and gave salient reasons for why this was an important direction to take the product in. Users, the ones you care about – not the crazy Cult of Too Expensive, seem to be amazingly resilient if given half an ounce of reason to be so. After all, they want to like you, they just need a little psychological hand-holding.

So what’s the takeaway from this article? Price your product above the “magic number” for your target market, but not so high that nobody buys it. Easy, huh? I wish. What is your target market? Obviously Macaroni, NetNewsWire, and FuzzMeasure fall squarely into distinct ones. Where will FlexTime fall? Probably somewhere between the $14.95-$24.95 – i.e., the price of a mid-range economy bottle of wine. Will I match the magic number? We’ll see. And I’ll get my share of hecklers, too.

49 Responses to “The Price Is Wrong”

  1. Adam Preble Says:

    A very interesting, informative, well-written article. Thanks for taking the time to write it. Now I’ll have to see what your product(s) do! (Got here via Gus Mueller’s blog)

  2. Dan Says:

    The one application I wonder about is Quicksilver. Alcor has said he’s not sure if he’d charge for Quicksilver or not [0]. If he made it open source that’d be great, but if he turned around and started charging for it I don’t have a problem with that and I’d gladly throw down the money the first second the option was available, but you can be sure there will be wailing and gnashing of teeth from people saying what ever price it might be set at would be too much.

    [0] http://blacktree.cocoaforge.com/forums/viewtopic.php?t=159&highlight=price&sid=5a0d5b5a4f2a7547c9de98777bc469ad

  3. Cameron Hayne Says:

    Developers also need to decide what their upgrade pricing strategy will be. And this isn’t even something that you can put off until the time that the first upgrade version is ready. You need to decide this at version 1.0 since what will seem a good price to users will depend on how much usage they expect to get for their money.
    If free upgrades for life (or some shorter period still measured in years) are promised, then users will be much more likely to go for a higher initial price. But if users expect that there will be a for-pay upgrade coming soon, they will be less likely to pay as much for the initial licence.

  4. S Says:

    I’m a big proponent of not underpricing things. I think it’s a mistake a lot of small businesspeople make, not just in software development. And in just about every field, it’s true that some people will complain about the price no matter how low it is. However, I also have to admit that I identify with those people a bit. The thing is, $15, $20 or $30 for a good piece of software is perfectly reasonable. In a lot of cases, it’s a great deal. It’s not a lot of money. But it also adds up. If I were to buy every piece of software that seems like it would be useful to me (or whose development I would like to support and encourage), I’d be spending many hundreds of dollars, which is venturing into the realm of “a non-trivial amount of money.”

    So, what happens in practice is that I really only buy software that is either so cheap that it doesn’t even feel like real money (I’m thinking sub-$10), or is so crucial to me that I feel I can’t live without it (e.g. Photoshop, despite its astronomical price). There are tons of apps I see from small ISVs that I think are cool and useful. But I end up not buying any of them, because I don’t want to spend enough to buy all of them, and it’s too hard to pick and choose which are worth it. The ones that go for $9 get purchased, the very few that are vital get purchased regardless of price, and the rest I do without. Is this completely rational? No. But we all know that purchasing decisions aren’t always made rationally…

    I know this doesn’t really add anything useful to the pricing debate. But I wanted to point out that software products don’t live in isolation, and the complaint of “too expensive” might not be quite as simple as it seems.

  5. macFanDave Says:

    Especially for the Mac, software pricing is a crazy universe. There are wonderful free apps, like TextWrangler, XCode, iPhoto Buddy and Monolingual. Others seem too good to be true, but Graphic Converter is that good for only $30! Apple’s iApps are so cheap that they turn the economics of photo organization/editing, movie editing, DVD making, sound editing, etc. on their heads. They meet the needs of all but the most professional user for about $16 each! On the other hand, I’ve seen a lot of one-trick ponies that I might use once or twice a year selling for way too much.

    One thing that you had better be prepared for if you are going to charge a non-trivial amount for your product: the customers’ expectation of support. Once I pay more than, say $20, for a software, I would expect that if I send an email detailing a problem clearly, I expect a correct solution from the developer within a day. Other customers would probably expect phone support that is available more than 9-5 M-F.

    People complain about the prices of many products and services, but the difference between most commodities and software is that most software these days is distributed on the Internet which is a two-way means of instant communication. I can’t go to Target and tell the cashier, “Man, I like this iPod, it’s just too expensive,” and expect anything to happen. If Steve Jobs sold iPods on his personal web site, I might try to complain to see if I could get a break. (According to what I have heard about Jobs’ personality, I’d probably have better luck with the Target cashier! ;-) )

    Price your software at whatever price you think is fair. If a long time goes by and sales are unsatisfactory, lower your price.

  6. wendy Says:

    The Price Is Wrong…

    nice…..

  7. ssp Says:

    I keep thinking that the perception of price is for one thing a matter of age. When I still went to school and didn’t have much money a programmer who wanted 20 dollars from me had to make an awesome application, simply because those 20 dollars were a lot of money for me. And as I didn’t have to pay for my own food, flat and so on at the time, I didn’t have the other costs to relate that price to. (Having programmed a little myself since and knowing how much time needs to go even into small features, certainly helps to value other programmers’ time more highly as well).

    Another thing that frequently irks me is that very often application prices seem to be out of relation to the application’s usefulness. Looking at applications like Transmit or GraphicConverter, say, I see myself spending something in the 30 dollar range and not looking back once. Both are powerful applications with a rich feature set _and_ they come with great support. So what should I expect from an application for 20 dollars? I can see how starters may not have the economy of scale play for them, but I’ll have to either _really_ like or _really_ need a new application with a small feature set and unproven support or future to drop the money for it.

    I can see how this is a difficult situation for developers but I also see myself willing to blow a fiver on a nifty plugin like inquisitor while I’m not willing to pay 20 bucks (or 25% of the cost of iPhoto) just to copy some of its photos over to a server on the web. I’ll have to start earning some serious money before I can start doing that.

  8. tfserna Says:

    Funny, just wrote last week about this… Please consider the following….

    (…)”Licensing Scheme(s) – Why do I consider this to be a ‘delicate’ issue?

    Well, for starters this deals with at least how one individual makes his living… Also, this deals with how one company or individual for that matter, prices his own work… Imho, you need to be extremely respectful when approaching these always sensitive matters.”

    From (shameless plug):
    http://tfserna.ngsec.com/2006/07/30/tinderbox-and-flint-licensing-schemes/

  9. Scott Says:

    I would say that $20 is the low end of the magic point and $30 is in the range, depending on the software. The thing to remember is not how much it cost the software to produce as the worth but how much the market will bear. And that is the valuation of the end user of the software. –

    And I would say that most people that will turn out 20 for an application would also turn out 30 just as easily — I don’t think that there will be a loss of customers in that difference. The people who complain 30 is too pricey will also complain that $20 is too pricey.

    With my software, (MailTags) Version 1.x has been donationware with a suggested donation of $20 — I would estimate that >70% of donators pony up the $20 (about 10% more than $20) — keep in mind that they there are no limitations on the software and the donation is totally up to them. I also get some people that have donated $1 — which leaves me wondering if that is what they actually think the software is worth. :/

    In general, I agree the danger is underpricing — you cannot as easily correct that without raising some sort of ire about perceived entitlement to software pricing that people have.

  10. Mithras Says:

    Whoops, Scott beat me to it — I was about to add MailTags 2.0 to the list of “from free to twenty” software. It’s well worth that price, though I wish Scott could somehow charge for it yet still make the source accessible :)

  11. Brent Simmons Says:

    This sentence — “I get the sense that people got an idea in their head about how much software should cost in 1983 and haven’t adjusted for inflation since.” — made me remember that software in 1983 costs a heck of a lot more than it costs now!

    It’s hard to compare, since it’s been so long — but, for example, MORE cost $250 in the ’80s and OmniOutliner Pro costs $70 these days. Prices have gone *way* down. (There are exceptions, of course: Photoshop and Office are still priced liked it’s 1989.)

  12. Scott Says:

    @Mithras

    Actually — I am placing MailTags 2.0 at $30 once it is released. During the public beta period (starting Saturday hopefully) people will be able buy a registration for $25. Of course, past donators will get a registration for free.

    I will still keep MailTags 1.2.2 as free and opensource — though I probably brand it MailTags Lite or something equally bland.

  13. Michael Tsai - Blog - The Price Is Wrong Says:

    [...] Daniel Jalkut continues a mailing list discussion on pricing Mac software. Brent Simmons warns of low prices and points out how much cheaper software is than in the 80s. I had been thinking before, and this discussion has pretty much erased any doubts I had, that DropDMG’s price was too low. I’m planning to raise it, probably to $20. [...]

  14. Adrian Says:

    Interesting discussion :)

    I’m not a developer but I am a “software junkie” – I love buying lots of little (and not so little) bits and pieces of software and as an IT “manager” I also recommend wider purchases for my institute.

    On factor that I’ve not seen discussed it what happens when a product is priced too high so that it makes few sales. I don’t mean “high” in the sense that people complain (there will always be some winers) but high in the sense that people just don’t buy (or very few people do). When that happens it looks to me like development often stalls and the product stagnates or dies. I’ve been burnt a few times by this and if software now looks over-priced for what is does, or for its current state of development, I will certainly think twice about it even if I personally can justify the cost.

    One example of this would be Sciral Consistency…

  15. Adrian Says:

    What happens when the price is too high in the sense that people don’t buy (or enough people don’t buy)? It looks to me that this can lead to stagnation and death of a product which otherwise could have done very well. I buy (and, as an IT “manager” for my research institute,recommend the purchase of) a lot of software and one thing I’m starting to evaluate when I look at software is a judgement on whether the product has a future. If the price appears too high for what the product does or relative to its competition then I will think very carefully about purchasing it, even if I can personally justify the price.

    An example would be Sciral Consistency. In my professional roll I’ve bought and use this product. However, for personal use (which it is also great for) I think it is priced too high relative to similar products and given the state of its development (you can’t even print!). Development seems to have stalled and I worried the product will disappear… In future I would be more wary…

    Also, I think it is simplistic to set a “magic point” of $20-$30. Obviously different pieces of software will have different points. A simple “one-trick” pony will be very different from a complex piece of software with a lot more “back-end” like MailTags…

    In the end for me it is about perceived value, both now and going forward. Each piece of software that I potentially might purchase requires an investment from me of not only the purchase cost but the time to learn it etc.

    Good luck with pricing your product!

  16. Christian Says:

    Just for the record: I for one *do* think that almost 18 Euros *is* a bit expensive for an *iPhoto export plugin* …!

  17. Christian Says:

    To clarify that remark: I think you’re making some good points about pricing software, but I also think you shouldn’t think about what kind of software you’re trying to sell, not just the price. For me as a user there is quite a difference between something like NewNewsWire and FlickrExport. The former is a “whole application” (one I use everyday), the latter is “just a plugin” (I use only every few weeks or so). And of course I’m willing to pay more for an app than for a plugin … (And I feel that 30 Dollars for a Mail plugin is approaching the “ridiculous zone”!)

  18. keith from plasq Says:

    Pricing is something we really thought about deeply, for Comic Life, when we released it.

    Something for developers to consider is also the ‘fax paradigm’ – it’s sometimes not what the product is worth, but what a network of products is worth: The first fax (xerox etc) machine sold is useless. The next is much more useful, when there are thousands, then a fax machine is worth a LOT more – and then when everyone has one – having a fax is priceless. Comic Life, as a tool to let people tell their own story is a bit like that – there are a lot of flickr posts which attracted attention to Comic Life etc. We figured the more people had it originally, the more comics would be shown to more people, etc. So we kept that ‘power of network’ idea in mind, as one factor, when setting pricing intially.

    So it might be worth figuring out as a developer, what the value of a network is. For example, if you made voice XYZ telephony software, and it had a proprietary standard, then you’d better make it cheap!

    I also respect the other ideal too – where a ‘pro’ app won’t be seen as a pro app unless it has a minimum X amount.

    Hope that helps!

  19. Eric Boehnisch-Volkmann Says:

    Thank you Daniel, for this great article. This exactly mirrors the dilemma many small to medium software vendors face.

    I agree with Adrian that the key factors are your target audience and the perceived value of the software. If your software is targeted at a professional audience, like FuzzMeasure Pro, then some people will even refuse to buy your software just because it’s too cheap. They will not even test your app because they would never use hobbyist software for their work. The same is true when you’re selling to retail.

    The perceived value of any tool depends on how important it is what it does for you or how much more work you need to spend onb a job without it. Example: DEVONagent, our Internet research tool, sells for US$ 49.95. Some people think this is too expensive, because they’re satisfied with Google anyway and do not see the necessity for something like DEVONagent. But most of our customers are information professionals who do serious research on the Web, and for them, this application can easily save many hours of manual work. One even bought a Mac mini only because it wouldn’t run on his Windows-PC.

    So there are those who think it’s way to expensive (they ask for $19.95 or less), and there are those who even buy a new Mac just because of it. The perfect price is somewhere between.

  20. Jeroen Sangers Says:

    It is very difficult to set the right price for software and it take many years of experience and a lot of ‘Fingerspitzengefühl’ to get it right. Joel Spolsky wrote an excellent essay about this dilema called “Camels and Rubber Duckies”: http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html.

  21. spstrings Says:

    Interesting article especially for people who are taking ‘Pricing Strategy’ class in their MBA study. What I will suggest for the software package pricing is the following:

    1. All copies are auctioned.
    2. Set a starting bid price, say, US$3. Limit the number of copies to be sold in a set period of time, say, 2 weeks.
    3. Let the auction begins.

    In two weeks, you will know what’s the price you’ve gotten from the market. After that, introduction ‘Buy It Now’ price while you continue another wave of auction in a set volume and set bidding time.

    Just a theory!

  22. Don Briggs Says:

    The main issues figuring in my decision to make Suite Modeler free:
    • Suite Modeler had accomplished its objectives:
    [1] I wanted to offer the Cocoa community some help with scriptability. Early on, I tried making an app scriptable, and it was so hard, I wrote Suite Modeler.
    [2] Although I had worked “in house” on Mac OS X since ’92 (NeXTSTEP), I had never released a commercial app on my own. I wanted the bullet point on my resumé.
    • Suite Modeler was always in my mind a stopgap measure; from its inital release, I have always expected Apple to offer us a better tool. I still expect it. Better to make it free BEFORE Apple “does the right thing.”
    • Core Data and the move to sdef make it less necessary. Sales had dropped.
    • I wanted to clear my plate for other projects.
    Suite Modeler always offered a free “Demo” mode that developers could use to find and fix errors in their suites. Now, they can save their work, too.

  23. pbear Says:

    Good article. I’ve found that as I began to have “disposable income” I would buy more apps and higher priced ones. I think the shareware concept turned me on to taking a chance with new software. $10 is the impulse sweet spot, $25 begins to throw up red flags (i.e. I seriously consider “Do I really need this?”), all depending on the software/feature set/etc.

    Regarding plugins (from comments): some plugins are mini-apps in themselves. I still like free plugins though…

    (Daniel,) I’d like to see your comments on _upgrade_ pricing. The high (or relatively higher) initial price of an app is not so bad when you know you’re going to get support and updates for compatibility.

    It’s a commercial example, but I remember Symantec’s Anti-Virus/Norton Utilities making the jump (if you can call it that) from OS 8 to OS 9 (IIRC). I don’t think there were any new features, and it burned my bran to fork over the upgrade fee (paying for virus definition updates and such is a whole ‘nother can of worms). OS 9 to OS X was a justifiable opportunity to charge for a compatibility update. I dropped Symantec a looooong time ago, and companies with similar policies I’ve learned to do the same.

  24. systemsboy Says:

    A couple other points to consider:

    1) How often will people use the software? I have the demo of Pacifist installed on my system. The demo is fully functional but presents a 15 second nag screen at each launch. Pacifist is $20, and it’s well worth the price, but I never pay it because I have need for the software maybe twice a year. I can never quite justify it spending $20 on software I use so little, as great as it may be.

    2) Can people make money with your software? One reason pro audio software like FuzzMeasure Pro is so expensive is that, indeed, it is geared toward a smaller niche market, so the developer can’t sell as many copies as something like an office suite. But another reason it’s priced so high, I think, is that it’s a business tool. I.e. people use it to make money. It’s much easier to justify a purchase if you figure it will pay for itself over time, and/or can write it off as a business expense.

    My two cents: I agree that FlexTime fits in the $15-25 range. I don’t think huge numbers of people will use it, so you can’t price too low. But for those interested in such a product — folks who stand to benefit a great deal from it — I don’t think $20 bucks or so will be a problem.

    -systemsboy

  25. Paul Collins Says:

    A few years ago (about when Jaguar was announced), repricing my VPN client from $88 to $58 coincided with a large increase in sales. It seemed that $88 was too high, and the repricing did make the difference. I think I got more complaints, though not many, about a $19 upgrade price (for Panther compatibility, which was a major rewrite), even with a 5-month grace period.

    Having purchased Suite Modeler a couple of years ago, I was actually pleased to see it become free. It was well worth the $25 for a single project, and I’m glad it’s freely available now to everyone. It’s probably still quite useful, in spite of the new sdef format (which was a nightmare in the beginning at least).

    Making a living at creating developer tools (especially for Mac, even more so when your audience is Mac developers serious about AppleScript support!) is quite a challenge, given the narrow audience. Perhaps this is an area better served by the open source approach.

  26. hagga_blog » Was darf eine Software kosten? Says:

    [...] Darüber Gedanken gemacht hat sich das Red Sweater Blog und auch Joel on Software. Beide kommen zwar zu dem Schluss, dass man den besten Preis für eine Software nur durch ausprobieren findet, aber trotzdem lernt man vieles über den Markt. [...]

  27. Ryan Ballantyne Says:

    When I decide to purchase something, I go through two stages:
    1) Am I willing to pay for this program?
    2) How much is this program worth to me?

    Decision #1 is made more or less in isolation from decision #2, and also from the actual price of the program. Decision #2 is made in light of the price; in other words, I don’t really pick a value that I think I would pay for the program. Instead, I look at the price and if the program “feels” that valuable to me, and (more importantly, since I’m a college student) if I have the money, I’ll buy it.

    Here’s an example: I bought NetNewsWire at $20, while it happened to be on sale. There are free alternatives out there, like Shrook and Vienna, but I paid for this one because I perceived it to be the best product in its class. Incidentally, four days after I bought my license, NNW 2.1 was released and the sale ended. I probably would have paid up to $35, and feel that at $20, I got a steal for a great product. I also would have happily paid as little as Brent cared to charge, without complaint. ;)

    The point is that nowhere in that equation does “too-lowness” figure in. I evaluate the product on its merits, and then pay whatever the developer is asking, provided I feel it’s reasonable and I have the money.

    I know that I’m not like most people. That caveat aside, the best advice I could give you is to step aside from all the hard work and time you’ve spent developing your product. Put yourself in the shoes of your target audience, evaluate the product on its merits and ask yourself how much you’d be willing to pay for it if it were somebody else’s app. And if you could remember a time when you paid room and board on $400 a month, that would be great too. :P (Kidding, but only just.)

  28. Kevin Walzer Says:

    I’m about to move the pricing levels of my programs from $6 to $20. I am curious to see what will happen with sales vs. revenue.

  29. Tom Says:

    Please, please, do not price with cents. I always feel like people are trying to trick me when they price like that, as if I don’t realize that five cents is not a real amount of money.

  30. Daniel Jalkut Says:

    Tom: I can appreciate that interpretation of the x.95 or x.99 pricing. But while a small percentage of people are offended by it like you, it seems to me like for most people (myself included) – even if we know the “trick,” we are programmed to read $19.95 as significantly more of a bargain than $20.00.

  31. Jon Says:

    Remember when WebObjects dropped from $50,000 to $699? I know of a corporation which was two weeks on the wrong side of this price drop.

  32. LKM Says:

    You make it sound like most Mac apps were underpriced. However, if I surf macupdate, I find tons of crappy stuff at huge prices (like all those “execute maintenance tasks regularly” packaged AppleScripts), while some awesome apps are pretty cheap (the canonical example being GraphicConverter).

  33. Daniel Jalkut Says:

    Jon: ouch! That’s the biggest sting of all…

    LKM: I didn’t mean to make it sound lke most apps are underpriced. I agree with you that there is a lot of crap at stupendous prices. It’s actually quite encouraging to me as an indie developer since I know I can compete by making something of greater value.

  34. Adrian Says:

    Kevin – consider you target audience – are the people who will use your software going to use it often enough for them to justify the cost?

    (A quick look at you website suggested to me they are the sort of programs for casual users and therefore $20 may be ruled out by many of them? Just a though and sorry if I’m misrepresenting your software?)

  35. Adrian Says:

    Christian wrote “(And I feel that 30 Dollars for a Mail plugin is approaching the “ridiculous zone”!)”

    You’ve obviously not used MailTags 2.0 :)

    Adrian

  36. Team Murder » This Chocolate Tastes Funny Says:

    [...] The latest post (at least while I was riding the bus and nowhere near a wireless connection) on Red Sweater Blog poses some questions and gives some answers to what might be one of the more controversial topics for Mac users and developers: how much do you price software that isn’t churned out of one of the app factories like Adobe or MSFT? It’s been sort of weird for me to do a partial migration to OS X after spending most of my time for the last five years or so largely working in a Linux environment because there is comparatively so little free (beer and speech) software available for the platform. The choices narrow considerable if you’re anal retentive like me and try not to run anything that runs emulated under Rosetta. This limits the commercial choices considerably as many of the big guns are dragging their feet when it comes to porting their applications to Intel or Universal binaries. [...]

  37. puiz Says:

    Jon: I’ve been wondering about that ever since. Did they ask for and/or receive something to ease the feeling of being a sucker of Olympic proportions?

  38. Kevin Walzer Says:

    I’ve reconsidered the $20 level for my own apps…they’ll stay at $6.25 for now.

  39. Kevin Walzer Says:

    …and the app I released earlier this week just got its first sale, after I lowered the price. Coincidence? Perhaps. But I’m glad to get the sale.

  40. meneame.net Says:

    El culto de lo caro…

    Ponerle precio a un programa es complicado. Parece que el precio tiene que ser lo suficientemente alto como para que merezca _respeto_: "Por debajo de $19.95 parece que es producto de un adolescente intentando pagarse los vicios. Por encima de ese…

  41. Origen Says:

    The perception of price it is a matter of age but also a matter of location.
    In today’s world, a 20$ software can be too cheap for a New Yorker but too expensive for a… Colombian (it’s an only an example). What price do use then?

  42. ansemond.com » Blog Archive » Says:

    [...] One of the things small developers wrestle with is: what price is right? [...]

  43. Dave Teare Says:

    Thanks for the excellent post.

    I’ve had many incredibly mean comments from the “Cult of Too Expensive” crowd attacking me personally for my product‘s price. It is amazing how angry people get! Imagine, people getting angry that my product is too expensive — if it’s a crappy product then there’s no reason to get mad, just delete the pos. If it’s a kick-butt product that makes your life easier, then look at the value / return-on-investment of the product, not just the price.

    One thing I’ve noticed about the “Cult of Too Expensive” is that they never try to help you, they just want you to “stop being greedy” and give them your product. I think it’s important to note that for small shareware developers like ourselves there are “other means” of payment.

    For instance, I have given away my products to several people that take the time to contact me and explain their situation. I had one person on disability who needed my automatic form filler to help her because she has incredible pain whenever she types, so I gave her a free copy in return for her proof-reading the user guide. We ended up both being happy.

  44. Chris Harris Says:

    Great post! I think another big mistake people or new companies make is pricing things according to cost. If you ask any good salesperson they’ll tell you that value is in the eye of the customer. Similarly, and any good economist will confirm that prices aren’t driven by costs but by the customer’s alternatives.

  45. Red Sweater Links » Blog Archive » FuzzMeasure Pro Price Cut Says:

    [...] Chris Liscio recently won a runner-up award in the Apple Design Awards for his advanced acoustic measurement software. I had recently highlighted the relatively high price of his software as proof that different markets deserve different strategies, but he’s decided in the wake of increased public recognition to lower the price to $125 and seek a wider audience. [...]

  46. Reuben Swartz Says:

    Nice article. Why do you think so many small software developers charge such low prices? Certainly, the wide availability of free and cheap software has something to do with it, but many free or cheap tools are as good or better than the “full-priced” alternatives. I think small programmers are often focused on the features and the uses, rather than the value they provide. This is a classic way to underprice (and starve your customers of cool enhancements).

  47. alexking.org: Blog > Product and Support Pricing Says:

    [...] I’ve been listening in on a number of conversations in this area recently, as the pricing for Tasks Pro™ and Tasks is something I believe I need to adjust in the near future. [...]

  48. Red Sweater Blog - Lawful Prey Says:

    [...] I wrote somewhat extensively about software pricing, just before choosing a number for my then “nearing completion” product, FlexTime. The price I settled on was $18.95. I thought it would only be fair to report back with some data on the sales of FlexTime, after a month of availability at this price. [...]

  49. High Earth Orbit » Blog Archive » links for 2007-01-25 Says:

    [...] Red Sweater Blog – The Price Is Wrong Pricing software is one of the toughest jobs facing independent developers. We’re stuck in this awkward position where we don’t necessarily have the name recognition to demand the highest prices, but we also can’t afford to “give away” the hard- (tags: business software marketing programming development toread) [...]

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