Software Pricing: Are We Doing It Wrong?

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There are from my point of view three prices for software

Free : No hassle, try it and if it is good use it
Cheap : Hassle to pay for, and it is probably outdated now or rubbish
Expensive : Probably good, and if not I can complain…

The problem is that Windows is currently in my Expensive category, but I cannot complain (or I can but nothing will happen)

The only software I buy is in the Expensive category and the only time I pirate it is to see if it worth buying and there is no demo/trial version

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I think the Snow Leopard to Windows 7 comparison is appropriate.

http://en.wikipedia.org/wiki/Windows_7#New_and_changed_features

This is pretty much like Snow Leopard. No major changes. Just a lot of improvements and some revisions.

With Tiger -> Loepard we got several largeish features: Time Machine, Quick Look, a much better synthesised voice, Spaces, Boot Camp. Which is on par with XP -> Vista. At least from an end user perspective.

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I completely agree, this would probably also cut down on piracy.

Another potential for windows is very cheap for home users and maybe a higher price for business users.

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@Mike - Good luck selling a dozen copies.

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I agree, and I think Microsoft do too. This is why they did a pre-SALE of Windows 7. At $49 it hits that sweet spot.

Hell at $49 I nearly ordered it for my iMac!

So why didn’t they keep it at that price?

My guess would be that it would mean lowering it for Dell, HP etc. who don’t have a “Why Not?” price-point (as they are corporations) and HAVE to buy it.

The first sale “sold out” (not sure how pre-order software sells out must be marketing). But I would bet that further sales are done - possibly closer to, or after launch date.

-Perros-

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Why doesn’t someone do a test with this? Someone big like EA, with a game that people want.

When the game comes out, it comes out at $50. BUT! You put up signs everywhere saying “Every two months the price is going to drop $3.” That way, everyone can decide up front what their price point vs. available time is worth. “Well, I’d rather save a bit, but fall semester starts in 3 months, so if I wait until the price drop I won’t have as much time to play…”

All kinds of factors will come into play - original release date, when your friends want to buy it, etc. And it’s certainly possible that you’d be willing to be a first-day buyer for one game on this scale, and wait 6 months for a similar game, just due to your circumstances.

Still, I think it’d be fun to see. Plus, every two months, it’s front and center in the stores again. “Now on sale!” (And it would solve the problem of an 8-month-old game that still retails for $50, and me saying “I’m still not buying it at that price.”)

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I couldn’t agree more with this article. It is ‘right on.’

I have several Macintosh programs that I love and use all the time. For example, 1Password (a killer password manager that sells for $39), Quickeys (for automation), SuperDuper (for backups), and MailPlane (Gmail client). These are all great softwares with super reviews. But they’re just too expensive for an impulse buy.

When a prospective buyer reads about them they do sound good. But so do hundreds of other applications with similar limited purpose. You just don’t want to buy (can’t afford) hundreds of apps in the $20 to $80 price range. So you’re going to take a pass on most of them and you’ll never know how they might have improved your user experience.

Free 30 day trials are not the answer because there is a learning curve for most software. I’ve downloaded quite a few applications with the intention of putting them through their paces only to have them expire before I got around to investing sufficient time.

I think software demand is highly price elastic. The App Store for iPhone pretty much proves that point.

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People only have so much disposable cash, and when it comes to buying software, you are buying blind (most of the time), meaning you really don’t know if you need it, want it, it’s it will fill all your needs, if it’s easy to use, and most importantly the one you actually want.

Especially things like games, some free games are really fun, some 50 dollar games are really a huge waste of money, but you don’t know until you’ve played them. If you ask me 50 bucks is way too much for any game, it’s a game, sure you can argue you got your money’s worth but I guess that depends on how you tally up your time/money/entertainment value.

I could go on for a long time on how I think game software is totally off base, especially with the idea that a game has a shelf life, people are still buying monopoly, fun is fun, no time limit on that. But that’s a different argument.

I agree with people getting paid for their work, I just argue what is reasonable. To me it’s more then obvious if companies like Microsoft are making billions and billions every year, there’s a really good chance they are over charging. Then to ease their guilt they become philanthropists and give back about 1-5% (which has wonderful tax implications for them) and they become heroes. I’m going off on another tangent again.

Back to small apps, especially for phones, you have a phone for about 2 years, how many times are you really going to use most apps in two years, and then you get a new phone, buy new apps or the same one again, which by the way is another huge issue of mine, I don’t mind paying once, the second time I resent.

Bottom line, I think most people don’t realize the value of most things, unless of course you are swimming in cash and then id doesn’t matter so much.

Everyone wants to think that they should make millions every time they create something, but could you image if everything you bought in life was 50 bucks? I think because the software business is still (relatively) young people don’t have a clue what a fair price is and Joe consumer is going wonder where all his retirement money went to.

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You are completely right, I think the same.
And I’m also happy to see that you’re fond of Valve softwares, and their policies. I completely agree with them. Moreover, they produce valuable software - ie. whenever I buy a software from Valve, I know it’s worth the price. :slight_smile:

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Do you guys think any MicroISV’s are making money at .99 cents an app. Please.

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This is what we economists call the price Elasticity of Demand.
http://en.wikipedia.org/wiki/Price_elasticity_of_demand

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Don’t forget market saturation. If you sell your software at a discount, you may increase the sales during that period, but overall decrease the amount of profit made over the life of the product.

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Microsoft has to charge that much because of its support costs. OS X costs less to support, games even less, iPhone apps even less. Of course you could go a la carte like the airlines and sell a discounted version with pay-as-you-go support.

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This really isn’t a revelation. Look back at Turbo Pascal pricing in the early 80s. Anders was convinced that Phillipe was either crazy or crooked to price his compiler so cheaply ($99). But Anders soon realized that volume trumps per-unit profit.

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Brahahaha… Just saw this from the comments in Jeff’s blog on July 25th. Its sounds about right.

Most of those people putting apps on sale are trying to recoup anything - yes anything - please anything, and I swear I’ll never have dreams about selling 80,000 units at .99 cents again.

Hahahhaaha…

EA may sell a few copies of Scrabble, but the vast majority of iPhone app developers better be doing it so they can put it on their resume.

I heard iPhone app development works like this:

  1. Spend six months learning the ropes and excitedly developing a game
  2. Put your game up on the iPhone store for 99c
  3. Wonder why your app sales didn’t even cover the cost of buying an iPhone, let alone six months’ salary

Confirm/Deny?

Jonathan Drain | D20 Source on June 25, 2009 9:24 PM

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With Windows 7, I was VERY close to pre-ordering - it was available for £49.99 here. Unfortunately, it was out of stock, and by the time it came back in, it had gone up to (I think) £79.99. That did 2 things

  1. Cross my barrier-price for this type of software (my barrier price for a game is FAR lower)
  2. Made me think I was getting ripped off (it was £30 cheaper yesterday)

End result was that I didn’t buy.

Now, if I could’ve bought a digital download of Win7, Microsoft would have my £50 with no real distribution cost, and I’d be happy.

Apple, on the other hand, have done very well with Snow Leopard pricing.

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Jeff have you heard of Chris Anderson’s newb ook “Free”? It talks about how everything that is digital is going to become free sooner or later. I think you’ll find it pretty insigghful regarding this issue.

You can listen to it here ( for free :slight_smile: ):

http://www.wired.com/techbiz/it/magazine/17-07/mf_freer

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I think there is an exponential wall buyers build as price increases:

$1 = line of morter
$10 = speed bump
$100 = 6’ wall
$1000 = large stone buildings with guards (in which happens budgetary analysis with the actuaries)

A small difference, depending where it is on the curve, could represent a massive increase in buying friction as I try to figure out if the software is really worth it. Often, the effort isn’t worth the effort; high priced software is usually also bundled with obfuscated brochure-ware instead of actual, you know, feature documentation or trials. Combine the two and it’s a death knell.

I wish my company wasn’t in the budgetary analysis pricing category. That market is not big and it is not buying new in this economy.

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@Scott
"The killer thing here is that, at least in the case of software, the price eventually drops to “why not” levels. How much did Half-Life 2 cost when it came out? $59.99? How much can you buy it for now? $19.99. And that’s not any kind of sale, that’s the retail price. Gamers, it seems, are willing to pay more just to satisfy their instant gratification need. I wonder if this is brought on by playing the games themselves or if gamers were just indulged more as children and don’t have any patience?"

Not only can you buy HL2 for $19.99, but for $10 more you can buy the Orange Box which also includes HL2: Episode 1, HL2: Episode 2, Portal, and Team Fortress 2.

In fact, it’d be pretty stupid to buy HL2 alone these days.

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Hehe, it’s more or less the same with taxes… of course to some point :slight_smile: