Golly, I wish I could run a successful shrinkwrap software business and be entirely ignorant of/feign ignorance of the high school economics concept called “market price”.
@Jamie:
“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.”
I’m wearing my Captain Obvious hat here, but it sounds like they were scamming you, as it’s impossible to have a pre-order that’s out of stock…
As mentioned by some other commenters, this exponential friction curve also has a complexity component.
At a dollar, how complicated can it be? Quick value add. Sold.
At $1000 per, uhm… Wait. What? Run down your pricing for me one more time. Your pricing is how complex? Yeah. I don’t have time to deal with this.
Wouldnt be surprised if lowering the price will help with the ratings too. Youd be less miffed if you paid 25$ for the game than if you paid 60$ or in my case 85$ for it. If it was me id be more tolerant of its faults and errors and would be more inclined to give it a fairer rating if i find the product to be priced accordingly (cheap).
@David Small: Software doesnt have a plural. Its not “softwares”. I also see many others write or say “the codes” when speaking about their code. Its code. Thats it. No “s” on the end of these words.
“I don’t have time to deal with this.” – this is the problem with the world today. No one has time to use their brains anymore. I attribute most of today’s problems with the allowance of the Right-On-Red laws. Once we were given the opportunity to make a right turn on red AFTER STOP, we as a society became more and more “I don’t have time to deal with this.” types. This is sad. Take time to use your brains people.
There is an interesting parallel between pricing and programming; anyone can do either one with almost no knowledge or training. Pricing is just assigning a number to something. Writing a “Hello world” program involves reading a half page of a tutorial. This low barrier to entry can fool people into not realizing the depth and richness of both disciplines.
If a programmer is going to set prices (or better yet develop a pricing strategy) then he/she should invest at least as much energy into learning about pricing as learning about a programming concept or topic. For starters, I recommend “The strategy and tactics of pricing” by Nagle.
While you are waiting for your copy of this book, I will give you the most basic idea about pricing - try to look at your product and price from the customer’s point of view. The customer sees your product and price side-by-side with lots of other alternatives (including not buying anything). Within this context, why would a customer buy your product?
Note that most customers do not care all that much about how hard you worked to make the product or what your hourly wage “should” be. If you want a high hourly wage, you are more likely to get it by reducing your hours (i.e. not investing a lot of time in functionality that customers do not care about) than by increasing your price.
You’re completely right, but it has been done before.
Quicken’s price, when it first came out, was about $40, with discounts in the big-box stores down to $20-30. It was included with a lot of machines, packaged with a lot of stuff.
People’s attitude about copying it? Eventually, they would buy a legal copy to have the manual, support, and patches.
WordPerfect would support their product, in the 80’s, regardless of whether you bought it or not. Eventually, they reasoned, you’d buy the product somehow.
WP had a good long run; Quicken’s still going.
At the time, Microsoft was selling its Office products under the other model: assume theft and charge a lot to compensate.
Where have we seen this battle before? VHS tapes priced at $40-80/tape, and DVDs priced at $10-25/disk. During the beginning of DVDs, did you see anyone making copies for their library? Nope. They just bought the disks.
“Inexpensive” does not mean that you give up the profit line for the business model.
Jeff, this is true for consumer software. Probably also for SMB’s who spend money like it’s their own. However, “What the hell pricing” would be unwise if you sell software into companies with 100+ people.
Also, things are about to change in iPhoneland with 3.0’s support for micropayments. It will be interesting to see if consumers go along or react by feeling nickeled and dimed.
A bit about this and the driving force pulling pricing down is actually discussed in Chris Anderson’s Free. Very good book (almost done with it). And you can even get it free from audible and somewhere there is a legally free pdf copy.
"Valve co-founder Gabe Newell announced during a DICE keynote today that last weekend’s half-price sale of Left 4 Dead resulted in a 3000% increase in sales of the game, posting overall sales (in dollar amount) that beat the title’s original launch performance.
It’s sobering to think that cutting the price in half, months later, made more money for Valve in total than launching the game at its original $49.95 price point. "
It might be risky to generalize from this. Left 4 Dead has a single-player mode and a multiplayer mode. Presumably, a pirated copy can run single-player mode, but cannot run multiplayer mode (too many people using the same keys).
If this assumption is correct (I have not played the game - I am relying on Wikipedia’s description), then the thousands of new purchasers might simply be people with pirated versions who’ve learned to like the game and decided to spend $25 to play online. These people would not have purchased the game on the first day for $25.
"The problem is US. WE are the problem and until we stop giving away our work and our expertise for nothing, or next to nothing, we will never be taken seriously by anyone. Not the customers and not the executives in those skyscrapers.
As far as the App Store goes, when I develop my app it will sell for about $19.99 or maybe $24.99 - depending. Heck if I am going to give it away for free or less than $3 because “thats whats expected”, etc. My position is that if you can afford an iPhone AND its minimum $80+/mth service plan, then you can afford my $20 software. I worked hard to produce it and I am not giving in.
Mike on August 6, 2009 5:21 AM"
Excellent comment Mike. The unfortunate thing is that the FOSS movement has convinced an enormous amount of devs that making money from the fruits of your labor is evil. Couple that with greedy executives that stupidly believe that all developers are interchangeable cogs in a machine and can simply be replaced with sweatshop workers with little to no skill and a toxic environment of low quality and expectations begins to set in. It’s going to be very difficult to reverse the damage they’ve caused in both developer and consumer expectations about the price of software.
Haven’t seen it posted yet but Valve does rip us Europeans of!
I like their weekend deals but their €1 == $1 scheme makes me pissed at them. We’re paying 40% more for our games? That alone is a reason to not buy from steam. Their regular games are thus overpriced a lot. It’s almost always better to buy the game in a retail store. They don’t have to make a cd, manual, distribute the cd. They don’t have to give the shopkeeper their percentage. Why isn’t it cheaper?
And not all of their weekend deals are great. This weekend dawn of war 2 was on it for half price: €25. It’s been available on play.com for €15 for months, without price reduction.
The other part of the iPod-app pricing is this – it’s very easy to get things through their portal (“iTunes”) and pretty tough for the average non-techie to get apps in other ways. Controlling the delivery AND having the pricing model, has been a one-two punch that has made [some] people call ‘iTunes’ the official ‘killer app’ that everyone was looking for.
I’m excited about Windows 7 and would pay to upgrade. But for $119, I have to wonder if it makes more sense to sell this laptop on ebay and just upgrade to another one that comes with 7.
Also, any hardware or software upgrade to an existing computer has to be ballanced against the inevitable upgrade of the whole machine. I’m going to have Windows 7 one day. It’s just a question of when, and I’m not impatient enough to spend $119 on it.
Looks like pricing at 10% (4.99$) would bring a 2800% sales increase.
I wonder how the piracy rates compare for the price changes, most software is pirated up to 90%.
My own data point:
I bought my mom an ipod touch. After she had played with it for a week or two on her own, I was recommending apps to her, cautiously recommending a few non-free apps. My mom shops around, buys the generic brand, and usually won’t make a purchase without some sort of discount or coupon. But $2.99 games she’d never played before? “Sure! Throw 'em on!”, she said.
As a consumer I’m more interested in how I can take advantage of this. And sure am glad of my decision many years ago of never again buying a game the day it is launched.
If I buy Left4Dead today or in 3 months will make absolutely 0 difference on my enjoyment of the game. But will do wonders to my wallet, I may even get new maps or a sweet gold edition and I will not have to go through all the bugs of earlier versions.
I religiously stay away from the “bargain bin” sections… If a game is priced at $5, it’s usually that price for a good reason (unless it happens to be a very well known name brand).
There’s frequently discussion of this on the Business of Software forums over at Joel Spolsky’s site: http://discuss.joelonsoftware.com/?biz
As several people in the comment thread here have pointed out, using the effects of a sale to decide on a price-point for normal use is comparing apples with oranges. An example from my own company: back in April we did a “one-day discount” offer – 63% off for one day only. We did more business in that day than in the average month. Later on, we tried dropping our prices by 50% without an annoucement and with no time limit. We kept the prices down for just over a month, and discovered that our sales had dropped slightly in total numbers of product sold. So now we’re back up to $199/copy; we figure that it was the “one day only” rather than the lower price that was driving the sales.
At the end of the day, all you can really do is come up with theories about good price points and then test them, one by one, in the market.
Of course, a combination of higher prices with carefully-planned discounts can be very effective. On which note, as a reward for anyone who’s read this far, for the next two days you can get Resolver One (link from my name below) at half price by using the coupon code “CODINGHORROR” 
I’ll post another comment here next week to tell everyone how that works out…