November 22, 2006
John Gruber talked about software pricing a few times this week, which is a subject I’ve been thinking of lately as well. Finding the “sweet spot” is always a tricky issue, and pricing your application too low can hurt just as much as pricing it too high. The assumption is that if your application costs less than the competition, potential customers might just assume your application is of lower quality, and that extra $10 spent on the competitor’s product is buying them a better application. I’ve actually heard one developer say he wouldn’t even consider purchasing an application under $10; if the seller doesn’t think it’s worth that much, he just assumed the software itself was useless or buggy. You can apply this line of thinking to sales as well; putting your application on MacZot for 60% off may or may not get you a few more sales, but what message is it sending in the long run? This has become more and more of an issue in the past few months, with websites like MacHeist and others giving away free applications by the dozen ((The catch here is that most of these free apps are a one time only deal, and if you want future upgrades and bug fixes, you’ll have to shell out for a real license. It’s more “unlimited shareware” than a real free license.)).
Speaking purely as a greedy consumer, I love free software and I love getting deals. If I think there’s a chance I can get a free application or a 50% discount, I’m probably not going to purchase it right away. Instead, I’ll wait until a sale comes up, decide I can’t live without it, or (more likely) the “new” factor wears off and I stop using that application altogether. Naturally you want to avoid giving your customers this impression, but does that mean you should avoid sales and discounts altogether?
Personally, I believe sales can be effective if done right, and I’ve heard similar opinions on mailing lists and blogs. Here are two ideas that come to mind.
First, instead of a “40% off” sale once every six months, offer an incentive to buy that isn’t really worth waiting for if you like the software. For example, a bundle discount when purchased with another product, or a “buy one get one free” license that the buyer can give away to a friend. If you customer waits until the sale is over to make his purchase, it’s not a big deal; they’re still paying the same amount in the end.
Second, if you are going to offer a price break make it part of your regular pricing. I have a great example of this. When I first tried Menuet, it showed me a little nag screen that included a $3 or $4 discount because I was using Synergy, a competing product. I liked Menuet, and I figured with the discount there was no better time to buy it, so I purchased a license. Since then I’ve seen a similar discount on banner ads at Phill Ryu’s blog and a few other places. If for some reason I did miss out on the original discount, it wouldn’t really discourage me from purchasing Menuet in the future. Every time I see an advertisement or a reminder of Menuet, I see the same enticement. There’s very little sense that I “missed” my chance to get a deal.
Have any experience on the subject? Post your thoughts in the comments.