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Software Pricing Trends

Pricing software was a science for many years

Pricing software can be more difficult than creating it.  There are companies that do just this – pricing software for others. Setting a low price brings more customers but requires more investment into customers support. Higher prices simplify customer support, but require more investment into sales and marketing.

Pricing software was a science for many years. The ability to have a cake and eat it too makes software (and music and videos) different compared to tangible products. A finished program (a song, a video) can be sold many times, but the rightsholder still has it, and can keep selling the same thing over and over again. Isn’t it amazing?

Many years ago Apple started selling downloadable songs for 99¢ a piece. It’s a lot easier to shell out 99¢ for just one song than $15 for the entire CD. Besides, the inventory is limitless – you don’t depend any longer on the stock at the local music store.  In no time a consumer spends the same $15 or more and production costs are close to zero.

But songs don’t need technical support.  You won’t blame a musician for playing a wrong note. This is not the case with the software though. You want that bug to be fixed AFTER the sale is made.

During the last 15 years, trillions of lines of open source and free software have been written. Most of these lines are a dead code that nobody uses. This code became useless because of the lack of funds for maintenance and customer support. And there is no one to blame for this. Software developers also need to buy food, houses, gasoline… They can’t work for free.

The vendors of a popular open source software make a living by charging an arm and a leg for training and customization of their products. They charge for service.

Last week one person called me asking my opinion about a certain software for advertising and managing meeting, conferences, and trainings. I’ve been using the services of this vendor for several years.  When I told the guy that they charge a fee for each person registering for to the event, he said, “Excellent! I was afraid they’d do it for free! If they charge money, they can provide support.”  Think about it – he didn’t want free service.

Then Apple did something else that changed people’s expectations about the cost of the software. There are thousands of applications on sale at iTunes store. Most of the products cost just a couple of bucks. Most of the products are useless. But it’s so easy to pay two dollars even for something that you won’t need. The last time I did it was yesterday. I had a program for iPad that had a certain issue. A quick search revealed that there is another great program of this kind, and people gave it great ratings. One minute later I paid $2.99…just to find out two minutes later that it suffers the same problem that the original one.  So what? It’s only $2.99. I won’t even bother researching about their return policy.

I’m sure many people easily get parted with their dollars getting cheap software they’ll never use. And by doing so, they set a new pattern for pricing software.  The vendors will be slowly forced to lower their prices way below what was considered reasonable just a couple of years ago.  And this will affect not only the consumer’s market, but the enterprise software too. It’ll be more and more difficult to sell $100K+ software to managers who (after business hours) live in a world where software costs $2.99.  OK, $9.99. Alright, $19.99.

Don’t you think that the quality of the software must go down the drain to be able to make it to the shelves of the one-dollar stores? Am I making things up?

Read the original blog entry...

More Stories By Yakov Fain

Yakov Fain is a co-founder of two software companies: Farata Systems and SuranceBay. He authored several technical books and lots of articles on software development. Yakov is Java Champion (https://java-champions.java.net). He leads leads Princeton Java Users Group. Two of Yakov's books will go in print this year: "Enterprise Web Development" (O'Reilly) and "Java For Kids" (No Starch Press).

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