Finding a price point

03 Jan 2005

Joel on Software – Camels
and Rubber Duckies

Joel Spolsky has a good article discussing various product pricing strategies and the inherent do’s and do not’s of software pricing.

His arguments for the most part are common sense but are dependent (imho) on the type of software you’re selling. People, I mean customers, always want to
think they’re getting the best deal. But how do you maintain that when you’ve got customer X who knows that customer Y paid amount Z and he wants to pay
Z-some amount. You don’t want to erode potential or realized good will with either customer so what do you do?

You don’t want to start selling site licences. By doing so you’ve set an arbitrary barrier on profit selling to large customers who could afford to pay mo
re. You’re giving a break to the very people that probably don’t need one.

Perhaps you’re interested in building long term relationships and building barriers to entry within a particular institution. You’re prepared to sell them
a system at a base price but obviously that system won’t exactly meet their needs (at least members of both parties believe that). So on top of that base
price you add a series of professional services paid for in part by the customer. The customer believes they’re getting a customized deal and a certain a
mount of say into how the software is going to work for them. They like this. From the companie’s point of view, what one customer wants is probably not
much different (at least part of the same superset of functionality) from what other potential customers would like to see. So basically, you have someone
else paying a portion of your development fees and you’re getting valuable insight into the direction of the industry you’re in (at least from the custome
rs perspective).

I’d recommend reading Joel’s article. He obviously has had success finding a suitable price point for FogBugz.