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Software Pricing

Software Pricing. Cathy Brode Taken from Camels and Duckies http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html. Software Pricing. According to Joel www.joelonsoftware.com. Camels and Rubber Duckies. Pricing is a deep, dark mystery.

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Software Pricing

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  1. Software Pricing Cathy Brode Taken from Camels and Duckies http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html

  2. Software Pricing According to Joel www.joelonsoftware.com

  3. Camels and Rubber Duckies • Pricing is a deep, dark mystery. • The biggest mistake software companies make is charging too little • An even bigger mistake is charging too much • “If you can't be bothered to read this, just charge $0.05 for your software, unless it does bug tracking, in which case charge $30,000,000 for it. “

  4. Demand curve • Joel’s first point is around building a demand curve • If 250 people bought your software at $199, 200 at $250 and 325 would buy it at $149 and so on. • This leads to a downward-sloping curve, because the more you charge, the fewer people will be willing to buy your software. • The key point is that the curve is downward sloping

  5. What about profit? • Assume that each ‘unit’ has a profit of $35 (you can’t take development costs into this) • This is where the camel comes in! • Plot the profit against price and you get a graph with a hump (local maxima to use its proper term) • From this method you can get the optimal price point. $220 in Joel’s example.

  6. Rich and Poor customers • Aka what is their budget. • ‘Rich’ customers should buy at $349 • ‘Poor’ customers at $220 • Guess what… • Profits go up

  7. No thanks • So if customers said no thanks lets give it away at $99 • Let me quote Joel here • “Babymosesinabasket, I think we just made $62K in profit! “

  8. Further segmentation • “customers are happy because we're asking them to pay the amount they were willing to pay already “ • Market programs as “Professional”, “Home” etc • Profits keep increasing - WOW

  9. Hmmm • How many would think they had a fair price? • Long term image of product. • How about comparisons with competitors? • Are they getting the Rolls Royce or the plastic Duck?

  10. For discussion • The more you learn about pricing, the less you seem to know. • All material is taken from: http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html

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