software pricing cathy brode taken from camels and duckies camelsandrubberduckies.html
DESCRIPTION
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. “TRANSCRIPT
Software Pricing
Cathy BrodeTaken from Camels and Duckieshttp://www.joelonsoftware.com/
articles/CamelsandRubberDuckies.html
Software Pricing
According to Joel www.joelonsoftware.com
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. “
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
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.
Rich and Poor customers
• Aka what is their budget.• ‘Rich’ customers should buy at $349• ‘Poor’ customers at $220• Guess what…• Profits go up
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! “
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
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?
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