Dec 20 2007
Simple Software Pricing
Jeff Atwood over at Coding Horror wrote an article recently on software registration keys. It got me thinking about software licensing and how people will often argue that software is too expensive and that is why they pirate it.
I believe that the reason people pirate their software, isn’t because they think it’s too expensive, but I believe it’s because they don’t feel the value they receive from the software justifies the price they pay.
Recently, I was looking at upgrading to windows Vista and depending on which flavour of Vista or XP you get it can cost up to $800. My first reaction was to close the browser and resign myself to the fact that XP did the job just fine now, so I don’t need to move to Vista and whilst that certainly is true, I decided to look at some stats. Vista will probably be around for at least 5 years like XP was and still is. If you’re like me, you’re going to be using Vista at least 5 days a week on your machine for at least 3-4 hours a day. If you do the math, it suddenly doesn’t represent such bad value.
5 Years x 5 days x 52 weeks = ~ 60c per day
That really isn’t that expensive for something that you are going to be using virtually every day for the next 5 years. Some people pay that much for a handbag that they’d be lucky to use once a week, let alone once a day. Heck, my Xbox cost $500 when I bought it, I’d be lucky if I use it once a week, and I’ve got another year to go before I’ve had it for 5 years and it’s on the verge of being replaced by an Xbox 360 which I wouldn’t even bat an eyelid at paying $600+ for.
I have said for a long time that I would purchase a lot more software if it wasn’t so expensive, but recently, I realised this wasn’t really the case at all.
What I was actually meant to say was that I’d purchase a lot more software if the price was a true representation of the value that I personally would receive from using the software
Microsoft’s Office Suite is a pretty good example of what I mean.
One gripe that I have with Microsoft is that their Office Suite of products was often priced way too far out of the price range that I’d ever consider purchasing it. I strongly believe that you should pay for the software you use, particularly, if as in my case, you use that software to make money, but I just couldn’t justify the $500+ for an office license. Then Microsoft came out with a promotion earlier this year which allowed you to purchase a license of Office Ultimate, the top of the range full version for $89 if you were a university student.
When I saw it at that price, I purchased it instantly, (for my wife as she’s a uni student, of course).
Why?
Because I felt that $89 was a price that accurately represented the value of the benefit that my wife would receive from using their product. However, it’s also what makes pricing software so hard. Joel Spolsky wrote an article about how he prices his software but even with all those complications, he doesn’t really cover the fact that no matter what the price of your software, people only like to pay what they think is good value.
Often tho, companies will try and compromise by making a crippled version of their software free, or put in ads, or tier their product pricing. Some of the poorer examples are Iron Speed Designer where they’ll let you build a 15 page app using their tool. 15 pages? Even the most basic web applications require more than that if they’re even remotely useful.
Microsoft offers various version of its software such as Vista and Office at various price points, but I don’t want to pay good money for your application then get to use a crippled version.
Other companies charge on a per user basis. This is getting better, but managing licenses is a pain, particularly when you upgrade your laptops or re-install windows.
One concept I really really like is what companies like Source Gear do, and allow you to use their products as a single user for free, but when you want to roll it out to your company, you have to start paying for it. Not only do I like it because I get to use a full version of their software for free, It also means I can pay more as I feel the value I’m getting out of their software increases.
Sure it means I can’t use it for my open source project, but at the end of the day, it does provide a pretty nice alternative.
I guess there’s no blanket formula to apply to software pricing, but it sure would be neat if someone could come up with a way to allow users to pay for the software based on the value they get from it but until then I suppose you’d be just as well off picking a random price that sounds about worthwhile and sticking to that.
