Choosing a price for your software is hard. Choosing the right price is even harder.
For Sights to See, I will release it at $9.99.
Let the wailing begin!
Customer value proposition
From a customer’s perspective the value proposition is easy to figure out.
If the customer buys a paper guide book, it costs about $20.00 from Amazon. The paper guide book is limited to only the places in it, weighs a lot, is hard to navigate and to navigate with, and is usually out of date.
If the customer buys an electronic guidebook, it costs on average $6.00. The electronic guide is limited to the places in it and are usually just reprints of the paper guide books without any additional interactive features. Want to go somewhere else, thats another $6.00.
For ten bucks, the customer can buy Sights to See and have as many guides and places as they want, the most up-to-date data from wikipedia which is always being updated, no extra weight to carry, the cool maps, the near me feature, and all upgrades to the software included. What a great deal!
In summary, for the customer its
- $9.99 for Sights to See
- OR $5.99 PER GUIDE for electronic guidebooks
- OR $20.00 PER BOOK for paper guidebooks
My value proposition
I have spent months of my time writing this application, perfecting it, crafting it and bringing it to market. I have spent money on setting up this business, money on systems and money on web sites and money on tools. Creating the software cost money, so I want to get money back to cover those costs, and hopefully afford a beer or seven.
Further, the App Store store does not enable upgrade pricing. Each sale I make is all the income I will get from the product. All upgrades will be free to my customers. But upgrades cost me time and money, and I know I’ll need more web hosting for some upgrades. But I will not get any upgrade revenue.
If I set the price too low, I may sell more units, but make less money, and with less money, there’s less incentive for me to upgrade the product. If I set the price too high, I’ll sell few units, and make less money too. Finding the sweet spot of sufficient sales and sufficient revenues is the trick. Which is why I look at the customer value proposition first. If it makes sense, the units should be high enough, and the return to me should be too.
One more point, setting the price to value also gives me room to discount the product later on. I hope never to do it, I feel annoyed when I buy a product and then the seller drops the price. But having the wiggle room is nice.
Ignoring the loud ones
I expect to have to deal with the following
- Emails from people saying they would buy the product if it were a lot cheaper: If the customer value proposition does not work for these people, then nothing will. More likely, if it were cheaper, they would email to ask for it to be free.
- Press reviews calling it expensive: My analysis of iPhone app reviewers, excluding the true professionals, shows that a large majority of them complain that all iPhone apps are expensive ($2.99 for a recommended game is expensive - give me a break!). I suspect their agenda is to get everything for free. The true professionals, like MacWorld, rarely comment on the pricing, allowing their intelligent readers to make their own value calls. When they do comment on pricing, its usually worth listening to.
Decisions yet to be made
Do I increase the price when the universal/iPad version comes out? Lots of developers do this. Start with the iPhone version being cheaper, say $9.99, then boosting the price higher, say $19.99, when the universal is released as the iPad version offers an even better value proposition. I’ll probably do this.
Do I create a separate and more expensive iPad version instead? I can do more on the iPad screen, which is better for customers and increases the value of the product. But I will also annoy existing customers who purchased the iPhone version because the’ll have to buy the same product again. Personally, I don’t like to buy the same thing twice, so I’ll very likely not do this.
Sights to See will be released for $9.99. The customer value proposition shows that this app will save them money, and the amount saved will grow as they travel to more places.
And I hope enough people buy it and love it as much as I do.