by bmac on 2/26/12, 5:15 AM with 113 comments
by cageface on 2/26/12, 9:48 AM
This is exactly the problem with the app store. People have an idea in their heads of what an app is worth, no matter how much work it took to produce it. Price is completely decoupled from cost and from sales volume. This is like saying a Lamborghini and a Kia should both cost $9999 because they're cars.
Ultimately this is going to lead to a ton of low quality junk in the market. A quick perusal of the top 50 selling apps suggests we're already there.
by underwater on 2/26/12, 6:36 AM
On the developer side pricing this kind of consumer software per-device seems like poor marketing. It's unnecessarily reminding every potential customer about incremental cost. It also anchors the price incorrectly: "this software is worth $24.95, but you'll need to pay $49.90 to use it."
An unlimited $49.95 license makes more sense to me. Or a two-device license with upgrades to capture existing users who are willing to make additional upgrades based on sunk costs.
by rmk2 on 2/26/12, 2:53 PM
If I find a free app that does what I need, that is very nice. However, at a pricepoint of 50$, I have to think twice. Whatever I pay (I am a student) basically goes out of my monthly living allowance, which means out of my food money.
I have around 400$ (300€ really) a month for food and everything else after rent went off, 50$ is a significant part of that. I live several days off of that amount of money.
So in order to be worth spending this much money on an app, it sort of has to be essential. At that pricepoint, for me at least, the question is not "do I feel like shelling out that money that otherwise would have been used for nothing", the question that arises is "is this worth cutting a significant chunk out of my food budget for this month?".
It's a nice thing that many here don't have a problem like this, but generally saying that we just don't pay enough seems to be...arrogant.
For people, the calculation between necessity and price is necessarily different according to what they earn, but a lower price will more likely fall into more people's "impulse buy"-range.
A piece of software might be good and do the right thing, but the question for me (and maybe for the author just as well) is: is it necessary enough to warrant spending this much.
by 6ren on 2/26/12, 8:51 AM
The app in question is free for home use; but paid for corporate. Corporate customers have an unbelievably different concept of "expensive" from you and me.
I experimented with different prices for a corporate product, and found charging too little or too much reduced profits. (Sadly, this experiment seriously irritated at least one developer. Who knows, maybe a cheaper price would have lead to greater volume in the long-term.) I would love to price by customer (price discrimination), so corporates pay what suits them, and individual developers/small businesses pay what's reasonable for them. The standard approach is to have extra features in the "Enterprise" version, but I haven't found a way to make this work for me. Anyway... I'd rather everyone enjoy all features; not have version-config complexity; and get feedback/bug reports from everyone.
{rant: "Enterprise customers are an unbelievable pain. They take weeks to answer the simplest questions, they misunderstand, miscommunicate, make unfathomable mistakes, they have to go through Legal, Licensing, Management. And they tend to be discourteous, seemingly without realizing it. Their money - and they will spend more than you could realistically imagine - isn't worth it."}
by dgreensp on 2/26/12, 5:20 PM
by chime on 2/26/12, 8:05 AM
No matter what price ($0.99 - $9.99) I set, I make the same gross revenue. Reviews tend to be nicer when people buy it for $2.99 - $4.99.
by gigantor on 2/26/12, 7:25 AM
by wallflower on 2/26/12, 8:40 AM
The classic idea of how easy it is to criticize someone's work without having a full appreciation of how hard it is to do the work (because he does not do it himself)
It is one thing to write about a startup, another thing to build a product/build a customer base.
by k00k on 2/26/12, 3:30 PM
by stoolpigeon on 2/26/12, 7:16 AM
by suresk on 2/26/12, 9:23 AM
The response from the vendor (about it being hard to make money to pay his developers when selling a fairly niche tool) resonates with me, though. I built a fairly specific-use tool on the side last year and started selling it on the Mac App Store. I found that prices weren't very elastic, and I had to drop the price down to $2 to sell very many copies.
Even then, people think I'm some big company selling this software, when the revenue I generate from it isn't nearly enough to pay my bills, much less hire others to work on it. Even last year when I spent a while in the top 5 in dev tools, I wasn't netting more than $25 per day.
Ultimately, I think the app store concept is really cool and will be a net positive in the long run, but I wonder how many useful tools will fall through the cracks because buyers have been conditioned to think that a $5 app is "expensive", even though it isn't nearly enough to support some tools.
by msutherl on 2/26/12, 9:21 AM
Do you think it's ethical to exclude lower-income consumers just because it's more convenient for you? If you really believe in what you're doing, wouldn't you want it to be accessible to as many people as possible?
by luriel on 2/26/12, 3:32 PM
I borrowed a friend's iPhone a while ago, and I could not even find a decent free IRC client, I'm sure there might be one somewhere, but most were at best badly crippled. It was very depressing.
And I thought we dealt with the whole "it costs too much to build this software" issue ages ago, how much did it cost to build most open source projects? And who cares? The point is that people has good enough reasons to build software without needing to charge directly for it.
by carsongross on 2/26/12, 4:26 PM
Low priced apps imply loads of users to make money.
The people whose price sensitivity falls close to your low price are more likely to be cheapskates or find your software marginally useful. They are far more likely to complain and require support.
God forbid you are selling at a one-time-fee (which is why I think the current mobile development land-grab will flame out and transform into services-on-your-phone). You are going to be expected to provide support forever, at the drop of a hat, for any version of your application. Figure out a way to get recurring.
If you go cheap/free, you monetize with ads (often ineffective and always annoying to your users) or by spying on your users. I doubt many of us want to do the latter (Although, sadly, enough of us might to knock out the ones who don't. Race to the bottom!)
I now want to pay good money for the apps I use: I want the developer(s) to eat and drive nice cars. I want them around and in the game for bugs, integration changes and general support. I want them to not feel any pressure to jam new features in just to get another rev out the door for the upgrade money. Effectively, I want to pay them a lot of money for their software, because it is often incredibly valuable to me, I just want to do it on a payment plan where I can opt out if I no longer find the software useful.
I think that model, in most cases, leads to better software than either the open source model, the one-time-fee model and the freemium model.
by adrian201 on 2/26/12, 10:20 PM
You're other option is to become a pirate (ARRhhhhh). Here in NYC, piracy seems to be such a pandemic that they're running Ad campaigns for people to report software piracy at small businesses (https://reporting.bsa.org/r/report/add.aspx?src=us).
Here's a business model I've been thinking of that I hope developers will adopt. I call it “Entrepreneur lay-a-way”. Basically if someone is a-self described entrepreneur you give them a full 1-year license to your software for free. At the end of the 1 year you charge that users credit card for the full license plus interest. The thought being if the entrepreneur is successful, in 1 year he'll be able to afford your software with interest. The entrepreneur benefits deferring payment for a year, and can use that money for other purposes (marketing, etc). He can then utilize you're wonderful tool to create value for his users and the world. It's a win-win all around.
by wccrawford on 2/26/12, 12:34 PM
The content is correct in that pricing apps is complicated and there are factors that people don't often consider. And that support costs should be a factor.
But nowhere does it prove the should be paying more. Maybe the developers could charge more, but it doesn't even prove they should do that. It just opens up the possibility.
And I think that ShareMouse is overpriced. $25 per computer? And his reason is that he wants to pay his developers well? That's a stupid reason. He should be looking for market equilibrium instead, then. He should be looking for the point where he makes the most money, instead of just picking a price and sticking to it. Even in a professional setup I would choose Synergy over his price, despite the manual setup (took me like 10 minutes last time) and lack of file sharing (the drives are network shared anyhow in any situation I've been in).
Also, if the claims of his page are true, then support cost should be nearly nil. He claims the thing automatically sets itself up, including monitor configuration. But if it fails to do that and you need support, that's even worse than not having it be automatic in the first place. If he's really having so many support tickets about it, it's not worth the money anyhow.
by Tmmrn on 2/26/12, 9:48 AM
>But all good things come to an end. Especially the free ones.
Why? For the past few years my desktop has been running very successfully on Open Source software. (With some blobs like flash that are just needed for legacy compatibility) I don't see that changing in the near or far future.
> I have had to stop using Synergy. Setting up this free, open-source app is a black art,
I remember when I was trying synergy. I opened the manual and thought "that is quite complicated" and quickly found quicksynergy (there are probably other equally fit GUIs). It's a bit counter intuitive what IPs to put where but after that it's just putting an IP or hostname in on each PC and click a button... That's much less "black magic" and didn't take me more than 5 minutes...
> and when CBS replaced my PC with a MacBook, giving me two-Mac setup (which, I admit, is extravagant), I couldn't get Synergy to work anymore.
So what was the error?
Of course that was not the point of the article. But he spent so much time explaining how he wouldn't buy the other application because it was too expensive I wondered why he didn't take that time to research why synergy didn't work or what GUI to use to make setting it up easy.
by eftpotrm on 2/26/12, 1:21 PM
At the core his point strikes me as inane - that he won't spend a tiny fraction of the cost of his other equipment to solve a problem, that he clearly underprices his time - but still, the pricing strategy here sounds flawed.
I use Synergy, too; I'm all Windows so Mac-compatibility isn't an issue, but it's a nice program. Note nice though. Not deal-breaker, not revolutionary, not transformative. Could I be persuaded to pay for a better version? Sure, but only so much. Elasticity of demand as highlighted in the article only goes so far; ultimately there will be a ceiling price above which your revenue falls.
It's a gadget, not a core tool, and (IMHO) needs to be priced at the 'impulse buy' level. $25 / machine is enough to make people think (even if it's a tiny fraction of total system cost) and you're suddenly out of impulse and into avoidance.
by rtisticrahul on 2/26/12, 1:33 PM
by alvarosm on 2/26/12, 4:07 PM
by glaugh on 2/26/12, 9:16 AM
The article itself doesn't really take that kind of position, it's just a linkbaity title, but gearing up for some moralizing annoyed me.
And it made me read the whole thing, so I guess the joke's on me and I should stop moralizing.
by bostonvaulter2 on 2/26/12, 9:46 AM
by gte910h on 2/26/12, 4:56 PM
by timjahn on 2/26/12, 3:20 PM
I'd love to see the data backing this claim up. That really intrigues me.
by feralchimp on 2/26/12, 4:20 PM
by zschallz on 2/26/12, 8:35 AM
by DanielBMarkham on 2/26/12, 4:38 PM
I really wanted to say something pithy and wise here, but this subject truly confounds me. I have many types of product out there: websites, apps, and e-books. I charge nothing for websites, nothing for apps, and a good bit for my e-books.
I have to say as a content producer, I'm much happier selling ten copies of my book about being a ScrumMaster for fifty bucks each (shameless plug: http://tiny-giant-books.com/scrummaster.htm ) than I am having 20K people visit my wife's recipe site each month where I might make 40 bucks from ads. (http://hamburger-casserole-recipes.com/) Of course, she feels much differently about this!
I've been reading about startups and pricing for some time. It's my conclusion, for what it's worth, that you have to experiment and figure out this stuff as you go along. It wouldn't surprise me if different people with the same kinds of content have completely different pricing models. Looks to me like the pricing model is based more on how the usage scenario fits into a particular user demographic than the type of product you are selling (apps, content, books, services, etc.) The average usage scenario of a technical person wanting greater efficiency from his expensive set of computers is completely different than somebody looking for a list of instructions on how to prepare tater tot casserole. Or somebody wanting to share a random 140-character quip.