Price Point Suggestions?

[Dexx]

Hey Thomas and Gang,

Just wondering how you all determine the price you'll charge for software you create (especially if there's no obvious competitors to price against)

For instance if I brainstorm a niche software idea, and I am able to create the software with some quick mind mapping in approximately 20 - 30 minutes...

What would a good price point be?

$17? $27? $47? $77?

It's hard in my head to logically justify charging $77 for something that took me 20-30 minutes to create...but at the same time, it's like... "If I didnt use TSB Pro and created it by hand...how much would I justify charging for my time"

Ugh! You can see my dilemna!

What do you guys think / do?

-Dexx

[TinkBD]

Pricing is hard for me, too.:(

That said...

I think that pricing needs to be inline with what a given niche is willing/able to pay.

Also, are you setting it up to benefit on backend sales? If so, charging a lower price may or may not make sense to get folks in your sales pipeline.

An important aspect of all of this is the fact that TSBPro is soooo versatile and our options are soooo open that we need to be careful not to lock ourselves into limiting boxes based on what we have been doing and what our assumptions are.

One of the most valuable things I brought away from my design training is the idea of starting each project with a clean slate... try not to impose unnecessary and incorrect assumptions based on previous projects. :)

Tink

[Dexx]

Graphic Design is another great example of pricing troubles, I've seen graphic designers charge $600 for stuff that took them maybe 30 minutes to make!

It's hard to wrap my head around that! heh

[TigerSoftware]

It is something that really should be tested but will also depend on what you are trying to accomplish.

If you want to build a list then pricing it lower will increase your sales. You can also give 100% commission to affiliates to send traffic to help build your lists.

If you are wanting it to go viral and make sales with all the nifty marketing banners and websites you put into the software, then you can price it lower as well. It works really nicely. You can give the person who buys a OTO of resell rights to help further the viral effect.

You can then create software to continue selling to your list that slowly goes up in price. Test it.

I am working on a massive list building campaign. I am giving my affiliates all profit from a membership site I am setting up. I am also thinking of offering 100% commissions on the express version. I really want concentrate on building my lists with buyers. I have plenty of products that I can sell to my lists later anywhere from $17 to $1k per year.


Best is to make a plan and price it accordingly. Build you sales funnel and that will help you dictate your pricing to start off with. Then implement and test.



Thomas

[TinkBD]

Graphic Design is another great example of pricing troubles, I've seen graphic designers charge $600 for stuff that took them maybe 30 minutes to make!

It's hard to wrap my head around that! heh

It IS difficult... but we must focus on the value of the finished product, not the time or effort that it took to create it.

For instance, I have 2 design degrees, including a terminal MFA... they both took time and $$ (LOTS of each :) ) and allow me KNOW how to design something in 30 minutes... Without the training and experience, it would take more time and effort and the results may be less effective.

BUT, thinking about how long a job (product creation) takes is thinking like an employee with a JOB.

We need to be thinking as business owners/entrepreneurs. It doesn't matter how long it takes or what it costs to create a product. What matter is what a purchaser is willing to pay or how we can benefit from the backend transactions/sales.

Tink

[fortesque]

Dexx:

Beware of my comments that follow! I get wacky ideas.
I've never sold software via the net. I bought a heck of a lot though.
I think of "value" when I buy stuff. Value for me is "what it cost" versus "what I get." What I get includes my "expectations" of the product or service. And cost is total cost. If I buy computer equipment, software etc. (or anything else I guess) I think about my time to learn how to use it, reliability, durability, ease of use and whether it hits the target of what I need. When I look at a Bic pen my expectations are set at one level. When I look at a Cross pen, my expectations about durability, performance, etc. are very different. And I'm prepared to pay different prices.
However, I'm an old geezer and probably have different value and spending ideas than a lot of younger people.
Research on pricing is tricky. Recently read a piece on "customer determined pricing."
Idea is that value is in the eye of the customer and let the customer set the price!
Of course there may have to be a minimum price to cover expenses, etc, but beyond that the idea was let the customer decide how much they want to pay for the item or service.
Researchers tried some experiments using this approach.
What they found was that when front end costs were high, that is, if the development costs were high and development time long, but subsequent costs to produce and distribute each additional item were low, then letting customers price the item (with floor minimum) actually generated more sales $$ and more profits. The idea is that the item appealed to a broader market based on that pricing strategy than if the seller had tried to "determine the price point".
So, where software is concerned, if Thomas' costs were high in putting together TSBPro but incremental costs of a sale are low (automated delivery; not including servicing the product) then he could benefit by having a "customer determined" pricing policy. However, Thomas' cost of servicing the product is not low (I'm assuming by watching the volume of traffic on this forum and the messages he has to respond to). Therefore "customer determined" pricing is not a good idea for him unless his "floor minimum" includes the cost of serviicing his customers. And probably where customer's will share lots of information about price as they do on this forum it could probably bend folks out of shape if they knew the price varied based on perceived value.
I'm thinking of using "customer determined price" on one of our services. Haven't convinced my business partner yet that it's a smart idea. But with all the pricing variation I see, I think it's worth a shot. Heck, I use AVG for anti virus protection, having switched from Norton. AVG is free (the version I use) and I was spending $150 per year with Norton. Not good value! Didn't use all the Norton features.
Likewise, I subscribe to PC Magazine's utilities subscription for $19 a year which allows me to download all kinds of software that has been pre-tested. Boy, that's has a lot of value for me. I also buy stuff like PConPoint for $19.95 to scan my computer registry, etc. That's worth a lot to me. If they go to $39 I'll second guess buying the service. $20 isn't going to break my bank account but there is still the idea of "value."
So, the question seems to be what is the value of your creation to those in the markets you want to serve. And what are their expectations including pricing issues? In my business, healthcare, people (patients) don't want to pay for anything out of pocket. They expect their insurer to pay. Charge $15 for a flue shot out of pocket. They will raise hell! Yet they will pay $15 for a Domino's pizza! Expectations and perceived value!
Anyway ramblings from a former management consultant.
John Burns

[fortesque]

Dexx:
Another thought on pricing. Seems one could test out different price points for the same software product. Vary the pricing based upon day of the week or hour of the day. Have a rotating pricing option on your web site. Change it manually or have an automated procedure do it. May sound wacky but you could test the impact of pricing at $9.95 vs. $19.95 (illustrative only!) by seeing what volume impact is of different price levels. Yeah, I know different days or different hours might attract different customers and their willingness to part with cash. But you could reverse the order after a week or more so each price point gets a fair turn at a designated day or band of time.
John Burns

[Dexx]

Thanks for the great and detailed responses everyone!

John your previous message brought up a good point that made me think of a previous sales letter that I purchased from...

the comparison of the $15 flu shot to the $15 pizza.

I remember purchasing several items where the end of the copy stated something like "for the price of a combo at McDonald's" or "For the price of a movie and popcorn you can have..."

and I really put myself into perspective when I bought them, thinking "Hey I'd spend money on those easily...this thing would last a lot longer then those...oh hell why not"


Putting the value of the product in perspective to what they normally spend money on makes a difference I think.

Also Tink, your comment on the fact that all of your educational training has gotten you to a point where creating certain things is "easy" for you, and yet would be difficult for someone else makes a lot of sense, thanks!

[MikeM]

What would you pay to go see a Doctor or Specialist for 10 minutes? Lots!

They can diagnose you quickly because of their education and training, and think nothing of huge charges because of it.

I don't think making software or graphics or ebooks is any different. Just because you can create it quickly doesn't make it worth any less money than if it took you a year to make it. You can make it quickly because you have invested in learning and the tools to accomplish that task. Just like the Doctor.

[Dexx]

Or the mechanic who takes 2 minutes to diagnose whats wrong with a car, and charges $80 bucks to do it! hehe!

[LorenW]

Software can be a big part of an overall value offer - but of itself downloadable
software is starting to have lower and lower perceived value... just like "ebooks" -
to me anyway and as more consumers become savvy about the availability of
free open-source software.

Just marketplace reality. However - people DO equate "cheap" with "junk" and
that can work in your favor.

If you want to get closer to top-dollar for the stuff you put out you need to make
it clear to the prospect the VALUE and RESULTS s/he will get from using your system.

Not software, not ebook. System. A synergistic, hi-tech system to get the results
the prospect wants in the easiest, fastest way.

See? It's about positioning your offer as having the best VALUE. WF is not the best
place to do it - you will get a warped idea of what the market will bear by targeting
savvy IM people.

I hope this gets the gears turning in your head.

[Dexx]

Thanks for the feedback Loren, and you are quite correct!

I recently purchased an ebook on defining price points, and had similar advice...

basically your price should reflect the results that the end user will obtain.


If I create a software that could boost their profits by 100-200% a month in PPC, then I should charge a price reflective of the benefits they will receive...

such as investment to get a higher return on investment for.


Same goes for a software that could save hours or days off the alternative of not having the software. What is the value of the time saved? Then price reflective of that value.

etc.

End story = People don't buy products, they buy results!

[RichHamilton]

And remember this: A low priced product is percieved as a low value product. A higher price creates a perception of higher value and may, in fact, increase unit sales as well as total dollar sales.

Using the right tool so you can do a job quickly does not devalue the finished product. In fact, it probably increases it because it does the job better.