Wisdom on Pricing Software

Recently I came across this excellent blog post, "Million Dollar Art", by Nate Otto on the Signal vs Noise blog. I started thinking, how relevant is it for software? Can you simply put a million, or even 30 grand price tag on software?

We first discussed it at work and there was the rational opinion that IT products help save time and effort. If a single person's job can entirely by done by a piece of software, then it should worth that person's salary. This makes valuing software quite easy!

Why think when you can Google. I came across this wonderful article at Smashing Magazine: You're pricing it wrong: software pricing demystified. It talks about the rational price vs. the perceived value of a product. Seems like branding, good marketing, superior design, support, average price for competing products and a number of other factors can increase or decrease the perceived value of a software. Read the whole article and some of the related links to get a better idea. Highly recommended!

When it comes to apps, the perceived value always seems to be much smaller than the app is really worth. 99 cents is very popular on the App Store. However, I think it will be wise not to go with the flow and really think about your audience and what they'll be willing to pay. Better yet, try to bend your ideas to fit to an audience which has more money to spend (Business Store for example...). Most importantly, be flexible. Start with a slightly higher price and be wiling to experiment with the price. You can never know for sure. Don't give away anything for free.

There's one caveat: iTunes rankings! Giving an app away for free might mean that you get more downloads on launch day, provided you run a great marketing campaign. Then, things become real tricky moving forward.

We're about to do some testing with pricing with the launch of tvQ 2.0. Will write my findings post launch.