Software Pricing analyzed

Filed in archive Technology on January 4, 2005

You can read books about it - or just Joel on Software's latest entry. Its hilarious and informative at the same time.

"Here are some examples of segmentation you're probably familiar with:

* Senior citizen discounts, since older people tend to be living on a "fixed income" and are willing to pay less than working-age adults
* Cheap afternoon movie matinees (useful only to people without jobs)
* Bizarre airfares, where everyone seems to be paying a different price. The secret about airfares is that people who are flying on business get their company to reimburse them, so they couldn't care less how much the ticket costs, while leisure travellers are spending their own money and they won't go if it costs too much."

"The reason I bring this up is because software is priced three ways: free, cheap, and dear.

1. Free. Open source, etc. Not relevant to the current discussion. Nothing to see here. Move along.
2. Cheap. $10 - $1000, sold to a very large number of people at a low price without a salesforce. Most shrinkwrapped consumer and small business software falls into this category.
3. Dear. $75,000 - $1,000,000, sold to a handful of rich big companies using a team of slick salespeople that do six months of intense PowerPoint just to get one goddamn sale. The Oracle model."