

How I doubled the price of my software product and sold ten times as many copies - kanebennett
http://www.startupproject.org/2011/06/price/

======
nhebb
I initially sold my app for $39.95. Trying this trick about 4 years ago, I
doubled the price to $79.95. Sales went down. Way down. I backed it off to a
50% increase - $59.95 and sales came back up. The volume was lower than at
$39.95, but the revenues were higher.

I also sell site licenses for the product at $995, and I bumped that up 50% to
$1495. The sales cycle is typically longer, so I let that price stand for a
few months. There were no sales. Dropping it back down to $995, sales resumed
as they were before.

Bottom line: There is no magic formula. You need to test the price elasticity
to maximize your revenues.

~~~
chernevik
Here's a theory about the OP:

I am guessing that at $9.99, prospective customers assume that prior customer
purchases don't reflect much due diligence -- that people would buy it for $10
"just to see", and just throw it away if bad. Prospectives might then assume
that $20 is enough to get priors to research it, or to think twice before
recommending it, and that sales at that price thus do reflect quality.

But prospectives don't know anything about priors purchases, right? Maybe
prospectives are assuming that the stuff is selling at that price. After all,
the seller knows the market best, right? And there is some truth to that
assumption: If it hadn't sold at $20, it wouldn't have been around for long.

If that theory makes sense, it may be that your customers felt that $40 was
high enough to suggest the consumer validation they needed. Validation was
only one component of their decision, "value" was another, and at 80 they
didn't feel the value was there. The theory suggests that if you had cut price
below 40, your total sales would have fallen.

I imagine that buyers often treat prices like poker bets, and try to extract
information about the underlying hand from the value assigned by the holder.

------
Sukotto
Possibly referring to [http://tbbuck.com/building-a-web-application-that-
makes-500-...](http://tbbuck.com/building-a-web-application-that-
makes-500-a-month-%E2%80%93-part-ii/)

Prices went from $9.99/month to $19.99/year to $19.99/ _month_

The take home quote

    
    
      What difference did increasing the price 12-fold make? 
      Colour me shocked, surprised and, frankly, happy: it 
      made *zero* difference!

~~~
mootothemax
Thanks for the mention, but it's independent of me :)

One aspect I didn't mention in my blog post is that I have a hard-core
following of four people that email me once every few months complaining about
the price. They complain that $9.99/month is too much, $19.99/YEAR is too
much, and that I can't be making any sales at $19.99/month. In short: don't
take pricing advice people who aren't giving you money :)

~~~
alanfalcon
>> In short: don't take pricing advice people who aren't giving you money :)

I think that's the key to succeeding in business.

~~~
chopsueyar
This is the real gem in this whole thread.

------
wccrawford
I think there's more at play here than just the old 'higher price = higher
quality' thing.

When I see '$9.99' I think 'bargain bin software'. That's because every
computer retailer has an entire rack of really crappy software and each one of
them is $9.99.

Oddly enough, $10 doesn't have the same stigma. It's probably the lack of
marketing BS.

Also, people expect a product to be priced according to value. If it's
underpriced, they're going to assume it's less useful than they require and
may not even waste time on a trial.

------
stayjin
Am I the only one that cannot stomach the idea ( doctrine ) that one should
sell his product as pricier as he can get away with or so that one maximizes
revenue?

I can understand that when I don't have a clue about how much is my product
value, I can probe the market for an optimal price setting, but... but then
again I should not be clueless about my niche and my product costs, should I?
If I have a concrete plan saying that I need to make 40% profit, why should I
take 60%, even if someone is willing to give it to me?

Why can't I say "Well, thank you for your kind offer, but I value my work at
this price, this is enough for me to make a decent living, with the extra
money please go buy cookies for your kids or give it to charity or whatever."

I mean, I look at myself, making everyday choices about what I can afford and
what not, I would like to buy a good quality thing if I can afford it, and the
list is usually longer than my affordance... well, my customers are in the
same situation like me, they definitely have one more thing they would love to
buy with their budget if they can afford it, so why should I take advantage of
the fact that they would pay more for mine, if I already make enough?

Like someone before said, does the author know why he was able to sell it at
double price? Knowing who his target customers are, should he?

~~~
msencenb
"Am I the only one that cannot stomach the idea ( doctrine ) that one should
sell his product as pricier as he can get away with or so that one maximizes
revenue?"

There is a fine line here. In my mind a product should be priced relative to
the value it creates for people. If this price point provides more money than
one needs to sustain daily life then I think its a perk. Besides that if I
make a product that is making more money than I need, that gives me more of an
opportunity to do a lot of things. Anything from building better more awesome
products to donating my time or money to charity.

~~~
stayjin
I can see your point and I think "the value it creates for people" ( including
both developer and customer ) is a good metric for how much it should be
priced. The problem is, why should we assume that the price is the only ( or
the most relevant ) proxy for "value it creates for people"...

~~~
anamax
> The problem is, why should we assume that the price is the only ( or the
> most relevant ) proxy for "value it creates for people"...

If you like, think of value as having economic and non-economic components.
You're charging money for the economic value.

------
swombat
So, did the guy investigate _why_ the sales went up? (other than a vague
"people think it's higher quality"... my hunger is not quite satisfied by
that)

------
bad_user
A funny thing happens to me and not by choice - whenever I'm searching for
something on Android's Marketplace, I tend to look at paid apps first whenever
I have a specific need and know what I want, even though I'm a cheap bastard.
Unfortunately many paid apps that I tried to buy are not available in my
country and I don't know why devs feel the need to limit their apps to a
certain geographic area, while keeping free apps unlimited.

The reason being that most free apps on Android's Marketplace (and even on
iTunes) are weekend hacks - unusable interface, breaking on updates /
unmaintained or filled with spam or limitations. It's the return of shareware
- and whenever I can't find something suitable I tend to say "fuck it, I'll
just do something by myself", instead of waisting time with all the crap out
there. And I did - I created my own phone calls / SMS blocker.

~~~
swombat
> _whenever I'm searching for something on Android's Marketplace, I tend to
> look at paid apps first whenever I have a specific need and know what I
> want, even though I'm a cheap bastard._

I do the same in the Apple App Store. I rarely ever browse through free apps.

Prior to the App Store, I also very rarely bought any software. Since iPhones
and iPads and all that stuff came out, I'm buying a good 1-3 apps per month on
average, every single month. I'm kind of amazed at that.

~~~
pbreit
But, if anything, the App Store has proven that lower, non-zero, prices are
better.

The App Store has also demonstrated that 0.00 is no longer a magic number when
your payment information is on file.

~~~
swombat
_The App Store has also demonstrated that 0.00 is no longer a magic number
when your payment information is on file._

Great insight. I'm writing that down somewhere.

------
bennesvig
This reminds me of my wedding photographer. She was just starting out and
priced her services much lower than what she was worth. A few months later she
bumped up her prices significantly and her business exploded. People viewed
her lower prices as an indication of low quality despite a quality resume on
file.

~~~
nanijoe
The situation is unique. Most of her clients have next to no experience with
hiring or evaluating a Wedding Photographer, so price acts as a greater
indication of quality than usual. IF AT&T doubled their pricing for SMS (for
example), they would likely lose customers, because we all have a better way
of evaluating quality than just price.

~~~
chopsueyar
Poor example.

------
bigsassy
This reminds me of the article by jacquesm:

"Double your price! (and no, I'm not kidding)"

[http://jacquesmattheij.com/Double+your+price+%28and+no%2C+I%...](http://jacquesmattheij.com/Double+your+price+%28and+no%2C+I%27m+not+kidding%29)

Here's the follow up discussion on HN:

<http://news.ycombinator.com/item?id=1639712>

------
eps
I am really curious to look at this beautifully designed Windows app. I am in
the middle of running my own experiment trying to see if a truly high design
polish in Windows app can translate to the higher revenues, and it'd be
interesting to compare the visuals. If anyone has any pointers as to what the
OP app might be, please share.

------
radarsat1
This works in many markets. Look at clothing labels for instance. Take a
fairly plain shirt or something, put a tiny logo on it, double the price. It
works.

My personal example is that I have several music recordings downloadable for
free from my website. No one ever listens to them as far as I know. At least
I've never randomly received feedback from my music website. I got a record
label to carry a track once, sold as MP3 for a low price, and all of a sudden
the track hits some top-10s, etc. People pay more attention when you attach a
price tag.

In all honesty, I actually think this would be a good approach for open-source
software funding: open the source, but package it up nicely and sell binaries.
I suspect that people would buy, even if someone else comes along with their
own binary; include a trademark clause perhaps to stop them from naming it the
same thing.

~~~
rick888
I think you could do this with open source, but it would only last so long. I
tried this a few years ago (I found some open source software, fixed bugs and
added some features) and sold it.

In the beginning I got sales. But over time, I got less and less because
people would just re-package it and give it out for free (they are allowed to
do this under the GNU).

I suppose it depends on your demographic of users too. More tech savvy users
will figure this out quickly

------
damonpace
Ask yourself this question? Would you hire a lawyer that charges $9.99/hr or
one that charges $299/hour? The higher the price the more "Perceived" value it
holds. Pricing strategy is an important part of bringing a product to market.
Then there is pricing optimization that needs to take place to find the
perfect mix of profits and revenue. Luckily for us techies we can iterate as
much as possible to find the right mix.

~~~
mathgladiator
Keep in mind, this is relative to the market. Would you pay $9.99/hr for a
lawyer if the average was $8/hr?

------
tanay46
Hmmm. Although increasing the price in his view increased the perceived
quality of the products and sales in the consumers eyers, I'm wondering
whether the pretty common tactic of showing a higher price and OTO'ing at his
lower price would result in a a larger revenue? Like writing the price is
19.99 but for this week only you can get it for 9.99.

------
nroach
The ghost developer is losing sales by going unmentioned in t he linked
article. After reading the article, I thought "wow, maybe I should give this
software a try- it sounds like its worth the money."

But, with no link to his site nor any info on the product, there goes another
lost sale.

------
badkins
Does anyone have any thoughts or experience with testing the "bargain-bin"
hypothesis with subscription based payments?

I can see a one time purchase of $10 for a piece of software as appearing
cheap, and therefore low quality. But what about a $10/year charge, or
$10/quarter.

------
credo
It has been a long time since I read the book, but "Predictably Irrational"
(among other things) talks about the same principle - how pricing impacts the
perception of quality.

It is a great book that I'd recommend to all entrepreneurs and students of
economics

~~~
kilian
I'm reading 'the upside of irrationality' currently, the follow-up of sorts of
predictably irrational, and I highly recommend that book as well.

------
Shenglong
They strongly emphasize that "usually" you cannot focus on price and quality
at the same time, in business school. When analyzing different aspects of a
business, you usually sacrifice one for the other. Not positioning your
product to be the cheapest alternative is also emphasized, because to the
majority of people, it does give the illusion of a subpar product.

The _actual price_ doesn't matter - it's all about how it's positioned
relative to your competitors. Very smart companies will price low with a
completely different pricing model, that makes customers feel like they're
getting a better price, not because it's cheap, but because of the unique way
their own business is structured.

------
drndown2008
Many apps that are sub $20 would probably benefit from a similar lift. I'm not
sure it would work on a $500 business app. But who knows...

~~~
jwn
Last year I upped the price of my B2B app from $399 to $699 (to coincide with
a major new release). The end result is my revenue remained fairly stable, but
I stopped getting Indian customers. This is a good thing because they required
much more tech support than their US or European counterparts.

~~~
arethuza
You probably crossed a common discretionary spend limit - under that amount
people might not have to get explicit approval for purchases.

~~~
jwn
Could be, but the end result is that I have fewer customers who happen to pay
more, and the time I spend responding to customer support emails has dropped
=)

------
lawfulfalafel
Can someone who has experimented with re-pricing their product explain the
legality of it? I mean can you offer different prices to different customers
at the same time? Or do you have to globally shift your pricing? Also, where
would you look up the laws for stuff like this?

~~~
drcube
Price discrimination is usually perfectly legal, at least in the US. Haven't
you ever heard of senior discounts? This doesn't mean there aren't cases where
it IS illegal, for example there are no "white people discounts".

As for how to find out, call a lawyer. You really don't want to trust the
legality of your business to a Google search.

------
chopsueyar
There was a really excellent HBR article on pricing some years ago.

Still relevant.

~~~
cschmidt
Have a link or reference?

~~~
chopsueyar
_How Do You Know When the Price Is Right?_

by Robert. J. Dolan

Published Sep 01, 1995

[http://hbr.org/product/how-do-you-know-when-the-price-is-
rig...](http://hbr.org/product/how-do-you-know-when-the-price-is-
right/an/95501-PDF-ENG)

[http://www.amazon.com/gp/product/B00005RZ5D/ref=as_li_ss_tl?...](http://www.amazon.com/gp/product/B00005RZ5D/ref=as_li_ss_tl?ie=UTF8&tag=littdidd-20&linkCode=as2&camp=217153&creative=399701&creativeASIN=B00005RZ5D)

I said it was old...but still relevant!

------
nsomaru
I'm not sure how we can take this seriously without proof.

------
joblessjunkie
An anonymous anecdote about an anonymous product is the best HN can offer
today?

~~~
sapper2
That is a good point. But FWIW I personally know several "shareware"
developers that told me the same story with their _own_ products. The bottom
line is always: $9.99 = bargain bin pricing. Good converting prices start at
$29.95 and up for productivity software.

------
aresant
Good article on this very strategy and some tips for price elasticity testing:

[http://www.conversionvoodoo.com/blog/2010/06/one-simple-
secr...](http://www.conversionvoodoo.com/blog/2010/06/one-simple-secret-from-
an-1890-economist-nearly-doubles-website-profits/)

------
josscrowcroft
ahh i want to know what it is! anybody find it?

