
Stop selling your Software for Peanuts - irrlichthn
http://www.irrlicht3d.org/pivot/entry.php?id=1384&v=2
======
babuskov
I read a similar article about 3 months ago and decided to give it a try.
Raising price gave me less total income. Here are the details:

I have a product called Attic Manager (guacosoft.com/attic) which is a home
inventory software with unique feature on the market - it is able to import
database from all versions Quicken Home Inventory programs. Currently, it is
only product on the market that does that (probably because it is not so easy
to do, I spent months reverse engineering their custom file format).

I used to sell it for $19.99 and got about 30 orders per month consistently in
the past 3 years. That's around $600 per month gross (my actuall earnings are
lower, because of payment gateway cut, but that is irrelevant here because
it's fixed percentage of gross price anyway).

After reading that "you should charge more", I upped the price to $29.99, a
50% increase. The experiment is still going on, but in the past 3 months I got
only 42 orders. That's 14/month. 14*$30 is $420 per month, or 43% less than
before.

So, all the "you should raise you prices" is just an idea to consider and
maybe test, but I wouldn't trust it blindly.

~~~
flyinRyan
How do you know your monthly orders would have continued consistently _this_
year? Were you adding features as fast as previously? How big is the market
for what you're doing? Maybe you are now closer to what your particular market
can bear and you'd have made even less at $19.99.

~~~
babuskov
I don't. But, I haven't changed the product since march 2012, I believe 14
months of consistent range of 27-34 sales each month can be considered stable.
Especially since the drop started the day I changed the price.

I want to leave it like this until the end of month 4. And then I'll revert
back to $19.99 to see if number of sales go back.

Although, I'm thinking I might offer two versions of the product, one for
$19.99 and other for $29.99 as someone suggested.

------
tux1968
Yelling into the abyss i fear. It's relatively well accepted economics that
product pricing tends toward the marginal value, which for software is near
zero. Either need to accept that mass marketing means low margin, or find an
under serviced niche where margins can be higher.

~~~
lenazegher
>It's relatively well accepted economics that product pricing tends toward the
marginal value, which for software is near zero.

Do you perhaps mean the marginal _cost_? I don't see any reason that the
marginal value to the consumer of software would be near-zero.

In any case, I'm not sure I agree - the marginal cost of AAA video games is
near-zero, but the market price is $40-$60.

~~~
drewcrawford
> I don't see any reason that the marginal value to the consumer of software
> would be near-zero.

If you look at the top 10 paid apps in the iOS app store, 9/10 are games. In a
sufficiently large market, games are interchangeable; I might equally prefer
hundreds of games. As long as at least one of those games is free, the
marginal value of some particular game to me is zero.

Now this may not be true for example when considering applications used for
business, that provide perhaps a lot of value. But these represent just a tiny
fraction of the overall market, which is mostly games and other mass-market,
interchangeable software. It is large in absolute terms of course; that is how
a great many developers make their living. But it is very small relative to
the overall ecosystem, so it is fair to characterize most purchases as having
essentially no marginal value.

~~~
coolsunglasses
The games on iOS are interchangeable because they're awful and barely register
as 'games'.

~~~
Samuel_Michon
Let’s see: Infinity Blade II, RAGE HD, Real Racing 3, Grand Theft Auto, Modern
Combat 4, Riven, realMyst, Year Walk, Bastion, Eufloria... I would call those
real games.

~~~
lmickh
Out of the literally hundreds of thousands of other games, those are just
outliers. Even if you named another 200 of them, they would not be
statistically significant to the whole list.

~~~
Samuel_Michon
If we’re talking about the majority, then the same can be said for PC games,
yet no one says all PC games are awful. There’s a reason why the games I
mentioned sell better than 99% of the games in the App Store: they are GOOD.
There are hundreds of good games in the App Store, and even though that number
may seem minuscule compared to the total catalog, it’s more than many other
platforms have to offer.

------
RyanZAG
Great point.. unfortunately, he's giving away his Darkness Springs games for
literally nothing, completely destroying the market for indie games while also
completely destroying his message. He seems to be very much part of the
problem.

~~~
irrlichthn
You are right there, but I blogged about why I made the game free here:
[http://www.irrlicht3d.org/pivot/entry.php?id=1367](http://www.irrlicht3d.org/pivot/entry.php?id=1367)
I even posted the sales details:
[http://www.irrlicht3d.org/pivot/entry.php?id=1370](http://www.irrlicht3d.org/pivot/entry.php?id=1370)

In short, after 5 years, the game makes more money through ads when it is
free, in contrast to selling the game directly.

~~~
RyanZAG
While it might be better for you to just make it free, it's obviously worse
for the market as a whole. The people you're complaining about on the app
stores have the exact same excuses - they tried to sell it, few people bought
it, so they just made it free. Now everyone expects it to be free. So their
next app and your next app now need to be free, too.

It's actually worse than that - it looks like your primary customers would be
game developers (you're selling editors for 3D apps, javascript webgl, audio
libraries, etc). This means that you are directly competing in your customers'
market with a free product that you are supporting from the money your
customers are giving you. You're de-valuing their market while using proceeds
from them to de-value it further. Woops!

~~~
irrlichthn
Well, it's a 2D game (my products are usually for 3D), but you have a point
there. I was primarily writing about the app stores, and it is a web game, but
you are basically right. Never though about that.

------
Unosolo
I regularly see developers going out of business because they are not charging
enough. I have been doing software consulting for the past six years and I
charge higher rate than anyone else I met in the niche.

The ex-contractors I had a chance to talk to don't describe becoming a
permanent employee as "going out of contracting business". The reasons they
usually cite for ceasing consulting: \- anxiety about not being able to get a
next contract \- additional paperwork, unpaid administrative overhead \-
dwindling of contract work stream \- unpaid travel

They tend to underestimate the volatility and added overhead of contract work
compared to permanent positions and they do not charge enough to cover the
risks and extra expense. A lot of the newly born contractors stay in the
business as long as the initial client keeps extending them and fail to build
a business.

The nature of their business is opportunistic and the business dies once the
first serious obstacle is met. In my opinion they fail to realise the
importance of negotiating a thicker margin that serves as a tool and
motivation to overcome many hurdles that are otherwise smoothed by employer. A
thicker margin provides business continuity and a long-term win for the
customers.

I can see clear parallels with selling apps. Sexy apps might be given away for
free, as there are plenty of competing developers some of whom are attracted
by vanity. However, charging more means getting higher quality customers who
self-select based criteria you set and advertise and will help build a more
stable, healthy business.

------
nemesisj
This is a non-businessman's response to a non-businessman's problem. Pricing
should be based on the value a customer receives for your product, regardless
if it "feels" or "seems" expensive. Instead of asking everyone else to raise
their prices, why not demonstrate more value to your users or educate them on
why the pricing is the way it is? Or maybe, the value being experienced by his
users just isn't worth the price he's charging.

~~~
jiggy2011
The problem with mobile apps is that I often don't have a clear idea of the
value I will receive. I've bought apps in the past that I have literally never
used.

At $1 this doesn't really matter because I will also occasionally buy a $1 app
which gives me way more than $1 in value. So really I may have paid $10 for
that useful app, but the problem is that the person who wrote that useful app
only gets 1/10 of the money. The other 9/10 is distributed among those who
developed the useless (to me) apps.

The answer as you suggest is to demonstrate the value before purchase. I think
the problem here is that the app store model is often not conductive to that,
you often just get a couple of bad screenshots and 1 paragraph of text.

On the other hand I will usually do more research when buying desktop
software, simply because doing research on a desktop computer is less painful
(I have a big screen and a proper keyboard).

~~~
StavrosK
What about the trial? You can try it out for 15 minutes, at least on Android.

~~~
jiggy2011
15 minutes isn't really long enough. Especially since you often need that long
just to download an update.

15 minutes might be ok for a $1 app, but it should scale with price. If I'm
going to pay $100 I probably want a month trial.

~~~
StavrosK
I agree that 15 minutes isn't very long, but you also aren't paying $100 for
an Android app, so it's probably long enough.

~~~
jiggy2011
I might pay $100 for an app though , if I had confidence that it was worth the
$100.

I think that google probably prefers that there be thousands of cheap apps
rather than a small number of good ones.

------
fhd2
I fully agree with this, although I'm more pessimistic: I don't believe that
we can force our way out of this. It might work, for a while, for small teams
that already have a community and sufficient loyal customers.

(I'll specifically talk about games, for which this is in my opinion most
severe.)

Developers have jumped right into a downwards spiral: Everyone really just
tries to make money - when all else fails by being cheaper then the
competition. That's rather natural and happens on all markets. However, games
do not have any intrinsic value, so they can go all the way down to 0. At some
point, games won't have any value left in the eyes of consumers - something
we're awfully close to.

But the bills still need paying. So customers are increasingly being tricked
into spending money ("free to play", "micro transactions" etc).

As someone who makes and enjoys games, this makes me sad. Unless we manage to
revert that spiral, making a living from games will soon mean to build some
kind of more-addictive-than-pleasant things more akin to market places and
chat platforms than games. And as a gamer, I don't want to touch these things.

I don't want to whine, I want to see the positive side. I just can't find it
lately.

~~~
dylangs1030
The race to the bottom is everywhere, but you're right in that it's most
apparent in games.

As always, developers are not necessarily savvy in business. Common sense
suggests that undercutting competition with lowered prices will drive market
share upwards, eventually beating them out. This is a desperation move, and
one that only ever works in the short term, if it does at all.

The truth is the race to the bottom exists because this kind of tactic is
deployed by everyone in response to everyone else. But it will only work as a
calculated move that crunches the numbers to find a sweet spot. Reducing your
game from $5 to $1 might get a lot more customers, but you'll need to increase
your user base fivefold just to match your previous revenue. That's not
realistic in most cases.

It's the same logic that people without a real edge mistakenly employ when
they say they'll disrupt an industry by taking something really valuable and
making it both better _and_ free. It's not sustainable, but everyone does it.

~~~
fhd2
Yes, this behaviour is certainly not limited to games. However, other software
makers seem to cope by moving to SaaS and ads somewhat successfully. Ads in
games haven't really proven themselves, and I'd personally hate it.

------
zokier
This somehow reminds me of the notorious "Open Letter to Hobbyists" by Bill
Gates

[http://en.wikipedia.org/wiki/Open_Letter_to_Hobbyists](http://en.wikipedia.org/wiki/Open_Letter_to_Hobbyists)

------
laumars
I have a few problems with the article:

1\. Two of the authors arguments for higher prices is "more intelligent users"
and "less support queries". Those strike me as incredibly snobby reasons to
set a price tag. In the case of the latter, if you're selling software then
you have to be expected to support it (I know customer support is an absolute
pain - I hate it as much as the next person. But think about things from the
consumers perspective. You'd be pretty pissed off if you've paid for a product
that doesn't appear to work for you and you're clueless about how to fix it).
As for the "more intelligent users" remark - I think that level of selective
pricing is just disgusting.

2\. The article neglects to mention that there's room for two different
business models: free versions subsidised by ads and non-free but without
adverts. While it sounds like the author does have an ad subsided free app on
the market despite his arguments about the merits of premium versions, quite a
few publishers seem happy to release against both business models concurrently
(ie they'll have both a free and a premium version available). I don't have
figures about how successful that strategy is (if anyone else does, I'd be
interested to read them), but I think the theory of that works rather well as
you're combating the piracy / freeloader issue with the ad subsidised versions
and have a premium version available for the aforementioned snobs and those
who just hate adverts.

3\. The whole article amounts to little more than price fixing and arguments
against a free market. The very reason prices are so low is because the market
is saturated so developers undercut each other to get sales. If the author
doesn't like that, then perhaps he should switch to a market that isn't
saturated rather than demanding that everyone is owed financial reward for
their work - even if their product is unoriginal and available "ten to the
dozen". This might sound harsh, but it's little different to any other
industry. eg if everyone became window washers tomorrow, there would be more
people washing windows than there would be houses with windows needing washing
- so the whole market would collapse. And it's a similar case in mobile app
industry, the market is far to saturated to guarantee every developer a decent
wage.

I hate being negative like this, but I'm so sick and tired about hearing
people moan that they're not earning as much as they think they should be
while working in a saturated market. And the remarks about tailoring his
prices to the "intelligent" was just unnecessary in my opinion.

~~~
jasonwocky
I took "more intelligent users" to actually mean "more informed users", which
I don't find offensive at all. Since they lead to less support queries.

And as for less support queries, this isn't snobby...this is just straight
economics. Any developer with business sense should be looking to minimize
support queries by any profitable means necessary.

------
wisty
[http://gigaom.com/2011/04/21/the-average-ios-app-
publisher-i...](http://gigaom.com/2011/04/21/the-average-ios-app-publisher-
isnt-making-much-money/)

So, the magic numbers seem to be $5.99, and $8.99 for games, and $5.99 or
$6.99 for non-games.

That's old data from 2011; but it makes sense. "A few bucks" has a similar
transaction cost (is it worth actually paying for?) as a $0.99 game, when you
compare them to "free". Though I bet if you charge any money (even 0.99) for a
game with IAP, you've already convinced them to open their wallets.

I'd love to see more recent data, but I can't see how "undercutting" the
competition is worth it.

Unless there's a network effect (spamming friends) ... why would you want 3X
the sales, and half the revenue?

------
chj
Pricing is indeed a hard problem. Given the competitive nature of App Store,
you can't raise price on your own. People have been used to cheap apps. One
solution is paid update.

------
motters
It's a valid point. Putting months of engineering effort into something which
sells for 1-3 dollars is economically illiterate unless you expect to sell
thousands of copies. Considering the very niche nature of many apps, selling
in large volumes is not something which could typically be expected to happen.

Of course if you then expect to be able to sell ancillary services around your
$1-3 app, as a sort of loss leader, then it's a different matter.

------
belorn
A large reason why software prices are so low is because software developers
are not legal liable when they push out products that breaks, destroy
information, spy/steals information, or might simply not even start up.

In almost any other market, producing such product would land you in jail, or
at least sued to the point of bankruptcy. Imagine a car dealer which sells car
that are nearly without bugs, but occasionally you loose steering or breaks.
Or what about a children toy that crumble to dust once the box is opened
because the manufacture process had some "bugs" in them. Cheap or expensive,
people expect physical objects to work and not be broken at the point when
bought from the store. Apps and software on other hand... is regarded as an
risky item. The consumer is liable for the purchase decision when the app is
broken, steals information, or simply won't start up. The cheaper the price,
and even fewer will try to ask for a refund.

Add some liability risk for the developer, and the market saturation will
decrease, prices will go up, and developers who spends actually effort and
time into their work will be paid.

------
dkrich
What he's talking about is cost-based pricing and it is usually a bad idea.
For those who don't know, it essentially involves taking the costs associated
with producing a product (in his case, his time) and marking up the cost to
some amount above that to ensure sufficient margins.

The fact is that when people buy a product they don't really care about what
it cost you to produce, they care about what value they can extract from it. A
classic example of this is the fragrance market, where people routinely pay
$80 for a 2.5 ounce bottle of cologne that cost less than two dollars to
produce. They do this because they imagine it will make them more attractive,
so to them, $80 is a small price to pay and don't really care about the
markup.

Some businesses can mark software up higher and higher and increase sales and
profits because they are providing a large value proposition in the form of
huge time savings, more sales, etc.

Because he only mentioned the time he invested and the existing bottom-of-the-
barrel pricing as the reasons all software shops should raise prices, I have
to say his logic is mostly flawed.

------
huhtenberg
This should really be supplemented with demo/free versions so that people
would have a chance to try things out before shelling out 10x the average
AppStore price.

When I am looking to download a new app, I can never tell from the description
and screenshots if it's good or not, so _the_ question is always - "What if
it's crap". With an app that costs 0.99, the answer is simple - "Let's try it
and see", so it's effectively a very cheap trial ... that just happens to come
with a _free_ full version. I would've readily paid more for latter, but I
already got it and it was free, so what's not to like. This is why in-app
upgrades would seem a natural way to convert people who like your app into
paying customers. Let everyone kick the tires and let those who like it move
on to a full version.

tl;dr - Indeed start charging more, but through in-app upgrades.

~~~
interpol_p
Apparently games with demos sell worse — seeing half the sales of their non-
demo counterparts.

[http://www.eurogamer.net/articles/2013-02-11-games-
without-d...](http://www.eurogamer.net/articles/2013-02-11-games-without-
demos-sell-better-on-xbox-360)

(Though it only looks at xbox 360 games)

~~~
enko
Those kind of statistics are useless. They lack any kind of control
whatsoever. For example, it's very easy to imagine that a company that knows
its game is not telling a compelling story might be tempted to make a demo to
try to get people into it, whereas a company with confidence in its brand
might not. Who knows, the demo might be doubling sales in those otherwise no-
hoper games.

You could just as easily rewrite the conclusion to be "companies who knows
their game is crap often choose to make a demo". Without a more sophisticated
statistical analysis, it's every bit as valid.

~~~
interpol_p
I'm not going to comment on the quality of the article. It's certainly not
exhaustive research and is only a small insight into some sales numbers. But
it does make a kind of intuitive sense.

Personally, if I play a game and see how its core game mechanics work then I
am much less likely to purchase it.

A lot of my game purchases are impulsive — I see something cool in the trailer
and want to try it. Once I've tried it I lose interest. Demos give me the
opportunity to lose interest without purchasing the game.

When I know I really want to play a game all the way through I will always
purchase it without trying the demo (if available). So in my limited gaming
experience demos have never been a step to a sale.

~~~
gizmo686
I generally avoid buying games for the same reason. Few really advertise their
core mechanics, and even the ones that do, I have no way to trust them on how
well executed they are. For cheap games, I am willing to take the risk because
even if the game is 'bad' I will still generally come out with a decent $/hr
ratio. But the only times I get 'expansive' games are if I have seen a lot of
people play it to the point where I have a good sense of how it works. Most
games do not have a large enough network effect to get to that point.

------
mmcnickle
Meanwhile, on another HN thread, you have _developers_ baulking at paying $70
for a very good text editor.

~~~
ruswick
This is because the market standard was and is $50. It's of no surprise that
developers are reticent to pay inflated prices that aren't in line with
comparable products.

If everyone else in town is selling coffee for $4 per cup, even the rich
people won't patronize a store selling it for $5.

------
dylangs1030
The author has a really good point here, but it's not realistic advice for a
lot of mobile developers. As much as I'd love to agree on principle, I don't
think it'll happen with the app stores' current incarnations.

There are several problems that prevent this from being actionable for most
devs:

1\. The barrier to entry is consistently getting lower, not higher. It's no
longer particularly difficult to deploy an app - either learn to design and
build it, or pay people to do that for you. It's never been easier to put
yourself out there as a mobile developer.

2\. This isn't marketing enterprise software to employees with spending access
to sizable company budgets. This is marketing small applications of limited
practical value (i.e. almost every mobile game) to people with limited wealth
without much in the way of customer support. People are shrewd about their
software nowadays - yes, they are more willing to spend their money on a
Starbucks coffee than an app, and you can argue the existential implications
and idiocy of this all you want, _it 's still what they're willing to do with
their money._

3\. The markets are too large. They're saturated with crap and quality alike
and it's insanely difficult to get noticed. If you are making a game, weather,
networking, camera, utility or entertainment app, you've got the deck stacked
against you. These are released en masse every single day by teams of
developers. Because of this, it's a race to the bottom and quality becomes
undervalued. This is, as always, supply and demand.

4\. A lot of the app store is an old boys' club, and the way to get in front
of a wide range of users is broken. If you have a reputable team behind you, a
large company's backing and you do a lot of marketing, this will not be an
issue for you. But that's not most developers. Most developers will struggle
to swim upstream in vain just to get noticed in one of the "Top ___" lists.
They might get a faint spotlight at #25 before being thrown back into the
depths of the app store like a rejected fish on a line. It gives the term
"starving artist" a new meaning.

I mean, I don't want to be cynical. I'm all in favor of developers not
underselling themselves. But I think you have to do a lot more than just tell
people to adjust their prices when you have all the aforementioned forces
working against them.

I can see that in some cases selling your mobile software for more leads to
nice benefits, like less of a customer support headache, requiring fewer
purchases, etc. But that's not possible for most devs because most apps
couldn't reasonably be priced at 30 euros. A really high quality audio or
business app could be, sure. But that indie game house? No, that advice
doesn't help them.

~~~
rlpb
> The barrier to entry is consistently getting lower, not higher.

Maybe so, but the difficulty in creating quality apps remains the same.
Perhaps the authors of quality apps are doing themselves a disservice by
hiding amongst the dregs.

~~~
daurnimator
How do you propose to stand out?

------
segmondy
The price has nothing to do with it. Sell your calculator app for $20, and
some kid in a third world country will gladly sell his for 99cents. His
99cents has the equivalent buying power of your $20. How can you compete with
that?

You can't compete on price, you have to compete on being different and value.
That way, even if you sold for peanuts, you will have so many users that you
can still make a lot of money. I rather sell millions of apps at 99cents each
than 100 at $100 each.

~~~
badclient
_I rather sell millions of apps at 99cents each than 100 at $100 each._

Talk about a false dichotomy.

------
anuraj
Price discovery is an outcome of demand-supply situation and information
asymmetry. Optimum price x can be derived by optimizing function f(x*n) where
x is the price and n is the number of users willing to pay that price. So the
approaches are:

1) Experiment with a sample population to determine 'x' 2) Use heuristics
about existing similar software to reach a price point

The point is many developers are just not looking at maximizing their earning
potential.

------
sirwitti
I guess this is a "normal" reaction of a crowded market. Everybody wants to
earn money and tries what works best.

Many musicians have quite similar problems: They can play for free or some
other band which is even more desperate to get a gig will play.

I personally try to keep away from priceless markets (though being a musician
too).

The only way I know to handle this is delivering the best quality I can and
finding customers who want/appreciate this.

------
Nursie
I'd quite like it if my fellow developers in the UK would stop charging so
damn little for their services too, salaries in this country are comparatively
depressed compared to North America or Australia, yet we still have the
constant bleating from business about lack of available talent.

You would think that this would result in higher salaries as engineers are in
high demand, but no...

~~~
flyinRyan
Much of that bleating is just posturing. They know they could get plenty of
talent if they paid for it, but they'd rather outsource. For outsourcing you
usually have to show that you can't find talent in-country so companies do all
kinds of tricks to make sure they can't fill the positions and can outsource
the job.

------
quackerhacker
Pricing models need to be tailored to the target demographic, volume
expectations, and market saturation. While some apps which provide great
functionality (logmein, spashtop, ect.) these are targeted to adults and the
competition is bleak, the pricing models can't be compared to certain games or
apps (like angry birds, flashlight, ect.).

------
stefantalpalaru
Maybe copies of a generic piece of software are really worth 1-3 euro in this
market. Why inflate the prices artificially?

------
drdaeman
Which market's destruction he's talking about?

Overall software market? Mobile app market? Game market? Indie game market?
From a consumer point of view, I fail to see any signs of destruction on any
of them. It's exactly the opposite, they seem to me as growing and constantly
expanding.

------
agilebyte
Maybe a product can serve as an advertisement for your services/company? So
instead of selling a product for its "proper" price one, trying to break into
a market, saves on ads and "spends" it on making a product that is free/too
cheap?

------
CitizenKane
I think it's very simple, you should probably simply charge more. See
[http://www.kalzumeus.com/2013/04/24/marketing-for-people-
who...](http://www.kalzumeus.com/2013/04/24/marketing-for-people-who-would-
rather-be-building-stuff/) under "The Most Important Pricing Advice Ever:
Charge. More."

~~~
dylangs1030
It's never going to be simple because the market isn't an ideally functioning
organism.

'patio11 makes great points, but his advice is mostly actionable for desktop
software and web applications, which are a completely different beast than
mobile apps.

Mobile applications won't sell at high prices unless they have a real core
competency that solves a real need that _doesn 't exist yet_ \- indie games
and to-do list apps have little hope of achieving that kind of benefit.

Aside from that, there is such a low barrier to entry that they _need_ that
kind of incredible edge over the competition to survive at high prices.

Take a look at the high-priced apps and you'll notice a trend - they're
typically not games/entertainment/weather/"fun" apps. They're real tools that
can be used in production or they're productivity _suites._

