For early-stage startups that are not well-known, press can definitely have a bigger impact than more features. For me, coverage in The Atlantic led to an interview on NPR, which led to tons new customers and a long-term benefit of being able to say we’d been covered by these two outlets. It helped with customer acquisition and award competitions, and would undoubtedly help with fundraising as well.
That may be true for Joe Spolsky. But he is one of the highest profile software people in the world. The 99.9999% of us who are less famous should probably spend more time on marketing.
In my case publishing a relatively unknown app, any kind of press obliterates the increase in customers due to features.
I guess 80% of my revenue was made on days of and immediately following press releases.
I never tried the press release route, sounds like you had good success with it?
And of course journalists only want new releases and new large features. Which is why getting features is usually only feasible on launch.
However it has been featured here and there and these features were always massive spikes.
a) Fog Creek had that high a profile when they put that advice into practice, and if not...
b) The people that Fog Creek had such a high profile among included its prospective/repeat customers (as opposed to just non-customer fellow software developers.)
But the context of this statement isn't really related to fresh startups. it's aimed at software companies... presumably with existing customers and revenue.
And yes, it's true that there are lots of exceptions at any level... a big press score or whatnot. The underlying point is solid though, imo. Most software companies best strategy is to make more/better software for their customers to buy/use. Shiny, big, spiky "tactical wins" are neither necessary nor sufficient. They just loom large in our narration of events.
b) Yes. Back then his customers were developers.
He said it had to be taken with the fact that Joel Spolsky's blog in its heyday had a tremendous amount of traffic from developers. He implied that it doesn't universally hold true.
That can work for others too. Maybe building an audience via a blog can be worth more than paid advertising, depending on the target audience.
I wrote a small tool that simplifies a single yet extremely annoying task (because I got sick of performing the task manually).
I offered it free for personal use, with clear notices that you need to pay to use it at work, and a way to contact me for a business license. I sold one license. Several other users e-mailed me to thank me for the useful tool, including some who indicated they were using the tool at work.
I could have added more aggressive nagging, or stringent enforcement (e.g. some form of online activation that blocks you if you're coming from a known corporate IP).
I could also have decided to make the tool available 100% for free under an open-source license.
The lessons I learned from this were:
- if you offer a free-for-personal-use version, business users will only pay if the hassle of going through the payment process is lower than the hassle of using the free version illegally; I suspect a nag screen will only be enough if it's really frequent, and will probably annoy your "free" users a lot.
- the effort required to write any form of license enforcement, or to set up and maintain easy ways for someone to pay for your software (e.g. credit card) is often not worth it
--> If it's a small thing, do the world a favor, and just make it free. The money you'll earn may not be worth the additional time and hassle you'll have to put in to earn it (not just for the additional code or sales setup, but also dealing with payments and customer inquiries, taxes/legal stuff, ...).
It's free and open-source on GitHub. You can download the source code and build it yourself with Xcode.
I also provide a $5 built app available to purchase via Gumroad, code-signed with my Apple developer account and ready for immediate use without Xcode with no scary macOS warnings:
I found that this model works really well for small projects where you want some of the benefits of open source and don't want to deal with upgrades or nag screens.
It would be even better if GitHub built some "paid release" features into their product, in addition to their Patreon-style Sponsors feature.
It's not just having to pay that's the problem. I like the ability to reinstall my OS whenever I feel like. This adds another step to setting up my machine and is extra work to automate.
For desktop software, I'd suggest to detect if the system has a proxy configured, that's a good hint whether it's a corporate computer.
But that’s probably one of the least user-friendly purchasing funnels you can possibly have. I think there’s some more basic lessons to learn about sales conversions before getting to those other conclusions you reached.
Setting up a "better" funnel would have cost me much more time, spent on stuff I didn't really enjoy doing, with no guarantee that I'd ever make enough money to give me a reasonable reward for that additional work. (Which would be more than the work that went into the tool.)
Maybe it would have worked and hundreds or thousands of people would have given me $5 or $10. Maybe the resulting support load would have been worth it. But again, I'd have to somehow make the free version less useful to have a decent chance on that. In retrospect, I regret not making the tool free from the beginning.
I have a hypothesis that price tolerance follows Pareto distribution, i.e. the function of the number of people willing to pay any given price for the same product must have the same shape as the overall wealth distribution among your customers. Therefore it should be theoretically possible to find your peak price that yields maximum revenue in the following three steps: (1) take measurements at several different price points (A/B test) (2) find the Pareto parameters for your customers (3) solve the differential and find the peak.
The same in a bit more detail:
Jeff Bezos is far wealthier than I am, but I don't think he would pay a million dollars for a hamburger.
This conclusion is sound if the schedule looks like fly out -> get haircut -> fly back.
If you do anything else while you're in Europe, then the travel cost is being amortized over everything you do. Maybe I was willing to pay a few thousand dollars for some Yarg cheese, and the haircut was a happy bonus.
That's a huge claim.
Anyone doing dynamic price optimization is doing this, long before 2016.
LEVITT: The very first class you take when you go and enroll in economics — introductory economics — typically on the very first day they put a demand curve on the board. And like every other economics student, when I showed up my freshman year in school and saw that demand curve, I just accepted it. I said, “Well, they put it on the board; it must be real.” And I never questioned anything about demand curves. I always just thought of demand curves as something that exists, like buildings or trees. They have a sort of a physicality to them.
But then when I went to write my own textbook with Austan Goolsbee and Chad Syverson — now this is before Freakonomics, so maybe 13-15 years ago — I actually had to sit down and write about demand curves. And I thought for the first time, “what really is a demand curve?” And I thought to really bring it to life, I think I have to find one, I have to show one to the students.
And I looked around, and I realized that nobody ever had really actually estimated a demand curve. Obviously, we know what they are. We know how to put them on a board, but I literally could not find a good example where we could put it in a box in our textbook to say, “This is what a demand curve really looks like in the real world,” because someone went out and found it.
DUBNER: So you’re saying that the demand curve as it exists in economics and economic literature is kind of a fiction or an invention of economists to explain the rest of the transactions around it?
LEVITT: Exactly. It’s an artificial construct, which turns out to be incredibly valuable for organizing the world and knowing how to analyze problems. And in that sense, who really needs to see one or to find one? But I’m a very tangible person, and I thought, if I could really have an example of a demand curve maybe I could push up the learning of the students.
It took me, I don’t know, 15 years between when I took the beginning economics to when I wrote the textbook to actually think hard enough about demand curves to really understand them. I thought if I could show someone a real demand curve, I might help the students learn about it much faster.
LEVITT: Yeah, so we aren’t faking it. I think that’s the wrong way to think about it. What I’d really say is that we completely and totally understand what a demand curve is, but we’ve never seen one. I don’t know if it’s fair to make physics comparisons, but you can imagine something like in the old days when the models had figured out something about protons and electrons, but we hadn’t actually figured out how to literally see an electron. And we knew it had to be there from the theory and then it was just a matter of making the colliders go fast enough or whatever it takes to see an electron, and then it was confirmed that they were there. So, in economics, it’s even easier because it’s not that we have to wonder whether demand curves exist or not, because we know they exist because we define them and they’re there. But I wanted to touch one; I wanted to hold a demand curve, and I had never had a chance to do that until I took Uber and it suddenly occurred to me that here was a chance to hold a demand curve in my own hand.
And you didn't need to copy-paste all that, I had read the article.
I stand by my post, the claim in the article is exaggerated.
No intention of taking it up with him, I'm sure he knows this; I was writing for the readers here.
I like the approach taken (among others) by Matthew Butterick for Practical Typography : I've enjoyed reading his book the same way and gladly paid for it /after/, as he asks, even though I would not have bought it at first.
I read it when it first came out. Its very good. Pricing is a surprisingly interesting and deep subject that is heavily intertwined with microeconomics and psychology.
In reality, different segments of your users have varying price sensitivities, which means the best practice is to charge the maximum price that each individual customer segment is willing to pay. Skip to the section on "Versioning" to read more about this.
Disclaimer: I run an API that helps businesses carry out versioning/dynamic pricing, https://modernpricing.com
Currently, we automatically connect to Segment (https://segment.com/integrations/modern-pricing/) to make the integration easier. Additional integrations have been commonly requested thus far, but we are prioritizing open platforms to start.
And from the Redgate Software website at:
Hope that helps.