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Pricing your software

Your software's ready to use, everything is set up, but before it reaches its users, one problem comes up: how much do you charge for it?

No one can tell you exactly how much you should charge for your software product, but there are some things you need to bear in mind when deciding your software pricing strategy:

Factor in the real cost of development

Software product pricing has to take into account the real cost of development. Real costs include everything you spend from the moment you begin working on the project to the moment your product reaches the market, in addition to the on-going costs of staying in business.

List the price where people can see it

Make sure the software product price is listed where people can easily see it on your website. If they have to search to find out how much the product costs, and cannot find it, some will assume they cannot afford it and will leave without making a purchase.

Avoid giving the "too good to be true" impression

Set your price according to the product category it is part of. Even though you might think it makes good software product pricing strategy, never set your price too low compared with the competitors, or else people might wonder if it isn't too good to be true.

Too high or too low?

Pricing software too low may not get you as many sales you think it should, because pricing, and software product pricing in this case, sends messages. Instead of getting you the results you want, too low a price may put people off from buying your software, making them think it's cheap and doubt its quality. Of course, too high a price may also put people off. However, it is easier to lower the price than to raise it.

No, you cannot fight a price war

As a small developer or shareware business, do not ever attempt to get into a price war. You may have the ability to make the product cheaper than anyone else, but large companies benefit from economies of scale, a benefit you probably don't enjoy, therefore you will not able to sustain a price advantage. Find some other advantage to compete.

Profit doesn't come last

Many people who are new to the software business make the mistake of thinking profit comes last when deciding on their pricing strategy. Software product pricing should be set so as to cover all the costs you incur developing it and allow for enough profit to keep you in business and provide you with the means to overcome the inevitable unexpected.

Limited-time offers

If you use the price to differentiate your software product, you will get the best results if offering it for less on a limited-time basis or as a competitive upgrade.

Complicated pricing schemes are not good

One of the traps shareware authors fall into when it comes to pricing strategy is making the pricing scheme too complicated. Too many options people have to choose from (like which version they should get, be it home/lite or pro or whether they want a code to unlock the product sent by e-mail or on CD, for instance) will only confuse them and can deter some from buying anything at all.

Do not set your price too low or too high, do not engage in a price war, do not confuse potential customers with too many options. These are just some of the things you need to keep in mind when deciding your pricing strategy, which will help you make more sales and implicitly more money from your software.

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Copyright 2006, all rights reserved. This article was written by Cristian Badea, CIO for Avangate B.V. / GECAD ePayment. Avangate is an eCommerce platform for electronic software distribution incorporating an easy to use and secure online payment system plus additional marketing and sales tools.

This article may be reproduced in a website, e-zine, CD-ROM, book, magazine, etc. so long as the above information is included in full, including the link back to this website.

About the Author: This article was written by Cristian Badea, CIO for Avangate BV / GECAD ePayment. With 4 years experience in the RAV AntiVirus team until 2003, Cristian now leads the development and operational side of Avangate / ePayment systems.
Avangate is an eCommerce platform for electronic software distribution incorporating an easy to use and secure online payment system plus additional marketing and sales tools.

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