But I still wasn't ready to part with my $50 for this little utility when the price point in my head was $0. And when there's so much great stuff in the App Store for $4.99.
This is exactly the problem with the app store. People have an idea in their heads of what an app is worth, no matter how much work it took to produce it. Price is completely decoupled from cost and from sales volume. This is like saying a Lamborghini and a Kia should both cost $9999 because they're cars.
Ultimately this is going to lead to a ton of low quality junk in the market. A quick perusal of the top 50 selling apps suggests we're already there.
And of course before the app store there was no low quality junk.
Frankly the problem with the app store is app discovery (something apple clearly understands). The emphasis is on (a) stuff that makes money, (b) stuff that gets downloaded a lot, (c) stuff that lots of people like. Once you go into niches it's insanely hard to FIND things. And if something looks intriguing but is expensive, there's no free trial mechanism.
If the app store fixed the discovery problem (and supported free trials) I think most of these issues would go away.
There's nothing wrong with a flood of free stuff, much of which is crap, and a ton of good cheap stuff aimed at broad markets ... This is actually a sign of progress.
This is like saying a Lamborghini and a Kia should both cost $9999 because they're cars. Ultimately this is going to lead to a ton of low quality junk in the market. A quick perusal of the top 50 selling apps suggests we're already there.
Agreed. The App ecosystem may soon become a race to the bottom.
He says he wants and needs the app, it's worth the money but he still didn't pay? That's not a very convincing argument.
On the developer side pricing this kind of consumer software per-device seems like poor marketing. It's unnecessarily reminding every potential customer about incremental cost. It also anchors the price incorrectly: "this software is worth $24.95, but you'll need to pay $49.90 to use it."
An unlimited $49.95 license makes more sense to me. Or a two-device license with upgrades to capture existing users who are willing to make additional upgrades based on sunk costs.
To be fair, I think some people might not have this problem, but from nought to fifty is quite a steep rise.
If I find a free app that does what I need, that is very nice. However, at a pricepoint of 50$, I have to think twice. Whatever I pay (I am a student) basically goes out of my monthly living allowance, which means out of my food money.
I have around 400$ (300€ really) a month for food and everything else after rent went off, 50$ is a significant part of that. I live several days off of that amount of money.
So in order to be worth spending this much money on an app, it sort of has to be essential. At that pricepoint, for me at least, the question is not "do I feel like shelling out that money that otherwise would have been used for nothing", the question that arises is "is this worth cutting a significant chunk out of my food budget for this month?".
It's a nice thing that many here don't have a problem like this, but generally saying that we just don't pay enough seems to be...arrogant.
For people, the calculation between necessity and price is necessarily different according to what they earn, but a lower price will more likely fall into more people's "impulse buy"-range.
A piece of software might be good and do the right thing, but the question for me (and maybe for the author just as well) is: is it necessary enough to warrant spending this much.
An app is more like a capital expenditure. You pay once, and never again.
You definitely should think twice, but the $400 monthly figure seems like the wrong comparison. You likely spend most of that on monthly expenses that recur.
I have the same issue of a limited budget. But for some purchases (software, books, furniture, etc.) I consider them on the basis of "does this provide X$ of value to me?"
If the item does provide enough value, then I use money I've set aside for that purpose, and I buy it.
Setting money aside for this sort of one-off value purchase is part of my monthly budget.
(Of course, I also have to weigh a $50 app purchase against other uses for my saved money.)
edited to add: I'm not saying you should be buying $50 apps of course, that is a lot of money on your budget. I'm just saying the reference point should be long term rather than monthly.
Those examples of elastic pricing are for consumer purchases (e.g. games).
The app in question is free for home use; but paid for corporate. Corporate customers have an unbelievably different concept of "expensive" from you and me.
I experimented with different prices for a corporate product, and found charging too little or too much reduced profits. (Sadly, this experiment seriously irritated at least one developer. Who knows, maybe a cheaper price would have lead to greater volume in the long-term.)
I would love to price by customer (price discrimination), so corporates pay what suits them, and individual developers/small businesses pay what's reasonable for them.
The standard approach is to have extra features in the "Enterprise" version, but I haven't found a way to make this work for me. Anyway... I'd rather everyone enjoy all features; not have version-config complexity; and get feedback/bug reports from everyone.
{rant: "Enterprise customers are an unbelievable pain. They take weeks to answer the simplest questions, they misunderstand, miscommunicate, make unfathomable mistakes, they have to go through Legal, Licensing, Management. And they tend to be discourteous, seemingly without realizing it. Their money - and they will spend more than you could realistically imagine - isn't worth it."}
I don't in general disagree, except to say that the consumerization of IT departments means that enterprises are using consumer-oriented stuff, so you get the best of both headaches these days.
And if you think the neterprise is bad, just try selling into the government channel. Jeebus frak, those guys are hideously cheap and supremely demanding. If it weren't for scandalously longterm lock-in due to high switching costs -- when everything is reviewed forever, almost nothing ever changes, including product selections -- no one would sell to the public sector EVER.
The author tries to be a little self-deprecating about it, but basically he's the Starbucks customer who engages the cashier in a long conversation about how the coffee is so expensive at places like this, and he's been meaning to start making his own coffee at home again, and shouldn't they lower their prices?
Yeah, my thoughts exactly. In the end he doesn't even buy it but wastes hours of his own potentially billable hours on trying alternatives and complaining. He also wastes the developer's time along the way.
Just buy the app if you like it. Put your money where your mouth is.
I too have found this, and thought it was very weird. I get a lot of emails from people using my apps (I put a highly visible email button for people to get in contact with me with problems of suggestions), and welcome not getting as many emails with the more expensive version.
I would be extremely curious if this holds for content as well as app. We've trained users that content is free, while apps can occasionally cost money. This has led to all kinds of price distortions in music and, most especially, ebooks.
As a content producer who works closely with engineers, I can vouch that good content requires no less training and effort than good apps. A novel-length ebook probably takes more time and effort to produce (for any level of quality) than an app. I'd imagine an album of music requires even more. Yet we we never hear stories about perfect price elasticity in content.
I'm genuinely curious if price elasticity holds true in content and, if so, why we haven't heard as much about it.
I can vouch for this as well with my app (http://www.teaapp.com )--it appears to be unit price elastic, based on some price experimentation I did on it at launch (varying between $1.99 and $4.99).
In spite of this my intuition tells me to price it at $.99 when Apple features it, and between $1.99 and $2.99 when people are hunting for it.
I just released my first iPhone app: http://www.wrestlingscorecard.com and priced it at $4.99 ($1 more than the other app on the app store.) I set the price point based on what I thought the app was worth, not on an expectation of sales. I haven't received enough reviews or ratings to show on iTunes, but the feedback I've gotten has been mostly positive. Even the complaints have been extraordinarily polite.
This concept points to one of Robert Cialdini's laws of influence: One is far more likely to drive all over around town to save 50 cents in the cost of a $2 pen than spend a few seconds to negotiate 50 cents from a $400 suit, even though the savings are exactly the same. You nickel and dime far less when you perceive the price to be 'not cheap'.
I noticed this too about myself when I negotiated with different contractors for work on my new house. At first it bothered me that I spent 5x as much time & effort finding a good cleaning company ($400 budget) than tile installer ($8k budget). Moreover, though I negotiated with everyone, including the electrician and painter, I didn't negotiate as much with the higher cost contractors as with the lower cost. Here's what I've come up with so far:
1. Knowledge: Part of it comes from the bike-shed phenomenon - I know how to clean, I don't know how to apply knock-down texture. So the more I know about something, the less I want to pay for it and consequently, the tougher I bargain. My solution to get a better deal is to simply learn more. I call up contractor A with absolutely no knowledge about how to fix the problem or what costs to expect. I get some idea (and learn industry-wide terminology) and then call contractor B. I use some of my new-found knowledge to show I'm not absolutely clueless. By the time I've called contractor E, I know more about my problem than anyone else, plus I have a good idea of the expected costs.
2. Past relationship: I only go through lots of contractors when I don't already have a good relationship with an existing one. I didn't have to get quotes from five tile installers because I did that three years ago and found a good guy to install tiles at my old house. This time I simply called him up and he gave me a reasonable quote. You could have a past relationship with the fine-suit tailor and don't need to negotiate 50c each time because you know he is already giving you a good deal.
3. Quality: In the end, you pay for quality at a given price point. I don't mind the cleaners missing a spot but I do mind the tile installer messing up a center tile. You don't want to negotiate too hard with the fine-suit tailor because a 1% risk of damaging a $400 suit due to cutting corners is a lot more expensive than 1% risk of damaging a $2 pen for the same reason.
4. Fungibility: All $2 Bic-black pens are same, not all $400 suits are. Same with cleaners vs. tile installers or painters. You do not want to use price as the only negotiation basis when advanced levels of workmanship is involved. Price can be the primary basis when it comes to common objects or services, available in many places.
5. Continued relationship: I don't much care if I buy another $2 pen from the same vendor in the future because there are many good stationery vendors but I'm not going to find another tailor, painter, or tile installer as easily.
6. Negative perception: I don't want higher cost contractors to think I'm a cheapskate who wants a $5 discount on a $8k project because then they will treat me like a cheapskate and will make decisions based primarily on cost-saving instead of the overall value. I don't want the tailor to use cheaper thread or tile-installer to use less thinset just to lower my immediate project cost because we all know this will cost me more in the long run. I don't mind what a stationery vendor does as long as he sells me the cheapest pen in original packaging.
My overall point is that it's not always irrational to find a better deal for cheaper objects than more expensive services.
> Rafe reviews mobile apps and products for fun, and picks startups apart when he gets bored.
The classic idea of how easy it is to criticize someone's work without having a full appreciation of how hard it is to do the work (because he does not do it himself)
It is one thing to write about a startup, another thing to build a product/build a customer base.
sure.
but its silly to argue about what the " correct " price is in any transaction.
the correct price is the one the buyer and seller both freely agree to and come away happy with. simple as that. there are no other factors.
if the seller is selling too low and cant paynhis staff, thats his mis management. not something to talk about publicly.
if they are succesfully selling the app at a high price and people buy it, and the seller treats his staff liks rock stars thats fine. nobody ripped anyone occ. there is nomneed to justify price, other than closing sales.
go watch carpet negotiations in morocco, i saw a guy pay 3000 usd for a nice rug, and a student pay 50 usd for the same size and type lof rig, same store.
(all hand made so cant say they were the same). so what was the rug worth? to rich guy it was worth 3k because he went to morocco and got it himself, blah blah.
to the student it was worth it because he negotiated the sales guy down from 5000 usd to 50 usd. in both cases, moreso in the latter, the salesman negotiated as if it were an art form, and in the end, made the point thAt once the parties avree on a price and close the deal there are no regrets. he wss happy he sold one rug for a huge amount of cash, and happy to sell one. henaply to a student who would appreciate it more. in both cases he made money, And we have. o ide what he true production cost is.
"the bitter truth we critics must face, is that in the grand scheme of things, the average piece of junk is probably more meaningful than our criticism designating it so." - Ratatouille
20 years ago, when I worked at CompUSA, we used to have this bin of budget software. In it, you'd find things like "3D Home Design" software, game clones, and Pagemaker wannabes. People used to ask all the time, why do I need to pay $200 for X when I can buy this one in the bin. They'd of course be cheapos, buy the one in the bin for $9.99, and then one of two things would happen, either they'd realize, wow, this is crap, and come back and buy the $199 "real" software, or they'd come back and ask a thousand annoying support questions on how to make the crap software do what they need. Some things never change.
I'm surprised synergy+ wont work in a pure mac environment. I use it every day but my setup is 2 linux machines and a windows machine. If I couldn't use it - I would buy something like what he describes. I would quickly look at any and all options - though $75 for the option described would give me pause. The ability to drag files from machine to machine sounds cool - though right now I get close to the same thing with ssh.
I find it a little odd that he spent so much time haggling over a $50 tool that is obviously providing a lot of value to him.
The response from the vendor (about it being hard to make money to pay his developers when selling a fairly niche tool) resonates with me, though. I built a fairly specific-use tool on the side last year and started selling it on the Mac App Store. I found that prices weren't very elastic, and I had to drop the price down to $2 to sell very many copies.
Even then, people think I'm some big company selling this software, when the revenue I generate from it isn't nearly enough to pay my bills, much less hire others to work on it. Even last year when I spent a while in the top 5 in dev tools, I wasn't netting more than $25 per day.
Ultimately, I think the app store concept is really cool and will be a net positive in the long run, but I wonder how many useful tools will fall through the cracks because buyers have been conditioned to think that a $5 app is "expensive", even though it isn't nearly enough to support some tools.
I find it more than a little odd. I've just bought the app (two computers), because it's something I've been looking for for a long time. I'd pay just for the shared clipboard feature. I can't count the number of times I had to copy a URL into a file on Dropbox, or Notational Velocity, just to be able to paste it into an E-mail being written on my laptop right next to my main machine.
Spending $50 saves me a lot of time and frustration. Also, it is much cheaper than writing the software myself (which I was seriously considering). I'm more than happy to pay that.
I also hope that because the software is well priced, the company won't feel a need to diverge into multiple half-baked products. I've seen that happen to Ironic Software (Yep, and afterwards Leap, Deep, Fresh), I'm seeing it happen to IcyBlaze (iDocument, and then Sparkbox). I'd much rather see a company develop ONE well-supported and polished app than diverge into multiple bug-ridden ones.
people think I'm some big company selling this software
I'm convinced this is a significant insight. Most consumers are trained to assume that they're always buying from Megacorp and that cheating and complaining is perfectly valid behavior.
Back when I was landlording, I had a HUD tenant who was a total pain - until she found out that her rent minus my mortgage was about twenty bucks a month. She had just assumed that as a property owner, I was rolling in cash. After that, she was pretty nice.
I am more inclined to think the customers may be right and this app is not worth $50 to them. There are competing free products, but also competing work flows like using Dropbox to move documents between your two laptops depending why you are using two. The guy has clearly thought about this a fair amount.
There is apparent oversupply of app developers who seem to think they will make money but the evidence is very few will build sustainable businesses while the rest just help Apple out by adding diversity.
Even last year when I spent a while in the top 5 in dev tools, I wasn't netting more than $25 per day.
I've had apps in the iPad "what's hot" music app list many times but they're still only bringing chicken scratch compared to what I could have made consulting instead. The handful of home runs you hear about obscure the fact that for 99% of us the best way to make money in the app store is to charge by the hour for writing them for someone else.
There's an interesting ethical question here. If you charge more for your app, you may make the same amount of money and save on support costs, but you're also denying less wealthy people access to a good tool. It's much like, for instance, the clothing business. Some low-end luxury brands sell clothing of comparable quality to what mass-market brands offer, but mark up the price. This means that only wealthy people can afford the clothing. While you could just as well sell it for less with possibly similar profit margins.
Do you think it's ethical to exclude lower-income consumers just because it's more convenient for you? If you really believe in what you're doing, wouldn't you want it to be accessible to as many people as possible?
Perhaps, but there's a threshold below which it just isn't profitable to code apps. Contrary to other developers reports, I haven't found that my net revenue is independent of unit price. And, as much as I'd like to play the philanthrope, I'm not rich enough to work for free.
> If you really believe in what you're doing, wouldn't you want it to be accessible to as many people as possible?
I don't think this is a real issue. Small developers love their apps and want people to have them, but are seldom filthy rich.
The equivalent of luxury goods are the crappy EA Tetris apps that people buy on the App Store for the name alone, and I doubt anyone involved in their production believes in what they do.
On the other hand, I really miss student discounts on the Mac App Store :(
ethical? its straightforward free market principles at work.
especially if similar quality clothing is available cheaply. finding a way to et people with more money to buy your brand even though its basically the same as the cheap one is just cine if you can do it.
ethics only come in when we start talking serious quality of life issues, like healthcare and food.... otherwise its all branding and marketing.
When you are used to apt-get (or equivalent packaging systems, or download.com or whatever on Windows), the concept of paying for apps when using the App Store is baffling.
I borrowed a friend's iPhone a while ago, and I could not even find a decent free IRC client, I'm sure there might be one somewhere, but most were at best badly crippled. It was very depressing.
And I thought we dealt with the whole "it costs too much to build this software" issue ages ago, how much did it cost to build most open source projects? And who cares? The point is that people has good enough reasons to build software without needing to charge directly for it.
When you're used to the polish and quality of commercial applications, the appeal of the rough and amateur GUI-centric apps available via apt-get is baffling. Linux is a great server OS but there's a reason its irrelevant on the desktop.
Low priced apps imply loads of users to make money.
The people whose price sensitivity falls close to your low price are more likely to be cheapskates or find your software marginally useful. They are far more likely to complain and require support.
God forbid you are selling at a one-time-fee (which is why I think the current mobile development land-grab will flame out and transform into services-on-your-phone). You are going to be expected to provide support forever, at the drop of a hat, for any version of your application. Figure out a way to get recurring.
If you go cheap/free, you monetize with ads (often ineffective and always annoying to your users) or by spying on your users. I doubt many of us want to do the latter (Although, sadly, enough of us might to knock out the ones who don't. Race to the bottom!)
I now want to pay good money for the apps I use: I want the developer(s) to eat and drive nice cars. I want them around and in the game for bugs, integration changes and general support. I want them to not feel any pressure to jam new features in just to get another rev out the door for the upgrade money. Effectively, I want to pay them a lot of money for their software, because it is often incredibly valuable to me, I just want to do it on a payment plan where I can opt out if I no longer find the software useful.
I think that model, in most cases, leads to better software than either the open source model, the one-time-fee model and the freemium model.
I agree with the author that some apps are overpriced. Case in point, how many people do you know that are running legitimate copies of Microsoft Office or Adobe Photoshop? For a true bootstrapped entrepreneur - who needs project management, site hosting, graphic design, etc. - it's near impossible to afford “top of the line” products. Instead you're left to use Open Source software that at times can be good (Open Office) or unusable (if you've ever used Fireworks, don't even try to use Gimp on a Mac unless you're masochistic).
You're other option is to become a pirate (ARRhhhhh). Here in NYC, piracy seems to be such a pandemic that they're running Ad campaigns for people to report software piracy at small businesses (https://reporting.bsa.org/r/report/add.aspx?src=us).
Here's a business model I've been thinking of that I hope developers will adopt. I call it “Entrepreneur lay-a-way”. Basically if someone is a-self described entrepreneur you give them a full 1-year license to your software for free. At the end of the 1 year you charge that users credit card for the full license plus interest. The thought being if the entrepreneur is successful, in 1 year he'll be able to afford your software with interest. The entrepreneur benefits deferring payment for a year, and can use that money for other purposes (marketing, etc). He can then utilize you're wonderful tool to create value for his users and the world. It's a win-win all around.
The content is correct in that pricing apps is complicated and there are factors that people don't often consider. And that support costs should be a factor.
But nowhere does it prove the should be paying more. Maybe the developers could charge more, but it doesn't even prove they should do that. It just opens up the possibility.
And I think that ShareMouse is overpriced. $25 per computer? And his reason is that he wants to pay his developers well? That's a stupid reason. He should be looking for market equilibrium instead, then. He should be looking for the point where he makes the most money, instead of just picking a price and sticking to it. Even in a professional setup I would choose Synergy over his price, despite the manual setup (took me like 10 minutes last time) and lack of file sharing (the drives are network shared anyhow in any situation I've been in).
Also, if the claims of his page are true, then support cost should be nearly nil. He claims the thing automatically sets itself up, including monitor configuration. But if it fails to do that and you need support, that's even worse than not having it be automatic in the first place. If he's really having so many support tickets about it, it's not worth the money anyhow.
One of the major points raised is that pricing is largely elastic; i.e. raising or lowering your prices doesn't affect revenue. This may mean in some circumstances the correct price is the one that is so high that it leads to just one customer.
If it is the case that the pricing for this product is highly / almost completely elastic then a high price makes perfect sense. Just look at Apple's pricing strategies.
I would be more interested in his reasons to abandon Synergy.
>But all good things come to an end. Especially the free ones.
Why? For the past few years my desktop has been running very successfully on Open Source software. (With some blobs like flash that are just needed for legacy compatibility)
I don't see that changing in the near or far future.
> I have had to stop using Synergy. Setting up this free, open-source app is a black art,
I remember when I was trying synergy. I opened the manual and thought "that is quite complicated" and quickly found quicksynergy (there are probably other equally fit GUIs). It's a bit counter intuitive what IPs to put where but after that it's just putting an IP or hostname in on each PC and click a button...
That's much less "black magic" and didn't take me more than 5 minutes...
> and when CBS replaced my PC with a MacBook, giving me two-Mac setup (which, I admit, is extravagant), I couldn't get Synergy to work anymore.
So what was the error?
Of course that was not the point of the article. But he spent so much time explaining how he wouldn't buy the other application because it was too expensive I wondered why he didn't take that time to research why synergy didn't work or what GUI to use to make setting it up easy.
At the core his point strikes me as inane - that he won't spend a tiny fraction of the cost of his other equipment to solve a problem, that he clearly underprices his time - but still, the pricing strategy here sounds flawed.
I use Synergy, too; I'm all Windows so Mac-compatibility isn't an issue, but it's a nice program. Note nice though. Not deal-breaker, not revolutionary, not transformative. Could I be persuaded to pay for a better version? Sure, but only so much. Elasticity of demand as highlighted in the article only goes so far; ultimately there will be a ceiling price above which your revenue falls.
It's a gadget, not a core tool, and (IMHO) needs to be priced at the 'impulse buy' level. $25 / machine is enough to make people think (even if it's a tiny fraction of total system cost) and you're suddenly out of impulse and into avoidance.
> $25/machine is enough to make people think and you're suddenly out of impulse.
And this is ABSOLUTELY intentional.
We do NOT want impulse purchases. We don't believe that it is ethical to lure/seduce users to rush to their credit cards.
We don't believe that it is for any good if people buy something and then perhaps realize that they don't need it, are not able to use it properly and waste everybody's time in support and finally perhaps request a refund and are left with an unhappy experience.
No thanks.
We rather want users to be convinced. The software itself shall stand out and trigger the purchase decision. Not the price tag and not any sales tactics.
I believe, that there are cultural differences between the US and Europe regarding sales approaches but we are just fine with that.
Try the software. Become confident with it. Check prices. Review your options. Try other programs. Be back and we welcome you.
I've been a Synergy user several times in the past, and it always seemed great for the first few days and then descended into annoying bugs. (No connection this morning for no apparent reason. Or my mouse gets trapped on one system once or twice a day.)
On the one hand, my notion of how much software should cost says $50 for a Synergy clone is insanely expensive. But if I think of the benefit received, I've got to say that a Synergy clone which Just Works probably is easily worth $50.
Nice Article. It is better to have few customers and provide excellent service to them rather than having lot of customers and providing mediocre/bad service. The price point should justify the quality of the software and the support given afterwards.
About mobile apps: Apple and Google have encouraged everyone to expect practically free apps and to develop apps practically for free. They, together with the phone manufacturers and carriers, get the money and the market share. The developers put half the value or more of ios and android, but they get practically nothing in return. And this will only work even better as more and more people get smartphones, thus increasing developer revenue somewhat, so developers will be even more pleased than they're now. The truth is developers are getting screwed and smiling about it.
[+] [-] cageface|14 years ago|reply
This is exactly the problem with the app store. People have an idea in their heads of what an app is worth, no matter how much work it took to produce it. Price is completely decoupled from cost and from sales volume. This is like saying a Lamborghini and a Kia should both cost $9999 because they're cars.
Ultimately this is going to lead to a ton of low quality junk in the market. A quick perusal of the top 50 selling apps suggests we're already there.
[+] [-] Tloewald|14 years ago|reply
Frankly the problem with the app store is app discovery (something apple clearly understands). The emphasis is on (a) stuff that makes money, (b) stuff that gets downloaded a lot, (c) stuff that lots of people like. Once you go into niches it's insanely hard to FIND things. And if something looks intriguing but is expensive, there's no free trial mechanism.
If the app store fixed the discovery problem (and supported free trials) I think most of these issues would go away.
There's nothing wrong with a flood of free stuff, much of which is crap, and a ton of good cheap stuff aimed at broad markets ... This is actually a sign of progress.
[+] [-] adrian201|14 years ago|reply
Agreed. The App ecosystem may soon become a race to the bottom.
[+] [-] paulhauggis|14 years ago|reply
[+] [-] underwater|14 years ago|reply
On the developer side pricing this kind of consumer software per-device seems like poor marketing. It's unnecessarily reminding every potential customer about incremental cost. It also anchors the price incorrectly: "this software is worth $24.95, but you'll need to pay $49.90 to use it."
An unlimited $49.95 license makes more sense to me. Or a two-device license with upgrades to capture existing users who are willing to make additional upgrades based on sunk costs.
[+] [-] rmk2|14 years ago|reply
If I find a free app that does what I need, that is very nice. However, at a pricepoint of 50$, I have to think twice. Whatever I pay (I am a student) basically goes out of my monthly living allowance, which means out of my food money.
I have around 400$ (300€ really) a month for food and everything else after rent went off, 50$ is a significant part of that. I live several days off of that amount of money.
So in order to be worth spending this much money on an app, it sort of has to be essential. At that pricepoint, for me at least, the question is not "do I feel like shelling out that money that otherwise would have been used for nothing", the question that arises is "is this worth cutting a significant chunk out of my food budget for this month?".
It's a nice thing that many here don't have a problem like this, but generally saying that we just don't pay enough seems to be...arrogant.
For people, the calculation between necessity and price is necessarily different according to what they earn, but a lower price will more likely fall into more people's "impulse buy"-range.
A piece of software might be good and do the right thing, but the question for me (and maybe for the author just as well) is: is it necessary enough to warrant spending this much.
[+] [-] graeme|14 years ago|reply
You definitely should think twice, but the $400 monthly figure seems like the wrong comparison. You likely spend most of that on monthly expenses that recur.
I have the same issue of a limited budget. But for some purchases (software, books, furniture, etc.) I consider them on the basis of "does this provide X$ of value to me?"
If the item does provide enough value, then I use money I've set aside for that purpose, and I buy it.
Setting money aside for this sort of one-off value purchase is part of my monthly budget.
(Of course, I also have to weigh a $50 app purchase against other uses for my saved money.)
edited to add: I'm not saying you should be buying $50 apps of course, that is a lot of money on your budget. I'm just saying the reference point should be long term rather than monthly.
[+] [-] 6ren|14 years ago|reply
The app in question is free for home use; but paid for corporate. Corporate customers have an unbelievably different concept of "expensive" from you and me.
I experimented with different prices for a corporate product, and found charging too little or too much reduced profits. (Sadly, this experiment seriously irritated at least one developer. Who knows, maybe a cheaper price would have lead to greater volume in the long-term.) I would love to price by customer (price discrimination), so corporates pay what suits them, and individual developers/small businesses pay what's reasonable for them. The standard approach is to have extra features in the "Enterprise" version, but I haven't found a way to make this work for me. Anyway... I'd rather everyone enjoy all features; not have version-config complexity; and get feedback/bug reports from everyone.
{rant: "Enterprise customers are an unbelievable pain. They take weeks to answer the simplest questions, they misunderstand, miscommunicate, make unfathomable mistakes, they have to go through Legal, Licensing, Management. And they tend to be discourteous, seemingly without realizing it. Their money - and they will spend more than you could realistically imagine - isn't worth it."}
[+] [-] jgarmon|14 years ago|reply
And if you think the neterprise is bad, just try selling into the government channel. Jeebus frak, those guys are hideously cheap and supremely demanding. If it weren't for scandalously longterm lock-in due to high switching costs -- when everything is reviewed forever, almost nothing ever changes, including product selections -- no one would sell to the public sector EVER.
[+] [-] dgreensp|14 years ago|reply
[+] [-] cronitron|14 years ago|reply
Just buy the app if you like it. Put your money where your mouth is.
[+] [-] chime|14 years ago|reply
No matter what price ($0.99 - $9.99) I set, I make the same gross revenue. Reviews tend to be nicer when people buy it for $2.99 - $4.99.
[+] [-] megablast|14 years ago|reply
[+] [-] jgarmon|14 years ago|reply
As a content producer who works closely with engineers, I can vouch that good content requires no less training and effort than good apps. A novel-length ebook probably takes more time and effort to produce (for any level of quality) than an app. I'd imagine an album of music requires even more. Yet we we never hear stories about perfect price elasticity in content.
I'm genuinely curious if price elasticity holds true in content and, if so, why we haven't heard as much about it.
[+] [-] siglesias|14 years ago|reply
In spite of this my intuition tells me to price it at $.99 when Apple features it, and between $1.99 and $2.99 when people are hunting for it.
[+] [-] Czarnian|14 years ago|reply
[+] [-] sceptre|14 years ago|reply
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[+] [-] gigantor|14 years ago|reply
[+] [-] chime|14 years ago|reply
1. Knowledge: Part of it comes from the bike-shed phenomenon - I know how to clean, I don't know how to apply knock-down texture. So the more I know about something, the less I want to pay for it and consequently, the tougher I bargain. My solution to get a better deal is to simply learn more. I call up contractor A with absolutely no knowledge about how to fix the problem or what costs to expect. I get some idea (and learn industry-wide terminology) and then call contractor B. I use some of my new-found knowledge to show I'm not absolutely clueless. By the time I've called contractor E, I know more about my problem than anyone else, plus I have a good idea of the expected costs.
2. Past relationship: I only go through lots of contractors when I don't already have a good relationship with an existing one. I didn't have to get quotes from five tile installers because I did that three years ago and found a good guy to install tiles at my old house. This time I simply called him up and he gave me a reasonable quote. You could have a past relationship with the fine-suit tailor and don't need to negotiate 50c each time because you know he is already giving you a good deal.
3. Quality: In the end, you pay for quality at a given price point. I don't mind the cleaners missing a spot but I do mind the tile installer messing up a center tile. You don't want to negotiate too hard with the fine-suit tailor because a 1% risk of damaging a $400 suit due to cutting corners is a lot more expensive than 1% risk of damaging a $2 pen for the same reason.
4. Fungibility: All $2 Bic-black pens are same, not all $400 suits are. Same with cleaners vs. tile installers or painters. You do not want to use price as the only negotiation basis when advanced levels of workmanship is involved. Price can be the primary basis when it comes to common objects or services, available in many places.
5. Continued relationship: I don't much care if I buy another $2 pen from the same vendor in the future because there are many good stationery vendors but I'm not going to find another tailor, painter, or tile installer as easily.
6. Negative perception: I don't want higher cost contractors to think I'm a cheapskate who wants a $5 discount on a $8k project because then they will treat me like a cheapskate and will make decisions based primarily on cost-saving instead of the overall value. I don't want the tailor to use cheaper thread or tile-installer to use less thinset just to lower my immediate project cost because we all know this will cost me more in the long run. I don't mind what a stationery vendor does as long as he sells me the cheapest pen in original packaging.
My overall point is that it's not always irrational to find a better deal for cheaper objects than more expensive services.
[+] [-] brey|14 years ago|reply
[+] [-] wallflower|14 years ago|reply
The classic idea of how easy it is to criticize someone's work without having a full appreciation of how hard it is to do the work (because he does not do it himself)
It is one thing to write about a startup, another thing to build a product/build a customer base.
[+] [-] dedward|14 years ago|reply
the correct price is the one the buyer and seller both freely agree to and come away happy with. simple as that. there are no other factors.
if the seller is selling too low and cant paynhis staff, thats his mis management. not something to talk about publicly. if they are succesfully selling the app at a high price and people buy it, and the seller treats his staff liks rock stars thats fine. nobody ripped anyone occ. there is nomneed to justify price, other than closing sales.
go watch carpet negotiations in morocco, i saw a guy pay 3000 usd for a nice rug, and a student pay 50 usd for the same size and type lof rig, same store. (all hand made so cant say they were the same). so what was the rug worth? to rich guy it was worth 3k because he went to morocco and got it himself, blah blah. to the student it was worth it because he negotiated the sales guy down from 5000 usd to 50 usd. in both cases, moreso in the latter, the salesman negotiated as if it were an art form, and in the end, made the point thAt once the parties avree on a price and close the deal there are no regrets. he wss happy he sold one rug for a huge amount of cash, and happy to sell one. henaply to a student who would appreciate it more. in both cases he made money, And we have. o ide what he true production cost is.
[+] [-] ctdonath|14 years ago|reply
[+] [-] k00k|14 years ago|reply
[+] [-] stoolpigeon|14 years ago|reply
[+] [-] suresk|14 years ago|reply
The response from the vendor (about it being hard to make money to pay his developers when selling a fairly niche tool) resonates with me, though. I built a fairly specific-use tool on the side last year and started selling it on the Mac App Store. I found that prices weren't very elastic, and I had to drop the price down to $2 to sell very many copies.
Even then, people think I'm some big company selling this software, when the revenue I generate from it isn't nearly enough to pay my bills, much less hire others to work on it. Even last year when I spent a while in the top 5 in dev tools, I wasn't netting more than $25 per day.
Ultimately, I think the app store concept is really cool and will be a net positive in the long run, but I wonder how many useful tools will fall through the cracks because buyers have been conditioned to think that a $5 app is "expensive", even though it isn't nearly enough to support some tools.
[+] [-] jwr|14 years ago|reply
Spending $50 saves me a lot of time and frustration. Also, it is much cheaper than writing the software myself (which I was seriously considering). I'm more than happy to pay that.
I also hope that because the software is well priced, the company won't feel a need to diverge into multiple half-baked products. I've seen that happen to Ironic Software (Yep, and afterwards Leap, Deep, Fresh), I'm seeing it happen to IcyBlaze (iDocument, and then Sparkbox). I'd much rather see a company develop ONE well-supported and polished app than diverge into multiple bug-ridden ones.
[+] [-] Vivtek|14 years ago|reply
I'm convinced this is a significant insight. Most consumers are trained to assume that they're always buying from Megacorp and that cheating and complaining is perfectly valid behavior.
Back when I was landlording, I had a HUD tenant who was a total pain - until she found out that her rent minus my mortgage was about twenty bucks a month. She had just assumed that as a property owner, I was rolling in cash. After that, she was pretty nice.
[+] [-] justincormack|14 years ago|reply
There is apparent oversupply of app developers who seem to think they will make money but the evidence is very few will build sustainable businesses while the rest just help Apple out by adding diversity.
[+] [-] cageface|14 years ago|reply
I've had apps in the iPad "what's hot" music app list many times but they're still only bringing chicken scratch compared to what I could have made consulting instead. The handful of home runs you hear about obscure the fact that for 99% of us the best way to make money in the app store is to charge by the hour for writing them for someone else.
[+] [-] msutherl|14 years ago|reply
Do you think it's ethical to exclude lower-income consumers just because it's more convenient for you? If you really believe in what you're doing, wouldn't you want it to be accessible to as many people as possible?
[+] [-] cageface|14 years ago|reply
[+] [-] gurkendoktor|14 years ago|reply
I don't think this is a real issue. Small developers love their apps and want people to have them, but are seldom filthy rich.
The equivalent of luxury goods are the crappy EA Tetris apps that people buy on the App Store for the name alone, and I doubt anyone involved in their production believes in what they do.
On the other hand, I really miss student discounts on the Mac App Store :(
[+] [-] dedward|14 years ago|reply
ethics only come in when we start talking serious quality of life issues, like healthcare and food.... otherwise its all branding and marketing.
[+] [-] unknown|14 years ago|reply
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[+] [-] luriel|14 years ago|reply
I borrowed a friend's iPhone a while ago, and I could not even find a decent free IRC client, I'm sure there might be one somewhere, but most were at best badly crippled. It was very depressing.
And I thought we dealt with the whole "it costs too much to build this software" issue ages ago, how much did it cost to build most open source projects? And who cares? The point is that people has good enough reasons to build software without needing to charge directly for it.
[+] [-] cageface|14 years ago|reply
[+] [-] yabai|14 years ago|reply
[+] [-] carsongross|14 years ago|reply
Low priced apps imply loads of users to make money.
The people whose price sensitivity falls close to your low price are more likely to be cheapskates or find your software marginally useful. They are far more likely to complain and require support.
God forbid you are selling at a one-time-fee (which is why I think the current mobile development land-grab will flame out and transform into services-on-your-phone). You are going to be expected to provide support forever, at the drop of a hat, for any version of your application. Figure out a way to get recurring.
If you go cheap/free, you monetize with ads (often ineffective and always annoying to your users) or by spying on your users. I doubt many of us want to do the latter (Although, sadly, enough of us might to knock out the ones who don't. Race to the bottom!)
I now want to pay good money for the apps I use: I want the developer(s) to eat and drive nice cars. I want them around and in the game for bugs, integration changes and general support. I want them to not feel any pressure to jam new features in just to get another rev out the door for the upgrade money. Effectively, I want to pay them a lot of money for their software, because it is often incredibly valuable to me, I just want to do it on a payment plan where I can opt out if I no longer find the software useful.
I think that model, in most cases, leads to better software than either the open source model, the one-time-fee model and the freemium model.
[+] [-] adrian201|14 years ago|reply
You're other option is to become a pirate (ARRhhhhh). Here in NYC, piracy seems to be such a pandemic that they're running Ad campaigns for people to report software piracy at small businesses (https://reporting.bsa.org/r/report/add.aspx?src=us).
Here's a business model I've been thinking of that I hope developers will adopt. I call it “Entrepreneur lay-a-way”. Basically if someone is a-self described entrepreneur you give them a full 1-year license to your software for free. At the end of the 1 year you charge that users credit card for the full license plus interest. The thought being if the entrepreneur is successful, in 1 year he'll be able to afford your software with interest. The entrepreneur benefits deferring payment for a year, and can use that money for other purposes (marketing, etc). He can then utilize you're wonderful tool to create value for his users and the world. It's a win-win all around.
[+] [-] wccrawford|14 years ago|reply
The content is correct in that pricing apps is complicated and there are factors that people don't often consider. And that support costs should be a factor.
But nowhere does it prove the should be paying more. Maybe the developers could charge more, but it doesn't even prove they should do that. It just opens up the possibility.
And I think that ShareMouse is overpriced. $25 per computer? And his reason is that he wants to pay his developers well? That's a stupid reason. He should be looking for market equilibrium instead, then. He should be looking for the point where he makes the most money, instead of just picking a price and sticking to it. Even in a professional setup I would choose Synergy over his price, despite the manual setup (took me like 10 minutes last time) and lack of file sharing (the drives are network shared anyhow in any situation I've been in).
Also, if the claims of his page are true, then support cost should be nearly nil. He claims the thing automatically sets itself up, including monitor configuration. But if it fails to do that and you need support, that's even worse than not having it be automatic in the first place. If he's really having so many support tickets about it, it's not worth the money anyhow.
[+] [-] bartelsmedia|14 years ago|reply
Don't hesitate and make a suggestion. We have everything from "it should be free" to "It works so well, I'd paid $100" so far.
[+] [-] tankenmate|14 years ago|reply
If it is the case that the pricing for this product is highly / almost completely elastic then a high price makes perfect sense. Just look at Apple's pricing strategies.
[Edit] fix grammar
[+] [-] Tmmrn|14 years ago|reply
>But all good things come to an end. Especially the free ones.
Why? For the past few years my desktop has been running very successfully on Open Source software. (With some blobs like flash that are just needed for legacy compatibility) I don't see that changing in the near or far future.
> I have had to stop using Synergy. Setting up this free, open-source app is a black art,
I remember when I was trying synergy. I opened the manual and thought "that is quite complicated" and quickly found quicksynergy (there are probably other equally fit GUIs). It's a bit counter intuitive what IPs to put where but after that it's just putting an IP or hostname in on each PC and click a button... That's much less "black magic" and didn't take me more than 5 minutes...
> and when CBS replaced my PC with a MacBook, giving me two-Mac setup (which, I admit, is extravagant), I couldn't get Synergy to work anymore.
So what was the error?
Of course that was not the point of the article. But he spent so much time explaining how he wouldn't buy the other application because it was too expensive I wondered why he didn't take that time to research why synergy didn't work or what GUI to use to make setting it up easy.
[+] [-] bartelsmedia|14 years ago|reply
Please check out http://www.keyboard-and-mouse-sharing.com/synergy-alternativ... for more info.
[+] [-] eftpotrm|14 years ago|reply
At the core his point strikes me as inane - that he won't spend a tiny fraction of the cost of his other equipment to solve a problem, that he clearly underprices his time - but still, the pricing strategy here sounds flawed.
I use Synergy, too; I'm all Windows so Mac-compatibility isn't an issue, but it's a nice program. Note nice though. Not deal-breaker, not revolutionary, not transformative. Could I be persuaded to pay for a better version? Sure, but only so much. Elasticity of demand as highlighted in the article only goes so far; ultimately there will be a ceiling price above which your revenue falls.
It's a gadget, not a core tool, and (IMHO) needs to be priced at the 'impulse buy' level. $25 / machine is enough to make people think (even if it's a tiny fraction of total system cost) and you're suddenly out of impulse and into avoidance.
[+] [-] bartelsmedia|14 years ago|reply
And this is ABSOLUTELY intentional.
We do NOT want impulse purchases. We don't believe that it is ethical to lure/seduce users to rush to their credit cards.
We don't believe that it is for any good if people buy something and then perhaps realize that they don't need it, are not able to use it properly and waste everybody's time in support and finally perhaps request a refund and are left with an unhappy experience.
No thanks.
We rather want users to be convinced. The software itself shall stand out and trigger the purchase decision. Not the price tag and not any sales tactics.
I believe, that there are cultural differences between the US and Europe regarding sales approaches but we are just fine with that.
Try the software. Become confident with it. Check prices. Review your options. Try other programs. Be back and we welcome you.
[+] [-] colomon|14 years ago|reply
On the one hand, my notion of how much software should cost says $50 for a Synergy clone is insanely expensive. But if I think of the benefit received, I've got to say that a Synergy clone which Just Works probably is easily worth $50.
[+] [-] rtisticrahul|14 years ago|reply
[+] [-] alvarosm|14 years ago|reply