Dien Rice
February 29, 2012, 10:07 PM
Hi Dien:
Thanks for mentioning the software.
My partner and I did develop the AthenaGold software.
When we started out we had a $15,000 budget....well....we have blown that right into outer space with costs that hit 6 figures 2 years ago....that is just developers fees by the way.
Hi Cornell,
Thanks again for further insights!
While I haven't "developed" software - I do own the complete and exclusive rights to a software product (which I don't sell any more).
What happened was, some time around the mid-2000s, I purchased the complete and exclusive rights to a software product, which was developed by someone else.
This company wanted to "streamline" their operations. So they were selling the complete and exclusive rights to a variety of their "non-core" products which they had developed.
The software product I purchased was software to backup your emails, if you were reading email on your computer (as opposed to reading email on a third-party website, such as Yahoo or Gmail).
Anyway, so I purchased the exclusive rights to the software, a couple existing websites to sell it (this was a product they had already been selling for a while), and so on. And I made some sales.
However, I wasn't really prepared for any support questions. Another thing is, I wasn't really prepared to "upgrade" the software as computer operating systems get upgraded, and so on. (Though the company I bought the software from did give me the contact details of the original programmer who had written the software, in case I wanted to hire him to upgrade it.)
With the benefit of hindsight, this purchase was a "mistake" for me, for the following reasons...
- I don't use email on my own computer - I use "web-based" email (specifically, I set everything up to use Gmail). That meant it was hard for me to "test" and use the software myself, so I could answer questions people had. Also, it meant I was less "passionate" about the software, too (since I wasn't even using it myself).
- I didn't have any kind of "support" set up. Because I wasn't really using the software myself, I wasn't even well-equipped to do the "support" myself, since I never really got to know the software very well.
Anyway, in the end, if people had problems, I gave them a refund.
I don't know if I broke even on this purchase. I think I probably made a small loss on this particular "venture". (For someone else, who was better positioned than I was to profit from it, they probably would have made a good profit. It wasn't quite right for me, for the above reasons, I realize now with the benefit of hindsight!)
How much should you charge for your product? If your product will probably need some kind of support, you should definitely factor that "cost" in, when you determine the price!
Let's say you sell software at $20 to 1000 people, or sell it at $200 to 100 people.
In both cases, you make $20,000. So they're the same, right?
Actually, no. The reason why is because in the first case, you need to provide support/customer service to 10 times as many people. So your "support/customer service costs" will probably be 10 times as high! (By "costs" I'm also including your costs in your time, not only regarding cash...)
Okay... I think I can slip down off the soap box for now... :)
By the way, here are a couple interesting articles on pricing...
This article says that pricing, in their experience, is completely "elastic" - that is, you'll sell just as much (in terms of dollars) no matter what you price you sell your product at... (This is specifically about games software.)
How Valve experiments with the economics of video games
http://www.geekwire.com/2011/experiments-video-game-economics-valves-gabe-newell
This other article talks about a different experience. In this case, by doubling his price, he actually sold 10 times as much! This is for a "productivity" app product...
(The reason he sold more is because there often seems to be a relationship between the price and the "perceived value" of a product... The higher the price, in this case, the higher the "perceived value" was for the customer, so they wanted it more.)
How I doubled the price of my software product – and sold ten times as many copies.
http://www.startupproject.org/2011/06/price/
I thought these were interesting... And it relates to the issue of "price"...!
Best wishes!
Dien
Thanks for mentioning the software.
My partner and I did develop the AthenaGold software.
When we started out we had a $15,000 budget....well....we have blown that right into outer space with costs that hit 6 figures 2 years ago....that is just developers fees by the way.
Hi Cornell,
Thanks again for further insights!
While I haven't "developed" software - I do own the complete and exclusive rights to a software product (which I don't sell any more).
What happened was, some time around the mid-2000s, I purchased the complete and exclusive rights to a software product, which was developed by someone else.
This company wanted to "streamline" their operations. So they were selling the complete and exclusive rights to a variety of their "non-core" products which they had developed.
The software product I purchased was software to backup your emails, if you were reading email on your computer (as opposed to reading email on a third-party website, such as Yahoo or Gmail).
Anyway, so I purchased the exclusive rights to the software, a couple existing websites to sell it (this was a product they had already been selling for a while), and so on. And I made some sales.
However, I wasn't really prepared for any support questions. Another thing is, I wasn't really prepared to "upgrade" the software as computer operating systems get upgraded, and so on. (Though the company I bought the software from did give me the contact details of the original programmer who had written the software, in case I wanted to hire him to upgrade it.)
With the benefit of hindsight, this purchase was a "mistake" for me, for the following reasons...
- I don't use email on my own computer - I use "web-based" email (specifically, I set everything up to use Gmail). That meant it was hard for me to "test" and use the software myself, so I could answer questions people had. Also, it meant I was less "passionate" about the software, too (since I wasn't even using it myself).
- I didn't have any kind of "support" set up. Because I wasn't really using the software myself, I wasn't even well-equipped to do the "support" myself, since I never really got to know the software very well.
Anyway, in the end, if people had problems, I gave them a refund.
I don't know if I broke even on this purchase. I think I probably made a small loss on this particular "venture". (For someone else, who was better positioned than I was to profit from it, they probably would have made a good profit. It wasn't quite right for me, for the above reasons, I realize now with the benefit of hindsight!)
How much should you charge for your product? If your product will probably need some kind of support, you should definitely factor that "cost" in, when you determine the price!
Let's say you sell software at $20 to 1000 people, or sell it at $200 to 100 people.
In both cases, you make $20,000. So they're the same, right?
Actually, no. The reason why is because in the first case, you need to provide support/customer service to 10 times as many people. So your "support/customer service costs" will probably be 10 times as high! (By "costs" I'm also including your costs in your time, not only regarding cash...)
Okay... I think I can slip down off the soap box for now... :)
By the way, here are a couple interesting articles on pricing...
This article says that pricing, in their experience, is completely "elastic" - that is, you'll sell just as much (in terms of dollars) no matter what you price you sell your product at... (This is specifically about games software.)
How Valve experiments with the economics of video games
http://www.geekwire.com/2011/experiments-video-game-economics-valves-gabe-newell
This other article talks about a different experience. In this case, by doubling his price, he actually sold 10 times as much! This is for a "productivity" app product...
(The reason he sold more is because there often seems to be a relationship between the price and the "perceived value" of a product... The higher the price, in this case, the higher the "perceived value" was for the customer, so they wanted it more.)
How I doubled the price of my software product – and sold ten times as many copies.
http://www.startupproject.org/2011/06/price/
I thought these were interesting... And it relates to the issue of "price"...!
Best wishes!
Dien
