Decreasing the price of your software product doesn’t necessarily mean you will sell more copies, and increasing the price certainly doesn’t mean you will sell less: today we are sharing the story of a Windows software developer who, by increasing the price of his software, managed to significantly increase the number of licenses he sold.
The software developer who’s story we are telling wishes to remain anonymous – however to provide some context: the application is a consumer-focused productivity application (he does sell to a limited number of enterprise customers), it is beautifully designed and of very high quality. For the purposes of this tale, let’s call the developer ‘Gary’ and the software ‘XProductivity’.
Gary launched XProductivity in January 2011 after six months of development, he is an independent, bootstrapped developer and this is the first product he has launched himself (being a full time software engineer for a larger company). The product was originally available for $9.99. Upon launching the software, Gary emailed every technology blog and journalist he knew to find some media attention for his product, and it worked: a number of major technology blogs covered the launch, and web traffic peaked at 50,000 daily hits over the launch period. Unfortunately, while traffic to the website was great, sales figures were very low: a huge volume of customers were viewing the website and deciding not to purchase the product. In an attempt to resolve this, Gary spent weeks tweaking and then fully re-designing the website, but it had no effect: people simply weren’t buying the product.
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By March 2011, Gary became desperate, and out of a desire to begin making some kind of real revenue from the product, he decided to double the price of the software to $19.99, hoping to sell to the same niche of particularly interested customers who were currently purchasing the product, but at this higher price. To his shock, sales of XProductivity immediately spiked, increasing to ten times the number of daily sales he was previously processing. Gary scanned his web analytics, trying to figure out where all these additional sales were coming from, or what kind of targeted media coverage the product had received. However, nothing was different: daily traffic figures were unchanged, and major sources of traffic were identical: the only change was the price, and that had causes sales to increase tenfold. These sales figures have remained constant for the past four months – it certainly isn’t a short term spike.
Rather than decreasing sales figures, doubling the price of his software product actually increased sales by a huge amount, and there is a very important explanation for this amazing tale:
For customers, cost still equals quality: Despite the proliferation of sub $2 applications on mobile app stores, consumers still have a mindset, at least in regards to desktop software, that a high price equals higher quality, and a low price means that the software will be lower quality. By increasing the price of his software product, it was immediately perceived by visitors to the website to be of a higher quality, and therefore they were much more willing to purchase the software. No change was made to the software, and no change was made to the website: customers simply assumed that a higher price meant that the product was of a premium quality, and were willing to pay for it. Despite the irony of this situation, it has proven true for a range of developers in recent years – and it’s a trend that any software business should investigate.
Read the followup to this article here – ‘How my startup launched to 50,000 daily pageviews with just a few emails‘.
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46 Responses
Wow!
Developers, do you think this idea applies only to desktop apps or to mobile apps as well?
Developers, do you think this idea applies only to desktop apps or to mobile apps as well?
That’s a very interesting tale – I wonder who the developer is?
That’s a very interesting tale – I wonder who the developer is?
Customers appear to be ripping themselves off in this case – buy cheap apps and you’ll be surprised at the quality!
Unless it’s a cheap app thats low quality that is..
It’s amazing that in the modern world, customers still assume that a high price means a quality product..
It’s amazing that in the modern world, customers still assume that a high price means a quality product..
cost = work = quality
work + greed = inflated price regardless of quality
well.. cheap-ass products are usually not good, so .. vice versa, more expensive products are assumed to be good. Makes perfect sense, really.
Great article!
Great article!
Why not reveal the name of the developer and the name of the software? How do we know that this is not an urban legend?
This story is part of a new series on the site called ‘The Anonymous Founder’, in which we will be telling the story of a variety of startup founders. You would be surprised just how many entrepreneurs have amazing stories to tell and advice to share, but choose not to share it just in case it damages the reputation of their product, or damages their own reputation. This series of stories provides an avenue for them to share those stories – and provides us with a glimpse into the ‘real’ world of startups.
We’re excited to be sharing these stories, and hopefully you will enjoy reading them!
I’ve seen exactly this effect with a client in the past: launched an app at one price, did some market testing and found no-one believed it could do what thy claimed at that price. Rather than spending marketing $ on communicating its value they doubled the price and immediately people started buying.
Nice try, Mr. Software Price Bumber!
Without showing any evidence, it’s hard to take this posting at face value. I can undertand the developer would want to remain anonymous but at least show us a chart or two.
I think we all know that consumers are dumb but I’m still not convinced that raising prices is the best approach. The App Store would seem to have proven this 1000 times over.
It’s amazing but if this product is more expensive, customers thinks it would be high quality and many people looking for quality before price now !
It’s amazing but if this product is more expensive, customers thinks it would be high quality and many people looking for quality before price now !
Proof would suffice.
The keyword here is “enterprise”. Businesses like buying more expensive software, as they feel they are getting more, and this increases their business value internally.
You see this with wine a lot too. In fact, you probably see it in many products where the “value” isn’t immediately tangibly visible or on the surface.
This is not a new phenomenon, especially if you know marketing, it is a little secret that has been a proven boost to sales for many many products…lower price often represents cheap as in low value to many minds out there. it is a perceived increase in value to be higher priced.
I wonder if there is any evidence that this holds true in book sales. After getting a distributor, I’m about to find out.
Change the price back to $9.99 and see if sales drop. #karlpopper
I had a friend that was trying to get rid of purebred puppies in the news paper. She wrote them as “pure-bred free puppies” and no one responded. The next week she wrote “pure-bred puppies, $50 each” and all of them were gone in a weekend.
What I find most interesting is this: “Gary emailed every technology blog and journalist he knew to find some
media attention for his product, and it worked: a number of major
technology blogs covered the launch, and web traffic peaked at 50,000”
Is this so ordinary that anyone can do? Could you get us some insight on that part maybe?
if u r not telling developer name and the product name, then atleast tell us what does that software do, what is the domain area/niche area/feature of that product?
so that we can better understand that target consumer behaviour reason.
this really depends on so many factors. the competition might be priced far above the 9.99, which can make this product seem inferior. Or products in the same range are no good ergo this one is no good as well. Although I do not necessarily think that cost=quality I will invariably pick the more expensive product just to stay on the safe side and I think I am not alone in this…
I have an identical experience developing commercial extensions for Magento Commerce. I was selling them for $49.95 and it went OK. I figured I had no tools to estimate my product’s value, I couldn’t do old-school supply-demand analyses. So I took a leap and doubled my prices… just to see what would happen. Well, my sales have quadrupled at a $99.95 price. I can’t explain it. The price doesn’t even include installation support, which is a separate service at 95$ extra. In the past I used to sell $95 installation service INCLUDING the extension. But nobody was interested in my service. So I decided to sell the extensions as-is, for people to install themselves, as I moved on to other projects. It was a great surprise to see sales soar. Somehow, people want to own a more expensive “product” instead of paying for a cheaper service that both solved the exact same problem. It’s completely irrational, but that’s how people are.
It is good to experiment with different options of pricing your product. Try lowering your price for a while and see how it goes and then increment a version number and double the price and see how that goes.
It is A/B tests like these that will eventually lead to the right and most effective price for the product.
I think there is fair/expected price for everything. This fair/expected price depend of many factors like price of similar product.
For exemple an IDE is insanely complex and costy to make. I expect eclipse total cost of making is far more than 1 billion. But because eclipse is free, many will just use it and anything more than 0 will be viewed as too expensive.
On the other side many will buy app on a phone that are just a revamp of an existing website or service… But sold for 1€.
What you’ll want to do is to guess the fair expected price and maybe release several version. Like a bargain version of the budget cautious and a premium version for the one that want the best.
In the example of the post, a limited version could be sold at 9.99. The standard version as 19.99 and the premium version at 29.99 or even 50$. The difficult part is to make sure everybody has still a usable software that do everything he need and that higher cost version seem suffisciently better to justify the price.
Its like buying an ED pill, which one you chose? a $0.25 or the $1.50 Pill? and in the next 30 minutes you will be on a hot date.