When I wrote that article about how to set prices for software, I generally concluded that in many ways you were completely doomed:
“The more you learn about pricing, the less you seem to know... I've been nattering on about this topic for well over 5000 words and I don't really feel like we're getting anywhere.”
In particular, to set prices well, you need to be able to plot your customers' demand curves, and it's almost impossible to figure out what your demand curve is, because it's so hard to charge different customers different amounts and get any kind of reliable data.
Sometimes, though, you luck out.
If you've been selling a product priced in US dollars to customers in Europe, you might actually have a bit of useful data. You see, the US dollar has dropped a lot in the past year. As the dollar falls, your product has become cheaper and cheaper for Europeans.
I looked back on the last year of FogBugz data, dividing the price by the pound sterling exchange rate, and discovered that our single-user license have fluctuated between 64 and 74 pounds, while our ten packs have fluctuated between 49 and 56 pounds, approximately.
That gives me just enough data to plot a segment of the demand curve for
English UK customers.
The data is not very conclusive, but it does support some things that I might have believed anyway:
On this curve, demand is measured in units purchased per day in
England the UK. I've left the Y-axis unlabeled because it's confidential sales data, but the shape is accurate.
There are a lot of reasons to be skeptical about this data:
Still, you may find this a useful technique to learn something about the demand curve for your product.
You’re reading Joel on Software, stuffed with years and years of completely raving mad articles about software development, managing software teams, designing user interfaces, running successful software companies, and rubber duckies.
I’m Joel Spolsky, co-founder of Fog Creek Software, a New York company that proves that you can treat programmers well and still be highly profitable. Programmers get private offices, free lunch, and work 40 hours a week. Customers only pay for software if they’re delighted. We make Trello, insanely simple project management, FogBugz, an enlightened bug tracker designed to help great teams develop brilliant software, and Kiln, which simplifies source control. I’m also the co-founder and CEO of Stack Exchange. More about me.