In 1938, two young engineers were ready to launch their first product. They’d struggled with what to build. After considering amplifiers, radio equipment, air controllers, harmonicas and even muscle-building electrodes for housewives, they’d finally decided to create an oscilloscope. Not wanting customers to be put off by a version one product, they sensibly called it the Model 200A.

The next step? Decide the pricing.

They eventually settled on $54.40. Was that because it represented the cost of manufacturing, plus a decent markup? No. These engineers hadn’t taken that into account. In fact, they soon realized that the cost of building each oscilloscope was more than the price they were asking. Was it based on what the competition charged? No. They hadn’t bothered to discover that General Radio charged $400 for an equivalent model.

They chose $54.40 because it reminded them of the 1844 slogan used in the campaign to establish the northern border of the United States in the Pacific Northwest (“54” 40’ or Fight!”).

What a dumb-ass way to price a product. ...

Visit Don’t Just Roll The Dice: A usefully short guide to software pricing Download Page

You can download Don’t Just Roll The Dice: A usefully short guide to software pricing in PDF format.

By Neil Davidson
First published by Simple Talk Publishing 2009
ISBN-10: 1906434387
ISBN-13: 978-1906434380

FORWARD
At Business of Software 2007 Michael Pryor held an impromptu session on how to price your software. So many people turned up, and so many people kept on arriving, that by the time they’d introduced themselves there was no time left to talk about software pricing. I’ve had similar experiences; in fact, “How do I price my software?” is probably the most common question I’m asked by software entrepreneurs and product managers.

This handbook is an attempt to answer that question. But first, I’d like to thank Phil Factor, Tony Davis and Michael Pryor for all their editing, reviewing and suggestions. More people than I can possibly mention have contributed with offers of help, anecdotes and proofreading. This handbook is way better with their input than it ever could have been without. Thanks guys.

Neil Davidson
Cambridge (UK), August 2009
http://twitter.com/neildavidson
http://blog.businessofsoftware.org

ABOUT THE AUTHOR
Neil Davidson is co-founder and joint CEO of Red Gate Software. Red Gate was founded in 1999 and now employs some 150 people. It was Cambridge News business of the year in 2006 and has been in the Sunday Times top 100 companies to work for three years running. It was founded with no VC money and little debt. Neil is also founder of the annual Business of Software conference and runs the Business of Software social network.

Comments (0)

Name

Email

Comment

smaller | bigger

Add Comment