On Pricing

Sep
19th

Wed

Pricing software upgrades

There’s an interesting discussion of how to price software upgrades on the Business of Software forum.

Sep
18th

Tue

Maybe the reason it seems that price is all your customers care about is that you haven’t given them anything else to care about.

— Seth Godin

activeCollab: The difficulty of switching from free to paid

activeCollab had become known as the free, open source, competitor to Basecamp. They’re now about to launch a new version of their product and start charging for it. The problem with this is that so far they’ve attracted people who are interested in a free product; people who don’t want to spend the money on Basecamp. They’ve built a strong community around that. They have the attention and goodwill of the community, but they’re wasting it by using a bad pricing strategy. To buy activeColab you pay a one-off fee of ~15x the monthly cost of an equivalent Basecamp price plan, plus ~3x the monthly Basecamp cost per year for updates and support. Here’s how I’d have tackled it:

Keep activeCollab free for all non-commercial use, with no limits.
Offer a support package for non-commercial users at a reasonable price (say $99 one-off). This would be for installation assistance etc.
Launch a new commercial version of the product under a new name - “ultraCollab” (or similar), using the pricing they’ve recently announced.

This way they would retain the goodwill of the community, and continue growing the community around activeCollab, but still profit from the commercial users who can afford to pay. activeCollab users would hopefully become ambassadors for the “ultraCollab” product, to help sell it into the companies they work for.

Sep
17th

Mon

SEOMoz gives you lots of things when you first sign up, then continued access to premium content for $49/month

Coghead: Base price with add-ons

Sep
16th

Sun

SiteGuys: Rarely are web agencies so upfront about their prices. SiteGuys list their rates on every single page.

Box.net’s simple price plans. I’d suggest charging businesses a little more - backup’s pretty critical for anyone, especially companies.

Pricing web services

Michael McDerment from FreshBooks has written two useful articles on pricing:

Three Buckets explains why simple pricing is a good idea.
No Annual Plans gives his reasoning about why you shouldn’t let customers pay upfront for a year.

An introduction

I wrote an article for Vitamin about web application pricing. It seemed to generate a lot of interest, so I’ve decided to document my ongoing thoughts on pricing (and business models in general). I’ll focus mainly on web applications.