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From: kovar@eclectic.COM (David C. Kovar)
Newsgroups: comp.sys.mac.apps
Subject: Re: prices
Message-ID: <110@eclectic.COM>
Date: 24 Apr 91 21:14:14 GMT
References: <1991Apr20.210745.4915@athena.mit.edu> <1991Apr22.055054.7976@hawk.cs.ukans.edu>
Distribution: usa
Organization: Eclectic Associates, Inc.
Lines: 45

In article <1991Apr22.055054.7976@hawk.cs.ukans.edu> chai@hawk.cs.ukans.edu (Ian Chai) writes:
>>Solution: Software companies should lower prices, to increase their
>>total sales. Just like government taxes. Increasing taxes does not
>>always increase revenue. 
>
>I second that! Yes, these prices sorely tempt me to piracy.

  Pricing is a really difficult thing. I don't know much about pricing large
products like Microsoft Word, but I've learned a bit about pricing 
"utility" applications, and the smaller stuff.

  If you set your price low, like more than 20% lower than your competition,
many people will believe that your product is inferior simply due to the
fact that it costs significantly less than other products. "If it's that
cheap, there must be something wrong with it." So you'd pick up a few
more sales from people who can't afford any product in the price range,
but you'd lose a lot more sales from those people who can afford the
going prices.

  One solution to the problem is to set your price up with everyone 
else's and then offer deep discounts to bring the price down. For
example, we offer 20% discounts to academic institutions and 10% discounts
to anyone, academic or otherwise, who orders 10 or more. This way,
people say "Ok, it's priced like the others, so it should be good, but
it's also got a nice discount so I can get a real bargain on it."

  If someone calls me up and says "Hey, I'd like to buy 100 copies but
your price is too high." I promise you I'll do my best to bring the
price down to something reasonable. I can afford to do that sort of
thing, since we're a small company, but Microsoft can't, so you're
stuck.

  Anyhow, that's a quick outline on pricing strategies. There's a *lot*
of written material out there on the subject if you're interested in
it.

-David
-- 

-David C. Kovar
	Consultant				ARPA: kovar@eclectic.com
	Eclectic Associates			AppleLink: ECLECTIC
	Ma Bell: 617-643-3373			MacNET: DKovar
						
         "It is easier to get forgiveness than permission."