Price of Success

We're all adults, and most of us probably like to think that we're fairly well-informed when it comes to basic life wisdom. We're familiar with the benefits of a bird in the hand over two in the bush, we know the risks of putting all our eggs in one basket, and of course we'd never dream of judging a book by its cover. Right?

Well, when it comes to books, most of us do judge the covers. If we paid no attention to them at all, the book industry probably wouldn't bother pouring millions of dollars into cover illustrations, embossed type fonts and decorative golden swirls. A plain white paperback would do just fine if we actually followed that particular ancient adage.

In our own line of business, one might argue that there isn't much of a cover to judge. Shareware tends not to come with illustrations and golden swirls, so authors often think that their prospective customers will dive straight in and familiarize themselves with the features and interface of their particular product. They are wrong. Prosaic as it might sound, the first thing most people look at is the price. The price of the product will also continue to remain of high importance while they browse through the website, install the trial version and decide whether or not to purchase.

Yet in spite of the fact that price is one of the most important factors where the marketing of a product is concerned, it is also one of the least understood. Many seem quite content to bluff their way through, giving little or no thought to the implications that a price tag can carry. As a result, most shareware authors make the same mistake: they sell their product for far too little.

Bargain bins may serve their purpose in some areas of business, but I firmly believe that there is little room for them in the software industry. Aside from impulse items such as low-cost games, most people need some level of reassurance that the software they're buying is of at least reasonable quality. This is why they are not likely to go for the cheapest available option.

Think about it: 'reasonable quality' and 'cheap' are not two concepts that look overly natural placed side by side. You know it, and so does the average consumer. Cheap is alright when you buy garbage bags, writing paper and playing cards, but when it's something that has the potential to destroy a very expensive PC system, people tend be prepared to pay that little bit more.

The number one rule when it comes to understanding consumer behaviour is simple. At times the consumer may seem puzzling and surprising, but ultimately is quite predictable. All it takes is a little bit of probing and patience, and you will know more or less what to expect. Once good example of this is the whole area of perceived pricing.

If you place two fairly similar products side by side and price one at $20 and the other at $80, you may well find that people show more interest in the more expensive application. Why? Because a higher price implies a higher quality. We know that if we spend $500 on a car, we're not going to be as satisfied as we would be with a $25,000 model. When someone goes looking for software, their number one concern is not saving money. It's finding a solution. And if a higher price implies a better quality solution, what message is the price of your software sending?

A sensible starting point when you want to set a price for your product is the market (or markets) that it may be sold in. First, you need to define your user bases as precisely as possible. "Home users" and "business users" won't suffice ? they are far too general. You need to take a very close look at your potential customers, and try to identify their level of expertise, their individual needs, their spending habits and their motivations.

The next stage is a more obvious one. Go and see who your competitors are. If you can find them, rest assured that your potential customers will do the same. Find out how they do business, how your product compares to theirs, where they sell, how they sell, and, of course, how much they charge for their products. Don't be tempted to make the number one error in pricing strategy. You do not have to undercut your competitors, and you have every right to charge more than they do.

Next, find out how well-known your competitors are. If they have a client page, check who uses their product, and see whether you're even going after the same markets. What strengths do your competitors have that you may lack, and vice versa? Have a look at the trial version of their product, and see how yours compares. Their weakness is your opportunity, but you have to recognise it to be able to use it.

At this point you may well have some sort of approximate price in mind. First, there are a few important areas that you need to consider. One of them is whether you're going to use a cost-based or demand-based pricing strategy.

A cost-based strategy means that you'll be competing on price. I think we've established that I'm no great fan of this particular method. A demand-based strategy, on the other hand, means that your primary focus will be on the needs and wishes of your consumers.

Let's assume that the product you're selling is a good one. Let's also assume that you've done your basic market research. You know which markets you'll be operating in, and you know the needs of your potential consumers. Broadly speaking, you have three viable options for setting the price. The first is an amount that you feel the consumers are prepared to pay. As a general rule, this is an inaccurate means of pricing your product, and pays no attention to all the ideas of perceived pricing. On the other hand, if you allow your prices to be set by your competition, then you'll be placing yourself squarely in their shadow from the very beginning.

The most realistic option is to set the price according to the value that your consumers place on the product. But there's a chicken-and-egg scenario here. Is the price high because the quality is good, or is the quality good because the price is high? This is where you need to get the balance right. Don't scare your customers away with an absurdly steep price, but don't make them turn up their noses at what they might perceive as a low-budget insult of an application.

Finally, let's not forget a little bit of consumer psychology. It may seem very basic, but the fact is that $49.99 is vastly more appealing than $50. Why? I honestly don't know. Some buyers need to reassure themselves that they're doing the right thing in picking your product. If that one cent allows them to believe that the $50 product is a forty-something dollar product, then so be it.

The price of your product is so much more than the number of dollars people need to part with. It speaks volumes about the quality of your product, and also the confidence that you have in it. The price tag tells the customer how much you think the product is worth. If you yourself don't believe that it's worth more than a few dollars, how could you ever expect your customers to think otherwise? A high price implies high standards and high quality. In this age where low-price and low-quality have become the norm, stand-out from the crowd. Be seen as a company offering quality over low prices. Be seen as a company with high standards. Be seen as offering value for money ? higher value than the rubbish found in the bargain bins. Set yourself above your competition and sell your software for it's true value. Be seen, be sold!

Copyright 2004 Dave Collins

About The Author

Dave Collins is the CEO of SharewarePromotions Ltd., a well established UK-based company working with software and shareware marketing activities, utilising all aspects of the internet. http://www.sharewarepromotions.com and http://www.davetalks.com.

---

In Success Language, Failure Means You Are Almost There!

We all know as we are progressing towards our personal... Read More

Success: What Are You Afraid Of?

What are your fears? Fear of failure? Fear of success?What... Read More

Authentic Success

A More Effective WayI own a stack of self improvement... Read More

Success: Beware The Arrival Syndrome

There is a saying that goes something like this: Getting... Read More

Reach Your Goals - A Higher Purpose

Find a higher reason to reach your goal than just... Read More

Success Through Discipline - The Rewards Of Discipline

Many of the problems we have with discipline are caused... Read More

What is Failure Anyway?

Does it surprise you that only 400 cokes were sold... Read More

Principles Of Success

Succinctly said, success is harmony. When the result is congruent... Read More

Shortest Path To Success!

Thoughts move faster than the speed of light.Expectations jump faster... Read More

I Would Give Anything To ?

A couple days ago I was listening to a CD... Read More

Psychology of Success

You must understand You are already a Success, and before... Read More

Does Your School Teach You How to Achieve Financial Freedom?

Study hard, get good grades and you will have a... Read More

Success Lessons From A Gym Wall And From The Rematch

Recently, I have been riveted by the amazing reality show... Read More

I Don?t Believe in Failures

I prefer to call the challenges, obstacles, side-tracks, and barriers... Read More

An Honest Commitment To Action Is Key To Your Success

With topics in personal development ranging from goal setting to... Read More

As Long As You Try Your Best, There Is No Such Thing As Failure

I always say to my children, as long as you... Read More

Extend Your Influence Without Shortening Your Life

Please repeat these four words out loud: "Maximum Impact....Minimal Touch"... Read More

Your Focus is the KEY to YOUR Success

Why do you need to know your focus when joining... Read More

Gracefully Accepting Feedback a Key Employment Skill

With the long-term trend of protecting employees' individual self esteem... Read More

Achieve the Success You Want: 7 Reasons Why People Dont

Change is one of the biggest concepts facing today's society.... Read More

10 Critical Success Clues

I don't need to be a gypsy fortune teller to... Read More

Stop Juggling, and Start Achieving! Three Steps to the Top!

Want more success in your business or professional life? Here's... Read More

Success Means Never Ever Giving Up

Persistence is the foundation of success. Although there are many... Read More

Visualize Your Way to Success

Human beings are visual creatures. Our imaginations are powerful tools... Read More

Top 25 Success Quotations

Consider what it takes to become an undeniable success with... Read More

Reach Your Goals - Give Back

Give back Once you've achieved success, use your skills, talents,... Read More

What Constitutes a Good Life?

The ultimate expression of life is not a paycheck. The... Read More

The Story of Big Jim

The power went out. Again!I looked out my second story... Read More

The Impossible Dream

The 72,500 men, women and children sat in an uncomfortable... Read More

How To Acheive Your Full Potential

If you want to make more of your talents -... Read More

Harness Mind Chatter and Make it Work for You!

"When you talk to yourself, you listen. No matter what... Read More

Benefits To Having An Education

If you look back to the 70s and 80s, many... Read More

How To Become Rich and Famous

If you want to be rich and famous, you have... Read More