Since we are all mature adults, we may assume that we have a good grasp of common knowledge. We've heard the adage, "A bird in the hand is worth two in the bush," we know the dangers of placing all our eggs in one basket, and we'd never dare to judge a book by its cover. Right?
Most people are guilty of judging books by their covers. There would be no use in the publishing industry spending millions of dollars on cover drawings, embossed type typefaces, and ornamental golden swirls if no one paid any attention to them. If we followed that particular old saying, we wouldn't need anything fancier than a plain white paperback.
It may be argued that there isn't much of a shield from criticism in our industry. Authors of shareware sometimes assume that potential buyers will jump right in and familiarise themselves with the features and interface because of the lack of images and golden swirls. The opposite is true. Despite how mundane it may be, the price is often the first consideration. As customers explore the site, download the demo, and weigh their options, the product's cost will remain a key factor in their final decision.
Despite its centrality to the success of any product's marketing, pricing is often misunderstood. Many are content to bluff their way through, seemingly unconcerned with the potential consequences this may entail. Most shareware creators erroneously set unrealistically low prices for their software.
While I can see the bin stores near me in various industries, I don't think there's much of a place for them in the software sector. Except for cheap games purchased on a whim, the majority of consumers want some guarantee that the software they are purchasing is at least passable. So it stands to reason that they won't necessarily choose the lowest alternative.
In your mind's eye, the words "decent quality" and "affordable" don't seem to go together very naturally. You are aware of this fact, as is the typical buyer. Garbage bags, writing paper, and playing cards can be purchased for very little money, but anything that could damage a costly computer system usually commands a higher price.
When it comes to studying consumer behavior, the golden rule is straightforward. The customer can be perplexing and unexpected at times but is usually pretty predictable. A little bit of questioning and waiting will give you a good idea of what to anticipate. Consider the case of how prices are being seen by consumers.
When shown side by side, it's possible that individuals will be more interested in the more expensive application of two otherwise comparable products priced at $20 and $80. Why? Because a greater investment usually yields better results. To put it bluntly, we know that a car that costs $500 is not going to make us as happy as one that costs $25,000. When looking for new software, the cost is not typically the priority. In other words, it's about finding a remedy. What kind of message is the cost of your software delivering if a higher price indicates a better quality solution?
When determining the pricing of a product, it's prudent to first consider where it might be sold. Get as specific as possible when defining your target audiences. It's not enough to say "home users" or "commercial users," as these are much too broad. You must scrutinize your target market in great detail to learn about their knowledge and skill levels, their specific wants and needs, their typical purchases, and what drives them.
There will then be a more blatant transition to the following stage. Get out there and check out the competition. You may be sure that if you locate them, your prospective clients will as well. Research their business practices, how their product stacks up against yours, where they sell, how they sell, and, of course, their prices. You must resist the temptation to commit the worst possible pricing strategy mistake. You are not obligated to offer lower prices than the competition and can feel free to charge more.
Next, research your rivals to learn how well-known they are. Investigate their clientele to discover whether your target audience overlaps with theirs. Who among your rivals possesses strengths that you don't, and vice versa? Examine the demo of their product, and evaluate how it stacks up against yours. You should take advantage of their vulnerability, but first, you must identify it.
Perhaps now you have a ballpark figure in mind. To begin, there are a few key factors to think about. You may adopt a few different price strategies, and one of them depends on whether or not you're meeting demand.
The focus of a cost-based approach is on pricing rather than quality. I believe it's quite clear by now that I'm not a big supporter of this approach. However, if you choose a demand-based strategy, you'll be more concerned with what your customers want.
Let's pretend for a moment that the item you're trying to sell is good. Let's also presume that you've engaged in some elementary study of the market. You have researched the markets where you intend to compete and have a good idea of what your target audience is looking for. If you want to establish the price, you can do one of three things. As a starting point, you can propose a price you believe customers are willing to pay. For the most part, this is a flawed approach to pricing since it ignores several factors that could affect how the price is perceived by the customer. But if you let your rivals choose your pricing, you'll start permanently behind them.
Setting a price that reflects what customers are willing to pay is the most practical strategy. It's a bit of a chicken-or-egg situation, though. Is the high price justified by the product's great quality or vice versa? A delicate equilibrium must be achieved here. Avoid pricing your product so high that it scares away potential buyers, but also avoid charging so little that the product is insultingly cheap and turns off potential users.
Finally, some considerations of consumer psychology should not be overlooked. The difference between $49.99 and $50 may seem small, yet it makes a huge difference in sales. Why? I really can't say. Some customers will only buy from you if they can convince themselves that they made the right choice. Let them think the $50 product is only $49.90 if that extra penny convinces them of that.
Your product's real cost goes much beyond the cash outlay required. That you have such faith in the superiority of your product is a strong indicator of its value. The price tag should reflect how much you value the goods to the customer. How can you expect your customers to pay more than a few dollars for something that you don't think is worth more than that? A high price usually means there are strict quality controls in place. In a time when low costs and poor quality are expected, you need to differentiate yourself. Promote your brand as one that prioritizes high-quality products over affordable prices. Build a reputation as a rigorous business. Gain a reputation for providing excellent value, better even than cheap throwaways. Stand out from the crowd by charging what your program is actually worth. To be seen is to sell.