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Don't just roll the dice
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Don't just roll the dice, Don't just roll the dice
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The Business of Software
Don’t Just
Roll the Dice
A usefully short guide to software pricing
Neil Davidson
i
Don’t Just Roll
The Dice:
A usefully short guide to
software pricing
By Neil Davidson
First published by Simple Talk Publishing 2009
Don’t Just Roll the Dice | Neil Davidson
ii
Copyright Neil Davidson 2009
ISBN 978-1-906434-38-0
The right of Neil Davidson to be identified as the author of this work
has been asserted by him in accordance with the Copyright, Designs
and Patents Act 1988.
This work is licensed under the Creative Commons Attribution-Non-
Commercial-No Derivative Works 2.0 License. To view a copy of this
license, visit http://creativecommons.org/licenses/by-nc-nd/2.0/
or (b) send a letter to Creative Commons, 171 2nd Street, Suite 300, San
Francisco, California, 94105, USA.
Reviewers: Phil Factor and Michael Pryor
Editor: Tony Davis
Copy Editor: Una Campbell
Typesetting and Design: Matthew Tye
Original photography: Neil Davidson and Matthew Tye.
Page 27 photograph by Jan Kratěna.
iii
Table of Contents
About the Author v
About the Reviewers v
Foreword vi
Product Pricing 8
Chapter 1: Some – but not too much – Economics 9
Chapter 2: Pricing Psychology: What is your product worth? 15
What is your product? 15
Perceived value 17
Chapter 3: Pricing Pitfalls 27
Competitors 27
Fairness 28
Pirates 28
Switching costs 30
Should you take your costs into account? 32
Chapter 4: Advanced Pricing 35
Versioning 35
Bundling 42
Multi user licences 44
Site licences 45
The purchasing process 45
Free 47
Don’t Just Roll the Dice | Neil Davidson
iv
Free trials 49
Network effects 41
Bargains 53
Different ways of pricing 55
Choosing the right model 58
Chapter 5: What your price says about you (and how to change it) 60
Practice trumps theory 62
How to change your pricing 64
Product Pricing Checklist 65
What’s your strategy? 65
What’s your product? 65
How will your customers judge the fairness of your pricing? 65
Who are your customers? 65
Who are your competitors? 65
How are you going to sell your software? 66
Can you segment your customers, and create versions? 66
How can you bundle your software? 66
Make an informed guess at your price 66
Try it out 66
Afterword 67
Bibliography / Further Reading 68
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