The lowest price doesn’t always wins. I’ve seen too many businesses collapse ‘cuz they tried to undercut themselves and the competition to the point of failure.

The lowest price point for the consumer may not work for many situations.

I sometimes don’t trust the lowest price point. If my wife saw me buy a $30 ring that was marketed as diamonds, she’d probably kill me ‘cuz it’s too good to be true. I mean, how much can a stupid rock such as diamonds cost?

It’s all about what the market can bear. If the market is willing to pay $XX for a product and it sells well then that’s where the point is.

I think BMW and Lexus vehicles are outrageously priced but I perfectly understand when some people feel it is worth every damn penny.

I have my iPod and personally think it was worth every penny. I have friends who think I’m crazy for overpaying for a portable media player when there are cheaper substitutes.

So price isn’t always the leading way to get “mass market penetration.”

(As an aside, we really need some non-cutesy markers to indicate moods for those whose sense of humor requires use of a blunt instrument.)

You see, personal rules serve their purpose. But as in all rules, they must be in service to the humanity they were constructed for, and not the other way around. (To the effect that I’m trying to spend less time properly constructing my communications where they cease to be I’m trying to write more off-the-cuff, before the message gets stale.)

For the three months which ended with September 2007, Google claims to have spent $548.7 million dollars “primarily of compensation and related costs for personnel responsible for the research and development of new products and services, as well as significant improvements to existing products and services”. Their income from advertising alone for that same time period was $4,189.5 million, or over $4 billion. Three months alone. 65% of that money came from their own websites, those apps that you think they give away for free. That’s why the apps seem to be free. The non-advertising income they got for the same period totaled $41 million dollars. That means nearly 99% of the money they made in three months came from advertising, which can’t be categorized as “just one way Google survives”.

Regardless of how little Craigslist charges for its advertising (both job listings and NYC apts), that is the vehicle through which it produces income. Also, its sole product is the listing service and forums, so they don’t need to invest in development as much as software publishers do.

You didn’t know oil is produced from wood? If you meant petroleum, then no. But there are a large number of companies that produce wood-based oils for use in medicine, furnishings, cosmetics, industrial processes, etc.

If you claim, “Actually building and selling software is easier than building on an assembly line.” then back it up with facts. The difficulty with “Once you design one”, is actually finishing the product.

The cost to develop and operate software has exceeded hardware for over 30 years. Here’s what Google’s Luiz André Barroso has to say about it, “Often the major component of TCO for commercial deployments is software.”

In Design for Trustworthy Software: Tools, Techniques, and Methodology of Developing Robust Software, Authors Bijay K. Jayaswal and Peter C. Patton state, “It is usually conceded that it costs ten times as much to prepare (or “bulletproof”) an enterprise application for the marketplace as it costs to get it running in the “lab.” It costs another factor of 2 from that point to market a software package to the break-even point. The high cost of software development in both time and dollars, not to mention political or career costs (software development is often referred to as an “electropolitical” problem, and a high-risk project as a “death march”), has encouraged the rise of the third-party application software industry and its many vendors. Our experience with leading both in-house and third-party vendor enterprise software development indicates that the cost of maintaining a software system over its typical five-year life cycle is equal to its original development cost.”

Don’t complain about pretenses here. You don’t bring facts to the discussion.

Craigslist sells very little advertising (eg apts in NYC), but is mostly free (I’m not renting an apt in NYC). The owner refuses to sell though it is worth millions, if not billions, and he could of course charge for a lot more advertising than he does now. The CEO is a socialist or communist or something like that.

Does oil come from wood now?? Software and wood is relatively easy to replace, compared to hardware and oil.

Actually building and selling software is easier than building on an assembly line. Once you design one, essentially all you have to do is let the computer make/distribute as many copies as you want at almost no cost; no unionized workers or parts manufacturers to wait for. If you don’t have blueprints or plans when you design apps, I’d say you need to work on your business and programming skills (what apps did you say you wrote?). Or looking at it another way, in software once you finish the “design” there is almost nothing left to do. I’m sure the folks at RollsRoyce would love it if they could build one and the rest could just be downloaded after they posted it to a server.

If writing an app is more complicated than “building a Rolls” (whatever that means), then I guess my point about one-man shops is more true than even I imagined.

Enough now. You pretend to want discussion, but that requires a lot more than what you seem to offer.

Best of luck.

Mr. db

I’m not sure how the software:hardware wood:oil analogy works out considering hardware doesn’t come out of software, please educate me.

Upgrading and distributing one application are two different things. Yes, the reproduction cost to distribute apps are low, especially online. But since applications aren’t “upgraded” on an assembly-line, it’s much like building a Rolls Royce. Except you don’t have any blueprints or design plans from which to build it; and every part must be hand-crafted, and often thrown away whenever the customer’s requirements are changed; and the roads it’s to drive on are repaired or expanded; and the fuel that powers it is reformulated. I take it back. Building a Rolls isn’t anywhere as complicated as writing an app!

Software is to hardware as wood is to oil.
It is a hell of a lot easier (and vastly less expensive) to upgrade one application and distribute it to millions of users, than it is to upgrade millions of computers or cars or whatever. Indeed, “some people don’t understand” that obviously, there is more than one “economic of things”. It is often the man that has or makes a lot of money, or wants to make a lot of money, that doesn’t question the cost of things. I’d suggest guilt by association.

I’m honored you visited my blog. I’m mindful of your comprehensive articles when considering additional features for Mori. (They’re also very helpful when doing competitive analysis.)

@db It’s unfortunate that you’re offended by your comments and my response to them. Taking your remarks out of context is only a problem if the meaning is changed. As I stated at the start of my entry, I felt bringing the discussion to a broader audience was important as the topic of software pricing is still divisive, as demonstrated in the subject of my next post, not to criticize you personally.

The difference between NOW and Chronos, and me in dealing with an uncomfortable subject is I choose to face it.

Too often, people avoid the difficult, choosing instead to leave in a huff or argue over the trivial. As members of a community, we have to learn how to get along with each other in spite of our differences. Disagreements shouldn’t keep us from understanding each other at more than a superficial level.

So please, feel free to demonstrate where my conclusions are faulty. That is the purpose of this site: not to serve as a broadcast vehicle where I push some PR to the community, but for us to engage in discussions which will help the community as a whole thrive. I think I remember being wrong before in my life. I welcome the opportunity to relive the experience.

@Wilson Thank you for your comments. I’ve been guilty of being similarly-minded in the past, complaining that some product couldn’t have cost more than $20 while conveniently ignoring the cost to manufacture and distribute it. Hopefully, as the economy continues to virtualize and more of the workforce becomes independent, they’ll understand the principles of business that drives so much of the underlying cost. I wish you well in your business.

I also have several customers that think it’s OK for me to sell items to them at “below cost prices” because that ensures their loyalty and they will “keep coming back.” They never understood that if they don’t pay a fair price that we can both agree on then the seller and the consumer will both win. I can invest some of the money back into the business and provide newer and better services. These consumers have only thought of themselves and don’t want to invest back into the business. If they think it’s a fair price, they will buy my products/services and keep coming back.

db had mentioned that Stone Studio offered free lifetime upgrades. That’s great for the consumer! I must admit that! But not all businesses can survive on that business model! That would be like asking my car dealer to give me a free lifetime upgrade just because I bought the 1997 edition of his car and I should get free upgrades! Or asking Apple Computers that I bought the 1984 Mac Plus and should get a free Mac everytime Apple released a new one!

I’m not sure what db’s background is but his “marketing” plan doesn’t appear to be that of someone who is an entrepreneur or business owner. His viewpoint is from the consumer’s side. It is a valid point for him to fight for the consumer’s side but it’s plain to see that he didn’t factor in the vendor’s side of things.

I have also worked on database programming with 4th Dimension databases in a previous life. I personally know the pain and anguish of developing customized solutions and how everybody thinks it’s as easy as apple pie. My time is short. I would gladly pay someone else for their work so that I don’t have to re-invent the wheel every time.

Yes, I’m fairly stunned but not surprised that some people don’t understand the economics of things and never sees things from the vendor’s side.

Thank you for this blog. I appreciate seeing someone finally vocalizing the frustrations of a vendor like myself who gets tired of customers asking for pipe dreams.