Comment Think of price while you're designing the product (Score 1) 259
I strongly advise companies who are building software (or anything else for that matter) to think about the price as part of the design process. A lot of companies have failed because they had a great product idea, but no idea what it was worth to different segments of the market or how to charge for it. Software is particularly vulnerable to this type of thinking, because people sometimes belive that it has no variable cost. While the incremental bits may be free, selling them usually isn't. Consider sales costs along with dev costs when doing break-even analysis.
Think about what your product can do that others can't. Not in terms of functionality, but in terms of what it lets users do. Software companies often get caught up in the technical wizardry and overestimate the value of technically hard features, while underestimated the value of simpler ones.
Software is amenable to tiering (like MSFT with Office Standard and Professional).
Small price differences are unlikely to create significant competitive advantage. They're more likely to erode your margin and the customer's perception of your value.
Also, think about what other pricing levers you can use to drive customer behavior. Volume licensing, free trial periods, upgrade coupons, and rebates are examples. A product priced at $69 with a well-targeted $30 rebate is likely to look more valuable than the same product priced at $39. Like tiering, these incentives can be targeted at specific market segments, increasing their effectivness while limiting your margin erosion.
