The Old Joel on Software Forum: Part 4 (of 5)

Pricing for a product...?

If there is a userbase of ~900 hardcore users, and the primary product cost $700, what is an appropriate price for an addon?

The addon will probably save the user 100's if not 1000's of hours, for its a gravely needed feature that the manufacturer refuses to put in. So until then, I am the only company that provides a solution.

TIA.

Thanks for the help.
Thursday, April 8, 2004

>The addon will probably save the user 100's if not 1000's of hours, for its a gravely needed feature that the manufacturer refuses to put in. So until then, I am the only company that provides a solution.

How much money (hourly wage*hours saved) will it save per user? Do these people cost a company $6/hr or $60/hr. How often do they use this tool? I wouldn't price it more than 50% of the cost of the original product itself.

GiorgioG
Thursday, April 8, 2004

The add-on automates several calculations for a trading systems development package.

So the end users are developing their own stock trading systems, and with my tool, they can evaluate their systems much sooner. The calculations greatly speed the development.

So whether they're a hedge fund manager or individual trader, if the tool is used appropriately, it could save them $1,000's.

Thanks for the help.
Thursday, April 8, 2004

>If there is a userbase of ~900 hardcore users, and the primary product cost $700, what is an appropriate price for an addon?

Come on now...there is no mathematical formula which tells this. I have seen some addons (like for Autocad!) which cost more than the original product. I have seen addons -- atleast the basic version -- which are given away for free.

The first thing to do is look at similar addon's and I do not mean just similar functionality.....addon's which you think save similar amount of efforts and are intended for the same target audience...see how much they sell for...call them...see what kind of discounts they offer...

Then you have to figure out the cost to you for developing, marketing and distributing the addon, do not forget the all important support costs....even plain email supports costs money...add in some reasonable profit margin say 20% and you have your low price point . Add in another 50% to it if you are not selling direct and the resellers are taking their cut plus people like "discounts".

Like I said that is no easy answer!

Code Monkey
Thursday, April 8, 2004

Excel costs $100. An add-on for excel that accurately predicts stock prices over the next 36 hrs would be worth many millions of dollars per license.

You have to price it experimentally and see what happens. Important: don't start too low.

Dennis Atkins
Thursday, April 8, 2004

One consideration: When the manufacturer of the base product sees you succeed in selling this add-in, what are the odds that he will implement the feature you speak of in the base, and boost his price by, say, [your price]/2?

Anon.
Thursday, April 8, 2004

==>Excel costs $100. An add-on for excel that accurately predicts stock prices over the next 36 hrs would be worth many millions of dollars per license.

Personally, for me, I'd pay *billions* for that one. Where do I sign up? <grin>

Sgt. Sausage
Thursday, April 8, 2004

I thought it should be billions too. Although such a system let loose in the real world would cause havoc.

Steve Jones (UK)
Friday, April 9, 2004

Joel answered this quite nicely here too: http://discuss.fogcreek.com/newyork/default.asp?cmd=show&ixPost=1389&ixReplies=25

Matthew Lock
Friday, April 9, 2004