Deciding how much you should charge for a piece of computer software is really really difficult. Even testing a given answer is hard. You can vary the price and watch your sales, but that can only tell you so much — how do you control for other factors? You can look at your competitors, but who’s to say they’ve made the right decision (if all the other software companies jumped off a cliff, would you jump too)? You can look at economic models, but in general they’re great for pricing goods made of atoms but terrible for goods made of information.
All you can do is get as much data as you can, churn the numbers, and try to work out an answer. You fiddle with the price and do discounts, and see what happens. You talk to your existing customers and ask them how much people who haven’t bought yet should pay. Or you ask the hundreds of brilliant people who read your blog :-)
So: what do you think? How much should we charge for Resolver One? Let me know in the poll below. I’ve not given “zero” as a response, but if you can think of a viable free software business model for us then you can post it in the comments. (Raising VC and then selling at an inflated price to Sun doesn’t count :-)
[UPDATE] Hello to visitors from reddit; I’ve added a link to the product information above so that you can see what software I’m talking about.
[UPDATE] An excellent link in the comments from Andy Brice (whose blog looks well worth reading). My takeaway: Don’t try to compete on price alone. You can charge more than you think, and the best way to find out how much is to ask people, in particular your existing customers.
It was also great fun rereading this Joel Spolsky gem.