You Can’t Make It Up In Volume

Audio version

Under the standard ShareMouse pricing model, it would cost $75 to equip each of
these three computers with a software licenses.

In February I wrote a story for CNET called, We’re not paying enough for apps. It stemmed from my conversation with Gunnar Bartels, CEO of Bartels Media, which makes the handy ShareMouse utility. I told him his app was overpriced, at $25. He argued, and I came around when I began to see how perfectly elastic prices are in software. We went our separate ways.

Until this month, when Bartels sent me a note. He had set up a test promotion with the CNET Cheapskate blog. For kicks, he offered a one-day $10 sale on Sharemouse.

“Holy cow!” Bartels wrote. Translation: He sold more licenses than the elastic pricing model predicted.

Part of the success of the trial can be attributed to the valuable marketing and promotion that came with the CNET post. Even so, Bartels says the sales figures were “overwhelming and surprising.” So he’s now planning on bifurcating the ShareMouse product line.

When the next version comes out, there will be a low-end $10 product, as well as a super-premium version with extra features, at the current $25 price.

Bartels says that the expected downside of selling at the lower price, higher support expenses, has not borne out. “Maybe our product is so good,” he says. Yet he will still be relying on the $25 product to make his business work. Even with the near-zero cost of distributing licenses, “at $10, it doesn’t leave much profit,” he says.

- Rafe

See also:
How Valve experiments with the economics of video games (GeekWire)
The AppStore, a microcosmos for understanding price elasticity (Best Practice Pricing)
Revenue = X (Oliver Reichenstein on Google+)
Valve cofounder explains Steam’s ongoing price experiments (TechSpot)

Audio of this column:

A message from Evernote

Get the best-selling handwriting app for iPad: Penultimate