Rethinking software pricing

Software is often overpriced. We hardly realise this and fall victims of clever marketing plans where a premium account is essential to use extra features for most products.

The thing is we take for granted that most software pricing is right. Let’s imagine the following scenario of a random product: we sign up for a new service that makes our work super-productive. We later find out that we need to pay a monthly fee in order to get some decent fully-working features. And in most cases we pay the required amount without any second thoughts. After all, what they’re asking for is worth the price and what is, in all honesty, $10-$15 a month (to name just a random price)? I mean, that’s what most people pay, right?

No! That is a big NO unless you happen to live in the US or an affluent European country. Take for instance a country like Greece, where the average monthly salary is between 500 and 600 Euros. Now, any hypothetical service or product that asks for $10 per month equals to $120 a year (just to pick a random price tag, which seems to be the average asking price for most software these days).

That is roughly 1/5 of the monthly salary of the average Greek citizen. And that is probably for supplementary software. If you count in a proper Word Processor, Image Editor or Anti-Virus, then one has to spend almost half of one’s salary on computer software alone.

Having lived in countries like Greece and knowing the economic situation, I often find it puzzling when tech review magazines name most services and products cheap. Maybe for them. For what percentage of the world population lives in the US or the EU? Shouldn’t a new startup really consider the fact that most people cannot afford a steep price tag?

Of course, you will argue, there are free and often open-source alternatives. Fair enough. Still, this does not account for the fact that fully-featured, mainstream software is way too expensive for the residents of most countries in this world.

When all is said and done, it is not just the software companies that need to realise that. Customers should think clearly if the asking price is worth the final product. After all, how much does extra bandwidth cost in our days? Surely it’s not that expensive to offer some additional MBs. Or how does a new theme justify an increase in price (after all there are thousands of CC images available for free)? Or even how much does it cost to have just a couple of people work for customer care? Are all of these features worth an expensive price tag for the individual?

In the end, I think we are all used to paying excessive amounts of money for basic software features or features that have only a negligible cost for most companies. Software pricing should be really reconsidered if it is to be ethical and fair.

The views expressed in this post are personal and do not refer to any specific piece of software or service. While I fully respect the services offered by most software companies, all I am suggesting is a reconsideration of the current pricing model by taking into consideration the situation in most parts of this world in order to embrace a wider user base on more ethical grounds.







One response to “Rethinking software pricing”

  1. psichel Avatar

    Software pricing is generally based on 3 factors:

    (1) The cost to develop and support the software versus other rewards (payment, recognition, related opportunities, etc).

    (2) How many can be sold. If you can sell enough units, the cost per unit can be small and still provide an attractive return.

    (3) What the market considers reasonable based on similar or competing products.

    Your argument is that reason (3) above sets the price too high, even though many independent developers and small business owners are struggling because software prices have been pushed so low. In some cases you may be right, but its hard to generalize.

    If you want high quality software that meets your needs and with ongoing vendor support, somebody has to find a way to make a living at it.


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