I’ve been thinking a lot lately about pricing and business models. When we started in the business, we developed high-functioning software calculators for Blackberry, Palm, Windows Mobile and Windows and were able to derive prices in the $60-$160 price range, depending on the product and niche. After a series of customer surveys, reading other developer blogs and books, and playing with our own prices in Apple’s App Store, it has become clear that these customers are no longer willing to pay these kinds of company-sustaining dollars. Instead, the price expected is diving toward 0 and there is now a disconnect between “price” and “value”, at least for digital goods, that had been there in the past.
(Please keep in mind: I’m not complaining. It’s reality and I’m trying to figure out how to adjust.)
In the old days, there were two classes of software: Nice To Have and Must Have. The Nice To Have software was just that. It was great if I had it but if it’s not there, I won’t fret about it. Since the customer really didn’t need it and there was no urgency to have it, customers didn’t value it and the price was low or free. Must Have products were the opposite: it was needed and there was urgency to have it, and thus prices were high. While we were developing a niche product, it was a high-need item within those niches and we could charge good money for that software.
Now it seems like the market has shifted. Now, because of the breadth of the Internet and the App Store and the ability to find people who Must Have your product or service, it seems that the Nice To Have category of products has disappeared. Instead, Must Have has split into two segments: Must Have for me personally and Must Have where I am a contributor.
If I’m a contributor — meaning that there is something I am creating that must be retained or stored or shared — than I am willing to pay for it. But if it’s for personal use than the expectation is free.
When did this change? I don’t know but it was occurring long before the price pressure of the App Store. Google has been rolling out “free” services (meaning free to the end-user) for years and the freemium model (where some stuff is free and other stuff is paid for) has become a predominant model for web applications.
We, too, have been going through a tremendous transformation, re-evaluating what should be paid for and what should be free in the FastFigures eco-system, re-evaluating whether we are a mobile application with web components or a web application with mobile extensions, and trying to figure out how we build a stable and growing company again.