Hello Friends,<p>I'm about to release a new application and I think I need some help thinking through the pricing.<p>The app is an add-on to a very popular application used by independent contractors and small businesses. I've essentially created new modules for other users of this application.<p>Anyway, the application I'm extending is a Freemium product, where a lot of people are using the app for free. The people who need my extensions do pay, and it's anywhere from $14/month to $300/month. I'm betting the mean is $25.<p>Any ideas here? Should I be Freemium? And if so, how do I price in relation to the mother ship? Any out of the box ideas besides "just price lower than the main application" (which is the best I've come up with)?<p>Thanks, Matt
Paying by the month gives you extreme flexibility. You can always lower the price in the future, although raising it is a bit harder.<p>One thing to do would be to compare what your app does with the one that costs 300/month, and what yours does compared to the one that costs 14/month. Where does your app fit in?<p>How much are you looking to make? How much are your costs per customer and costs per month? The basic way to price is to add up your fixed costs (rent, hosting, marketing, etc) and the cost per month for providing the software, and then add in a healthy profit margin. That's how much you should charge.<p>There are a lot of other pricing mechanisms, including how much money your software will save the customer, how much value they perceive it to have, etc. You could always start high and just keep lowering the price until you reach the ratio of customers to price that you want.
Start high and drop it over time if you are not satisfied. Also, maintain a "permanent license" option that is not monthly, that is about 6 times the monthly cost, and don't drop that as fast as the monthly cost if you have to drop it.