Tim Bray points out this terrific (if long) article from Joel Spolsky from last month on software pricing. Anyone who’s at all interested in how to price software or online services really needs to read this whole article.
And, in fact, you can’t even be sure that the demand curve is downward sloping.
The only reason we assumed that the demand curve is downward sloping is that we assumed things like “if Freddy is willing to buy a pair of sneakers for $130, he is certainly willing to buy those same sneakers for $20.” Right? Ha! Not if Freddy is an American teenager! American teenagers would not be caught dead in $20 sneakers. It’s, like, um, the death penalty? if you are wearing sneakers? that only cost $20 a pair? in school?
I’m not joking around here: prices send signals. Movies in my town cost, I think, $11. Criminy. There used to be a movie theatre that had movies for $3. Did anyone go there? I DON’T THINK SO. It’s obviously just a dumping ground for lousy movies. Somebody is now at the bottom of the East River with $20.00 cement sneakers because they dared to tell the consumer which movies the industry thought were lousy.
You see, people tend to believe that you get what you pay for.
Every time I read one of Joel’s articles I wish I was in the market for bug-tracking software so I could try his FogBugz software. Seems like a product from someone who thinks so intelligently and writes so well would at least be worth a good look.