How to properly price a software product?

Hello, I hope this is the right forum for this question.

I've developed a software product, long story short - I'm basically ready to release it and I'm having second thoughts on pricing.

It's a niche industry-specific B2B product, I haven't found any competitors per se, in that no one is offering this exact same service.

Most articles on product pricing basically say to include your costs plus a reasonable profit margin, which is more than obvious. Hosting expenses being close to 0, all of my costs will be marketing.

What approaches do software owners here use to assess how much their clients are willing to pay? Primary market research (interviews with potential clients), A/B testing over time? Any ideas and tips would be appreciated.

One downside of having a very niche product - I don't have an infinite number of leads, if I do tests they will have to be in a reasonably small group.

Hi, i've done marketing for a new software product in the past. Basically this is how we priced it.

1. If you know the aprox client base, calculate 3 percent (max 5). Now divide your costs by that number of people. At that number add between 20 and 30% (+ 10% if the costs are recurring). This would be your baseline. You absolutely can't go below this line. Some adjustments are necessary.
2. Now you take the baseline and, judging by the NEED of your buyers, add X amount to the price, to a point that YOU would be willing to buy the software without even thinking twice.
3. From the beggining announce that this is a low-introductory price. If you have constant sales and higher than average conversion rates, increase price by 5-10%. And so on until you hit the sweet spot.
4. Repackage it, sort of acting as a competitor and offer it at premium price. The goal of this step is to make the original software more affordable. And if you make a few sales of the premium software...that's a bonus. BEst of all that the premium software has a few features, non vital, that makes it somehow different than the original. There are people that buy everything to compare and test.


That's what i did. It was a successful campaign.
What i wrote above is not set in stone. It depends on your niche and all, so adjust wherever it is necessary.

Good luck!

Have you thought of recurring? Is this a type of software that would want updates over time? There is nothing better than the recurring subscriptions model, also if your product has a high initial price, it could be broken up via subscriptions to make it easier to swallow from a prospective buyer standpoint.

NxtGenLedz said:

Have you thought of recurring? Is this a type of software that would want updates over time? There is nothing better than the recurring subscriptions model, also if your product has a high initial price, it could be broken up via subscriptions to make it easier to swallow from a prospective buyer standpoint.

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Hello, no, I don't think prospects would be very receptive to recurring payments for this type of product.

Nothing much to update either, except fixing bugs or adding features.

I think you should still try it. Offer some kinda great bonus for recurring and charge a small monthly fee. At least give it a shot. Don't knock it just yet.

MrGeneric said:

Hello, no, I don't think prospects would be very receptive to recurring payments for this type of product.

Nothing much to update either, except fixing bugs or adding features.

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I'd offer all options. A recurring to spread the cost over say 12 months at a premium, a one-time fee, addons if you can get them (consultancy, support whatever).

The more you tie them into recurring payments the better.

I would also suggest to change the price-model and features to a classical free-small-full Szenario with monthly rates.

Monthly rates with no ending. Make the price worth it. People are almost always willing to pay $20/mo indefinitely vs $300 one time.

Well you can always check what the competition has to offer, and give better deals on your product.