Putting a price on software is one of the most difficult decisions for developers when releasing their own products. We’ve previously written about how to approach pricing like a science and how to address specific technical audience. We also shared a post about learning from price changes.

This time we want to share some insights from over 2 years of running Binpress, about what components sell the most and generate the most revenue, and how it relates to their pricing (and licensing). While we’re talking about Binpress components here, this article is relevant for selling any kind of business or developer oriented software.

Higher priced components sell better and generate more revenue. And it’s not even close

Lets compare some sales numbers between lower and higher priced components.

  • Components priced at 100$ or more generate 51% more sales compared to lower priced components.
  • Components priced at 100$ or more generate 1,269% more revenue compared to lower priced components. Yep, that’s a factor of more than 12 higher revenue.

If those numbers surprise you, it might be because it goes a bit against common logic. Sure, higher priced products generate more revenue per sale, but that should be offset by people buying more of the lower priced products. Right?

Well, it turns out that conventional wisdom is not really applicable here. Lets explore reasons to why that is:

  • Buying components is not an impulsive purchase. People pay for components to solve a need, and after doing due diligence and research first.
  • That need is usually a business need and not a personal one. People are willing to spend more when they believe they’ll have good ROI (return-on-investment).
  • Higher priced components usually solve bigger / more painful problems. The smaller a problem is the easier it is to ignore it, and vice-versa.
  • Higher priced components represent higher quality and set expectations accordingly. When purchasing the question is less about price and more on whether it’s within your budget. If it is, the exact number doesn’t matter that much – and better solutions are preferred.

Touching more on the first point, many publishers come to Binpress with experience in software marketplaces such as the App Store or Google Play, and are used to selling low-priced software and hoping to reach a mass-audience. Binpress’ audience is completely different – in size, in disposition, and in their motivation for purchase. For those reasons, applying App-Store like pricing schemes on Binpress is counterproductive.

Raising your prices does not affect conversion

Here’s another punch in the face of conventional wisdom – generally speaking, raising (or lowering) component prices on Binpress does not have much effect on purchase conversion.

This is true up to a point – there seems to be a (pricing) cliff for most people below which a sale would occur. That cliff is individual and changes between person to person, but in general it is much higher than you think. Once you satisfy the “need” portion of the equation with your component, the main question is whether you fit in the budget.

There is an exception to this rule, and that is providing discounts. Giving a discount gives the feel of greater value and urgency – especially if it time limited.

Two prices are better than one

Many components are submitted for review with one license and pricing attached, and we always recommend having at least 2, each with its own pricing. The goal is to have tiered pricing, where the lower tier(s) appeal to individuals and smaller companies and the higher tier(s) appeal to bigger / higher budget companies.

The motivation is that pricing does not exist in a vacuum – creating a point of comparison between different pricing changes the perceived value of each – with the lower tiers appear to have better value and the higher tiers appear as more premium.

In addition, giving clients the option to spend more (while providing more – with different licensing), can only have a positive effect on the bottom line.

You need to sell less to make more with higher pricing

While a fairly obvious point, it is one that is commonly overlooked by publishers we talk to. Even if you are afraid that higher prices will reduce sales, keep in mind that you need to make less sales with higher pricing to generate the same revenue.

Do you think that raising your prices by 50% will hurt your sales by 50% or more? most likely, that is not the case. From our research, raising prices by 50% will hurt your sales on average by 5-10% (and sometimes not at all). Again, it is all a matter of staying within the budget of your target audience, and representing the value of the component well.

There is also actually a side benefit to making less sales, in case that does occur – you have to provide less support. Your time is valuable, and you should consider time investment in support when pricing your components.

To the bigger component goes the spoils

After reading all of this and going over your components, you still can’t justify going over a certain pricing point. The solution – publish bigger components! publish components that justify a higher pricing point, and price them accordingly.

That’s the most important advice we can give to current and potential publishers – if you can’t decide in what component invest time in getting ready for publication, always go with the bigger solutions that solves a bigger need. The rewards for publishing a bigger, higher priced components are simply not proportional to the time investment, as shown in the numbers in the beginning.

Some inspiration

Want to see some of our best components and get some component idea inspiration? take a look at the following:

If you have any questions regarding pricing or component ideas, leave a comment or get in touch through our contact form. We are here to help :)

Posted in Building an Open-Source Business Pricing