EME18 Software price & pricing

Software price & pricing

18.1 Software price & pricing

Characteristics of software

conventional pricing models are not directly applicable to
software products: the fact that it can be duplicated virtually for nothing is particularly significant when it comes to setting a price.
This means that software providers need to base their prices on how much their potential customers are willing to pay.

Pricing Strategies

Price: The amount of money expected, required, or given in payment for something.
Pricing Strategy.

18.2 Software sales strategies

Organization in the Software Industry:

• Region
• Industry
• Product
• New and existing customers

Channels in the Software Industry:

1. Direct sales vs indirect sales
   Decision basis:
   • Efficiency (evaluate transaction costs).
   • Effectiveness: evaluate the service (quality) given to customers.
2. Traditional marketing theory:
   • Professional and complex products are suitable for direct selling.
   • Standardized software products are suitable for indirect sales.

Key performance indicators (KPIs)

18.3 Software pricing strategies

Cost Structure of Software

• High fixed cost to develop the first copy.
• Marginal cost of additional copy is low or zero (negligible cost to duplicate).
• Distribution costs fall first copy cost is a large proportion of total cost.