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076 How Do I Price My Software? What Is The Right Price For Software? · DevQuestions with Tim Corey

• 0:00
  SPEAKER_00: Welcome to the Dev Questions Podcast with Tim Corey.
• 0:03
  SPEAKER_00: Join us each episode as we tackle the questions you are asking about a career in software development, understanding the industry, and new technology.
• 0:12
  SPEAKER_00: If you're just starting out or you want to grow stronger as a developer, this is the place to get your questions answered.
• 0:19
  SPEAKER_00: Now, here's your host, expert developer and online educator, Tim Corey.
• 0:24
  SPEAKER_01: How do I price my software?
• 0:27
  SPEAKER_01: What's the right price point for the software I'm building so that I make the most money without pricing myself out of the market?
• 0:36
  SPEAKER_01: This is a great question for today's dev question episode.
• 0:40
  SPEAKER_01: And I want to dive into how do you get this right?
• 0:44
  SPEAKER_01: Because it's really tricky.
• 0:46
  SPEAKER_01: If you set your price too high, no one buys.
• 0:49
  SPEAKER_01: And if you set your price too low, you don't make any money.
• 0:53
  SPEAKER_01: So where is that right middle ground where you're not losing money or you're not leaving money on the table?
• 1:00
  SPEAKER_01: So I'm gonna go over some questions to ask to figure out the best price point for you.
• 1:06
  SPEAKER_01: And then I'm gonna go over how I set pricing because I think it's even though my courses are not software, the pricing thoughts that I've gone through are pretty similar to how you'd price software.
• 1:20
  SPEAKER_01: So you'll see a real world example on how I do it.
• 1:24
  SPEAKER_01: Okay, so the first question to ask yourself is how do you want to be perceived financially?
• 1:31
  SPEAKER_01: So, how do you want your app to look?
• 1:34
  SPEAKER_01: Do you want it to look cheap?
• 1:37
  SPEAKER_01: Do you want it to be premium or do you want it to look free but not be free, like a freemium model?
• 1:46
  SPEAKER_01: So let's talk through some of these.
• 1:48
  SPEAKER_01: Uh cheap.
• 1:49
  SPEAKER_01: Well, a cheap, let's look at the app store, like on your iPhone or your Android device.
• 1:55
  SPEAKER_01: A cheap app when it's not free is usually a dollar.
• 1:59
  SPEAKER_01: Okay, so it's it's a you know, just 99 cents, just just enough to charge you something.
• 2:07
  SPEAKER_01: Whereas a premium app might be$10 or$15,$20, or even more.
• 2:13
  SPEAKER_01: So what do you want to look at look like in the market?
• 2:18
  SPEAKER_01: Okay, do you want to look like the um the throwaway, the cheap, the, you know, um not expecting much of this but giving it a shot kind of price, the very, very cheap price?
• 2:31
  SPEAKER_01: Do you want to look like you are a a luxury item or a this is going to be a big deal purchase with with your app?
• 2:42
  SPEAKER_01: Or do you want to look at the the freemium model where you come across at first as free and maybe you are to get started, but then you charge in the back end, whether it is a subscription model or it's remove the ads for money or something like that.
• 2:59
  SPEAKER_01: It's not just about the money itself, it's about how you want to be perceived because the same application selling at$1 will be perceived differently than if it were selling at$20.
• 3:15
  SPEAKER_01: So it's not just the money itself, it's the perception that goes along with that that you need to think through.
• 3:23
  SPEAKER_01: So, how do you want to price your ob your application, but also how do you want your application to be perceived?
• 3:29
  SPEAKER_01: Okay, and then who is your competition and how are you competing with them?
• 3:36
  SPEAKER_01: So when you identify your competition and you look at it and say, Okay, am I competing on price?
• 3:43
  SPEAKER_01: Is that where I'm at?
• 3:45
  SPEAKER_01: Is it based upon features where you say, you know what, price isn't the real thing here.
• 3:50
  SPEAKER_01: It's all about the features that I provide that somebody else doesn't.
• 3:55
  SPEAKER_01: Or is it the value you provide?
• 3:58
  SPEAKER_01: Maybe your application is faster than the other application.
• 4:02
  SPEAKER_01: Maybe your application allows you to allow the user to do more in less time or allows them to um, you know, find some other value in your application, maybe not features it specifically, but just you know, your features work better.
• 4:19
  SPEAKER_01: And so there's a value there.
• 4:21
  SPEAKER_01: It doesn't break as often.
• 4:23
  SPEAKER_01: So, how are you competing there?
• 4:25
  SPEAKER_01: Are you competing on price?
• 4:26
  SPEAKER_01: Are you competing on features?
• 4:27
  SPEAKER_01: Are you competing on value that you provide?
• 4:31
  SPEAKER_01: So that's the next question to answer.
• 4:33
  SPEAKER_01: The third question to answer is how are you gonna support yourself?
• 4:37
  SPEAKER_01: This is one that people often don't really understand or don't think through fully.
• 4:43
  SPEAKER_01: So the first option is a one-time purchase.
• 4:47
  SPEAKER_01: So you offer an application, people buy it.
• 4:51
  SPEAKER_01: Well, think through that because you probably need to set your price higher if it's just a one-time purchase.
• 5:00
  SPEAKER_01: If you're selling your application and you sell it for$20, well, that$20 is great revenue when you get it.
• 5:10
  SPEAKER_01: But then what happens when you have to support that application three years from now?
• 5:16
  SPEAKER_01: Where you've had to support it all along?
• 5:18
  SPEAKER_01: How much support can you really give before you're not making any money?
• 5:25
  SPEAKER_01: Because if for every person who buys your application, you on average have one hour of work to do, well, then you're getting paid$20 an hour, which could be okay.
• 5:40
  SPEAKER_01: But maybe you have your your uh timing spikes, and now it's two hours or three hours on average per purchase.
• 5:49
  SPEAKER_01: Well, now you're down to six or seven dollars an hour is all you're making.
• 5:54
  SPEAKER_01: And you see how that goes down, or maybe it's just the fact that you have everyone buy up front, and then you don't have a big trickle of income.
• 6:04
  SPEAKER_01: Maybe there's only a few people buying over time down the road, and yet you still have to support this application.
• 6:11
  SPEAKER_01: So a one-time purchase, you have to charge more for up front, knowing that you'll support it longer than you're gonna get income from it.
• 6:21
  SPEAKER_01: Maybe you want an upfront purchase and support.
• 6:26
  SPEAKER_01: A lot of companies do that.
• 6:27
  SPEAKER_01: So if you're buying software, let's say you're buying, you know, Teleric or one of those other software vendors, you buy their product, but then you also buy support.
• 6:38
  SPEAKER_01: So maybe the product is$1,000 and then the support is$200 a year.
• 6:44
  SPEAKER_01: Well, that$200 a year goes to support new versions and upgrades and fixes and all the rest.
• 6:52
  SPEAKER_01: That residual income can be really helpful to a business.
• 6:57
  SPEAKER_01: So think that through.
• 6:59
  SPEAKER_01: Is it a one-time purchase or an upfront purchase with support as well?
• 7:05
  SPEAKER_01: Or the third option is is it a subscription model?
• 7:09
  SPEAKER_01: You're saying right up front, this is a software as a service or something similar where you're gonna pay annually.
• 7:16
  SPEAKER_01: So Office 365, which is now Microsoft 365, that's a concept like that where you pay per year.
• 7:24
  SPEAKER_01: And I believe it's$100 a year right now for uh I think it's a family plan, it's$100 a year.
• 7:30
  SPEAKER_01: Um, actually a great value because I was used to buying new Office products at about$400, and I could use them for as long as I wanted to, is a one-time purchase.
• 7:43
  SPEAKER_01: But with$100, I get the new versions as they come out and I get from my whole family.
• 7:50
  SPEAKER_01: Yes, I don't own it, but because I'm paying over time, Microsoft can invest more resources into not just making big new versions I had to upgrade to, but in upgrading continually.
• 8:04
  SPEAKER_01: Well, the same is true for your software.
• 8:06
  SPEAKER_01: If you have a subscription model, you can continue to invest as it makes sense.
• 8:13
  SPEAKER_01: When you have 10 users at$10 a month, okay, that's not a ton, it's a hundred dollars a month that you're making.
• 8:20
  SPEAKER_01: And maybe you spend a little bit of time on it.
• 8:23
  SPEAKER_01: But maybe as you grow, you get a thousand users a month.
• 8:27
  SPEAKER_01: Well, that's ten thousand dollars a month of income.
• 8:31
  SPEAKER_01: That's a big deal, and something can you can devote more time to, maybe even full time.
• 8:37
  SPEAKER_01: Well, now you're able to do a whole lot more knowing you have that continual income coming in.
• 8:44
  SPEAKER_01: Now, of course, people drop off, but you can look at your rates and see how that works.
• 8:48
  SPEAKER_01: So that subscription model might work for you.
• 8:52
  SPEAKER_01: You gotta make sure it works for your customers as well, though.
• 8:55
  SPEAKER_01: Another option is people say, Well, I want to do ads or affiliate revenue.
• 9:01
  SPEAKER_01: You're not gonna make a ton of money that way, but think that one through and see if maybe that's a route you want to at least consider.
• 9:08
  SPEAKER_01: And finally, the donation model.
• 9:10
  SPEAKER_01: Maybe you are just doing this, you know, because you want to help people out, but you have the ability to have donations.
• 9:18
  SPEAKER_01: Not a great income stream, definitely not predictable, but it can be at least, you know, something that pays for coffee or pays for um a new computer or something like that if you get enough of them.
• 9:31
  SPEAKER_01: So those are some options, things to think through.
• 9:34
  SPEAKER_01: Um, and that is one of the questions you have to think through.
• 9:39
  SPEAKER_01: So the three questions that that I think you should think through are how do you want to be perceived, especially financially?
• 9:45
  SPEAKER_01: Who is your competition, how are you competing, and then how are you going to support yourself with this application?
• 9:52
  SPEAKER_01: Because all three of those will impact how you set your pricing.
• 9:58
  SPEAKER_01: Now let's talk through what do I do?
• 10:00
  SPEAKER_01: So I sell courses, but it's a similar concept.
• 10:05
  SPEAKER_01: So the first thing to think through, how do I want to be perceived?
• 10:09
  SPEAKER_01: Well, my perception is is I want to be perceived as providing premium courses with deep value.
• 10:16
  SPEAKER_01: I'm not competing on the cheapest courses, I'm competing on giving you the resources you need to learn, let's say C sharp, the easy way, the quick way, and yet the most in-depth way.
• 10:31
  SPEAKER_01: So it's a premium course offering with deep value.
• 10:34
  SPEAKER_01: That's the perception I'm looking for.
• 10:37
  SPEAKER_01: For my competition, a lot of people think that my competition is Udemy or Plural Site.
• 10:42
  SPEAKER_01: It's not.
• 10:43
  SPEAKER_01: I don't perceive them as my competition because I am not competing on the cheapest, I am not competing on having the most.
• 10:53
  SPEAKER_01: That's what they do.
• 10:54
  SPEAKER_01: Udemy competes on having$9,$10 courses.
• 10:58
  SPEAKER_01: That's their competition, is the cheapest ones around.
• 11:01
  SPEAKER_01: And you know what?
• 11:02
  SPEAKER_01: People buy them and collect them, but they don't actually change their lives because of them.
• 11:07
  SPEAKER_01: Not at a great percentage.
• 11:09
  SPEAKER_01: Yes, you can, you absolutely can.
• 11:12
  SPEAKER_01: By and large, though, people don't.
• 11:15
  SPEAKER_01: They buy it and then go, yeah, I'll put it in the library and then forget about it.
• 11:19
  SPEAKER_01: Okay.
• 11:20
  SPEAKER_01: Plural site, people buy that because it's got tons of courses on there, and then don't really ever get a lot done with it.
• 11:28
  SPEAKER_01: That's not what I'm looking for for my students.
• 11:32
  SPEAKER_01: I'm looking to change your life, change your trajectory of your uh whole career through giving you premium content with deep value.
• 11:44
  SPEAKER_01: So I'm not competing with Eudemian PluralSight.
• 11:47
  SPEAKER_01: I have set my sights on colleges and boot camps.
• 11:50
  SPEAKER_01: That's who I compete with.
• 11:52
  SPEAKER_01: I'm looking to give a better education than a college or a boot camp will in the topics I teach.
• 12:00
  SPEAKER_01: So my foundation courses will give you more value than a college degree or a boot camp will in that subject matter.
• 12:09
  SPEAKER_01: Okay, that's what I'm focusing on competing with.
• 12:12
  SPEAKER_01: Now, for me, support, I really focus on one-time purchases primarily.
• 12:20
  SPEAKER_01: And the reason why is because again, I want to give you deep value.
• 12:24
  SPEAKER_01: And so I'm focused in on lifetime access, access to the forums, access to, you know, have that experience of not just learning it once and then moving on, not just like you go to college, you get the lecture once.
• 12:42
  SPEAKER_01: You don't usually get the lecture for life, okay?
• 12:45
  SPEAKER_01: You get it once.
• 12:46
  SPEAKER_01: Same the boot camps.
• 12:47
  SPEAKER_01: Boot camps are this stream where you have to get in and paddle as hard as you can to keep up all the way to the end.
• 12:56
  SPEAKER_01: Because if you get you know behind in any area, the stream is past you.
• 13:01
  SPEAKER_01: You're it's it's gone.
• 13:02
  SPEAKER_01: You'll not really catch back up very easily.
• 13:05
  SPEAKER_01: That's not what I want.
• 13:06
  SPEAKER_01: I want deep value.
• 13:08
  SPEAKER_01: And so I'm looking at, hey, you know what?
• 13:11
  SPEAKER_01: You can learn at your own pace.
• 13:13
  SPEAKER_01: And then when you're actually doing this at your job, you can refer back to it again.
• 13:19
  SPEAKER_01: Because then you're applying the real world after you've practiced, hopefully.
• 13:24
  SPEAKER_01: Um, but you're applying the real world, you go, wait, how did Tim do this?
• 13:28
  SPEAKER_01: And you go back and look at the video again because it's a long-term resource.
• 13:32
  SPEAKER_01: That's why I focus on one-time purchases.
• 13:35
  SPEAKER_01: Now, with that, a one-time purchase needs to be higher because the fact that I'm getting an amount of money up front, and then there is some level of support.
• 13:48
  SPEAKER_01: I have a full-time support person just for my students.
• 13:52
  SPEAKER_01: Well, that support has to last for the lifetime of your use, which is years.
• 14:00
  SPEAKER_01: So that one-time purchase has to be a bit higher.
• 14:04
  SPEAKER_01: Now, I do have a subscription model as well, and that does benefit my company because it allows me to have some stable income and not be fighting for you know uh the next thing or the next sale to bring in uh a chunk of money and have this up and down uh income stream.
• 14:25
  SPEAKER_01: That uh subscription model does help with the um the stability of the income.
• 14:31
  SPEAKER_01: And I do have some focus on that, but primarily I'm looking at that long-term value out of the one-time purchase.
• 14:41
  SPEAKER_01: Now, for my pricing, I encourage you to value the purchase.
• 14:47
  SPEAKER_01: So when you purchase something for$100, you value it.
• 14:52
  SPEAKER_01: When you purchase something for$10, often you throw it in your collection and you say, Oh, I'm gonna collect that course.
• 15:01
  SPEAKER_01: You don't get the value out of it.
• 15:03
  SPEAKER_01: I don't want you to put my courses in a collection.
• 15:06
  SPEAKER_01: I don't want you to collect all my courses unless you're gonna go through them all.
• 15:10
  SPEAKER_01: And I want you to do it one at a time.
• 15:13
  SPEAKER_01: Don't just buy all front and and hope that you get to it.
• 15:16
  SPEAKER_01: Buy one at a time and go through them because I want you to get that deep value.
• 15:21
  SPEAKER_01: I am encouraging that with my pricing.
• 15:25
  SPEAKER_01: It also, because of how I set my pricing, it supports growth.
• 15:30
  SPEAKER_01: You see, I am not looking to just do things on volume.
• 15:37
  SPEAKER_01: Volume for me is actually not a good thing because the higher my volume is, the more time it takes to support my paying students.
• 15:45
  SPEAKER_01: And I really try hard to support them as much as I can, which is why I hired Tom.
• 15:50
  SPEAKER_01: Tom is my community manager and he spends his whole day focused on the community, helping them, answering questions, helping with invoices, working with refunds, and all the rest of the stuff that goes on with the community.
• 16:05
  SPEAKER_01: Well, that's expensive, and the more I have students-wise, the more time it takes from his day, and the less time he can do other things with his time and with my time.
• 16:18
  SPEAKER_01: So I need to set the price at a point that supports growth because with that support of growth, also that allows me to do more free content.
• 16:28
  SPEAKER_01: I've set my price lower and tried it out.
• 16:31
  SPEAKER_01: I even tried a Udemy course, and what I found was it actually took away from the company instead of adding to the company, and so we actually shrunk a little bit because of that lack of income.
• 16:47
  SPEAKER_01: The volume didn't make up for the lack of income.
• 16:52
  SPEAKER_01: So my pricing I set to support growth, and that supports for me more free content that I can do.
• 17:02
  SPEAKER_01: So for me, I jealously guard that pricing and I don't just lower it uh whenever I feel like because the fact that while I love to give everyone all of my premium content, what that would do is it would take away from my ability to provide more free content.
• 17:22
  SPEAKER_01: So I say, no, I'm not gonna lower my prices because in doing so, I will hurt the user who can't pay.
• 17:30
  SPEAKER_01: So that's how I set my pricing.
• 17:32
  SPEAKER_01: That's how I think through those questions and how I apply it to what I do.
• 17:37
  SPEAKER_01: So if you follow a similar pattern, not the same answers to the questions, but that similar pattern of asking those questions and answering them for yourself, I think it'll be much easier to come up with a pricing model that works best for your specific situation.
• 17:54
  SPEAKER_01: All right.
• 17:54
  SPEAKER_01: Thanks for listening for this week's episode of Dev Questions.
• 17:57
  SPEAKER_01: If you have a question about being a developer, check out the archive of this podcast and see if I've already answered it.
• 18:04
  SPEAKER_01: And if not, go to I am Tim Corey and go to the podcast page.
• 18:07
  SPEAKER_01: There's a form there you can fill out to ask your question.
• 18:11
  SPEAKER_01: And hopefully you'll see you on a future episode of DevQuesti.
• 18:15
  SPEAKER_01: Have a great day, and as always, I am Tim Corey.
• 18:19
  SPEAKER_00: Thank you for joining us for this episode of Dev Questions.
• 18:22
  SPEAKER_00: Tim is committed to making it easier for you to become a developer.
• 18:25
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• 18:32
  SPEAKER_00: You can also send your questions to questions at IamTimcorey.com.
• 18:38
  SPEAKER_00: Until next time, remember, you are too smart and your time too valuable to waste it making all the mistakes Tim did.
• 18:45
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