Pricing strategies for software products

Posted on September 14, 2008

As you probably realized if you read my previous articles on pricing strategies for small businesses and deciding price based on the customer, I’m all against going cheap as a way to market a service or a product.

Now, let’s have a look at this: 80% off Coupon for Acronis True Image Home 11. If you take into consideration the processing/delivery fees you will understand that Acronis is left with… nothing. Of course that, not being a brick and mortar product, at least it doesn’t cost you anything. Also, it’s only valid for a week.

So let’s see. It’s not going to cost them a fortune as it only runs for a week, but they are not making any money on it. On the other hand, why don’t they give the software for free if a 80% discount is not making any money?

Because pricing strategies are not only a marketing tool. Pricing can be a business development tool. Let me explain why, I have at least 2 valid reasons.

First, Acronis True Image is sold (besides the Acronis site) through affiliates. If you don’t know what affiliates are, well, they are online resellers (of course that’s a very short explanation). These affiliates work as an additional sales and marketing force to the software author and they only get paid a commission on successful sales. This makes affiliates a highly efficient sales force. Now, it’s quite hard to get the good affiliates work for you, and even if they sign-up, if they don’t have sales, they will not promote your products anymore because they are only paid if they sell something. So in this case what a limited time 80% discount would do? It should help them make some sales - getting the Acronis True Image at only $9.95 should be an offer easy to sell. The 80% discount is meant as a business development tool - some new affiliates will sign-up to promote an “easy selling product”, and the ones that sell something will probably promote the products even after the promotion is over, because they saw there is money to be made.

The second valid reason is this: have you ever worked in a bigger company? If you did, you probably heard terms as market share - getting a piece of the market. If you manage to get a certain market share, sometimes it’s not really important the volume of sales you made, because owning a slice of the market will bring you indirect profits later (like cross-sells, additional services or anything else). So if you heard this in a bigger company, let me tell you that small businesses work on the same basic principles, only the scales are different.

What else could a 80% discount mean? Maybe the competition just launched a new product - they expect excellent sales in the beginning, so why not make things harder for them with a big discount? Maybe a new product version is due, so why not sell the older one to the max now? And there are plenty of more reasons that show that pricing strategies are not only a marketing tool.

PS: With Acronis True Image you can copy your entire PC, including the operating system, applications, user settings, and all data. In the event of a system or disk crash, virus attack or other fatal failures you can restore the entire disk contents in minutes — no reinstallations required! You could protect your small business assets with only $9,99 - the discount is only valid for a week!

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