Re: Tierred pricing (was Tiger tools...) -- MIDRANGE-L


Chris Rehm wrote:
>
> On Tuesday 30 October 2001 10:29 am, Brad Stone wrote:
>
> > 1.  Besides the fact that it's the "norm", what reasons are
> > given for the need to price software on a tierred level?
>
> Economics of the software vendor. Trying to provide a strong enough revenue
> stream so that they can stay in business without pricing themselves out of
> the smaller business markets.

(I'm a vendor).

The big cost in software delivery is getting somebody to buy it.
Smaller companies tend to have simpler purchasing and make
faster decisions. They also tend to be less demanding. That
means the cost of selling the product to them is less than with
the bigger sites.

That being siad, we tried tiered p[ricing and didn't like ti -
we price by concurrent connections - use of the software, not
capacity of the server or depth of pockets of the customer.

> > 2.  Does the software for a larger machine require more
> > coding, support etc. to make up for the difference?
>
> I don't think it is possible to answer this on a global basis.

Me neither. typically it would be support and not coding costs.

> > 3.  What other industries tier their pricing for the SAME
> > product?  (ie gas costs the same for a ferrari and a tempo).
>
> I am taxed less if I only make $10,000 than if I make
> $100,000.

Actually you are taxed more on 100,000 than on making 10,000 ten
years in a row. If your kid goes to a private university and you
are in a higher income bracket, you get less of a discount in
the form of scholarships and fginancial aid - that you have to
pay with dollars you pay more tax on.

> Actually, tier pricing seems to be a lot more common than I thought.

Well, in reverse, poor people pay a higher percentage of their
income on food and clothing and shelter than people who are not
poor. (In some states they exclude sales tax on fgood and
clothing to help mitigate this.) Probably small sites pay a
higher percentage of their DP budget on licenses even while they
are paying less in absolute dollar amounts for the license.

We discovered a strange phenomenon - we charge half as much for
our product which is more capable than the competitors - but we
find that prospects then assume our product isn't as good, or we
wouldn't charge less for it. The problem is that when people
don't know the brand, they use price as a predictor of value. So
much for being a nice guy.


--
Brad Jensen brad@elstore.com
President
Electronic Storage Corporation Tulsa OK USA
918-664-7276

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