Joel on Software - On the Pricing of Software - Fortune

Joel on Software - On the Pricing of Software

You can have focus groups and ask people, but they’ll lie to you. Some people will lie to show off their generosity and wealth. “Heck, yeah, I’d buy a pair of $400 jeans in a New York Minute!” Other people will lie because they really want your thing and they think you’ll decide to charge less money if they tell you a low number. “Blogging software? Hmm. I’d pay, at most, 38 cents.”

Then you ask another focus group the next day, and this time, the first man to speak has a crush on a pretty woman in the group, and he wants to impress her, so he starts talking about how much his car cost and everyone is thinking Big Numbers. And the day after that, you serve Starbucks during the break, and while you’re in the john everyone unbeknownst to you gets into a side conversation about paying $4 for a cup of coffee, and they’re in a real frugal mood when you ask them about their willingness to pay.

Then you finally get the focus group to agree that your software is worth $25 a month, and then you ask them how much they would pay for a permanent license and the same people just won’t go a penny over $100. People seriously can’t count.

Author Joel Spolsky
Work Camels and Rubber Duckies