James wrote:
>
> Going by memory:  The hardware (947 to 987) was something like $8 to $10
> thousand.  The rest of the $170,000 went to tier priced third party
> vendors.  Same users. Same applications. Same site. Same everything.
>
> Now I'd call that being "forced" or "bent" or "hosed" or...pick your own.

Well, I'll go ahead and put my flamesuit on with Bill Lancaster.

I, too, have recently left a software vendor company that considered
long and hard on how to price.  In James example, something difinetly
did change.  Otherwise, James would not have been upgrading or adding
another machine.  In this case, it appears the amount of data that was
being processed changed.

Anyway, pricing software is *very* difficult.  Just on this thread
users have mentioned at least three different methods to price software
that other users said wouldn't work.

In some cases, user based licenses works because the amount of
processing is controlled by the number of users running the application.
In some, user based licenses doesn't work because they are not related
to the number of users, but to other things such as the amount of data
processed (this would be similar to James having to pay for the extra
processing speed even though the users, applications, site and
"everything" remained the same).  While even I would like to get
faster cpus for no upgrade cost, I know this doesn't work for the
vendor.  Specifically with s/w tools, these products typically are
data related not user related.

So, with these types of products, do you charge a flat fee or a step
fee?  Those products that can have a profitable return (remember while
you don't want to pay too much, you also want to make sure your vendor
stays in business [unless you've decided you don't like the product
or vendor;] and to do this they need to make a profit) with a low fixed
fee, vendors can do this.  Unfortunately, most of these products can
not have a profitable return at a price that the 917 customer can
afford.  So, then the vendor has to decide whether to tier price or
to fix price and lose the low-end customers who 1) need the product
and 2) want the product, but can't afford it.

There are micro-economy models that show that tier pricing in some
cases *does* add more 'social value' than fixed pricing at a value
where some can not afford it.  If anyone really cares to see a
graphically example of this, I can build one in a Word or Excel file
and email it.

What's the right answer?  There isn't one right answer.  The market
sets the price -- when it's too high, complicated, 'unfair', etc.
customers don't buy.

Each of you are in a business, and unless that business has price
controls such as most utilities, your price is being set by the market.
In controlled industries, you actually have more money spent on
deciding a price than in uncontrolled.

Again, as with Bill -- flamesuit is on :)

LB