Gyaan Sutra On entrepreneurship and technology

Pricing is difficult.

Unlike programming, most of the business issues don’t have a convergent set of answers. So when it comes to taking decisions, relying on gut and some random bits of information is the best that one can do. Yet, if you are a freelancer and have no prior experience in pricing a product, this should help.

Joel, of Joel on Software, plots the price of their product priced in USD divided by the pound sterling conversion rate, and derives two major conclusions.

Large customers (on the left, enjoying the volume discount) are not price sensitive. There does not appear to be any correlation between price and sales. These are larger businesses that are used to spending money on things, and it’s not their money, anyway.

Small customers (on the right) are price sensitive. They’re startups and small ISVs that are used to watching their budget. They exhibit a classic downward-sloping demand curve as economics would predict, and they like prices that end in 9 a bit better than prices around it (there’s a small bump below £70).

And hey, while you are here, don’t forget to subscribe to Gyaan Sutra.

Joel