SpanningSync aka “Lessons on pricing your product, service or web app”
The feature:value ratio
Over the last few weeks I’ve been putting major effort and thought into the pricing, packaging and features to be included in the different account plans for SugarStats.
So what am I do to? This is a business after all and we do need revenue to keep going, but at the same time we need to provide value to our customers and craft the right packages and feature:value ratio.
Price too high and your market will tell you. Don’t combine the right features and your market will tell you. Price too low and most likely they won’t tell you but you’ll be out of revenue and be taken for granted 
.
Thus the feature:value ration is crucial: You must find and price the right package that includes a good balance of features that your target market will perceive as valuable. Note the word perceive, because when it comes down to it, the theory of relativity always rears its head.
A lesson from SpanningSync
So thinking about this all, I was seeing another situation slightly related which I could use as an example. Spanning Sync Inc made a nifty software app called Spanning Sync and are, from what I can gather, a small group of developers. It basically syncs iCal with Google calendar, full duplex, seemlessly. The software itself is simple, transparent and brilliant. It has been in beta for 4 months and has something like 18,000 or so BETA testers (me included).
They finally reached 1.0 and are going to charge for it, nothing wrong with that. But seemingly they’ve made it a bit over-priced and are getting a fairly large amount of back-lash (from me included) on the blog post.
Read here:
http://blog.spanningsync.com/2007/03/spanning_sync_v_1.html
Over 100 comments BASHING the pricing. Mind this isn’t from a group of penny pinches (I could be wrong), but people who will PAY for VALUE. Its OBVIOUS the value of this software doesn’t match the price. Where I think the relativity bug is biting here is that this same target group of people have direct comparisons (TextMate, which cost $30 for example) of other software to relate it to.
Though this may be an initial over-reaction, it may not be that bad after all. $25 a year is much more appealing and workable, especially since in a year this functionality might be built into OS X itself! So $2/month is not bad at all. It just might be their strategy to get people on subscription and make the “buy-now” price a little less appealing (which is mainly what everyone is complaining about)
Spanning Sync themselves have commented back and have stuck to their guns with comments along the lines of:
“There’s clearly a segment of the community that doesn’t want to spend $25/year or $65 once for our service. We’ve heard that loud and clear, and we respect that.But there’s also a segment of the community that agrees with us that our service is worth that much or more. Those people are making their judgement known to us by buying subscriptions, and we are intently focused on making our service as good as it can be for the people who choose to use it.”
This is fine too if it works for them. You have to decide what types of clients you wish to attract to your service. Perhaps they’re looking for people who will feel like they’re getting more out of the product and appreciate it much more (You’d either have to or NEED to if you’re going to pay $65 for a simple sync app). Maybe the people commenting in reality only represent a small portion of their customer base but they’re the only ones who will really know for sure. In this case the 1 year subscription make the most sense and if you break it down is not nearly as bad. In the end it’s all relative.
But I have to agree with what another commenter said:
“I’ve been wrong before. I, however, think that for every person that chose to comment, there are at least another 10 that just shrugged and said “oh well”. The real test will come once people’s trials start expiring. And then after that will you continue to bring in new users?”
Some Lessons
So there are some lessons:
- Keep in mind the voice of your market (especially early adopters) when making decisions.
- Be able to adapt and listen to those who’ve helped you build your service.
- Price it at what you think a “fair” value is, stick to your vision and what you feel is right.
- If you can, try to hit the “sweet spot”. Here is an example a commenter made on the post about the “sweet spot” in regards to SpanningSync:
$65 X 18000 = $1.17 Million …. nice dream$65 X 180 = $11,700 …. reality
$20 X 200,000 = $4 million …. sweet spot
Basically outlining, from a one-time price perspective, they would do MUCH better by cutting their price and likely getting many many more buyers (200,000 for the mac market is a EASY grab if people find the price right and I think $20-$30 would be perfect for this product). Though as I said above the main goal just might be that they want more people to subscribe.
Jarkko Laine made a post about it:
http://jlaine.net/2007/3/15/hello-and-goodbye-spanning-sync
So I thought this was an interesting story. It is all about what kind of customers you want to attract, what your main short/long term goals are and what collective perspective your target market has on subjects like this.
For SugarStats I think we’re almost there. We’ve got a good foundation on what we want to offer and for what. In the end you just have to go with what feels right for you.
.
Posted on March 16, 2007
Filed Under Apple, Business, CSS/XHTML, Daily Thoughts, Design, Entertainment, General, Hardware, Hosting, Marketing, Mobile Tech, PHP/MySQL, Productivity, Quotes, Ranting, SEO, Startup, Tech, Web
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I'm Marston and here you'll find my rantings, rhetoric and other useful info. I dig tech, photography, quantum physics and organic food. I'm the founder of SugarStats.com and thats my days developing.
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[...] I’m hooked on SpanningSync, a little app that transparently keeps my iCal and gCal in sync. This is great because gCal is truly collaborative & sharable & free, whereas iCal enables my phone sync. I ended up paying a year’s subscription for $25 although it’s a pretty crazy price for such a little tool (full price is $65–as a comparison TextMate is $39). Their announcement post spawned some interesting comments around pricing, as well as a few related posts. This comment sums up the problem: Also… $65 X 18000 = $1.17 Million …. nice dream $65 X 180 = $11,700 …. reality $20 X 200,000 = $4 million …. sweet spot [...]