> From: "Gess Shankar" <gess@earthchannel.com>
> Subject: Re: re[2]: Lyris
>
> On 27 Nov 96 at 19:55, Brian J. Murrell wrote:
>
> > How do you justify the increase in price when the lists/subscribers gets
> > bigger? What more do I get when I pay the premium for more lists and/or
> > subscribers? I must get "more" of something due to the increase in the
> > price?
> >
>
> This has been a puzzle to me as well. I think Lsoft has a similar
> pricing model with recurring charges thrown in. I can understand some
> price differential if the managing larger lists or large number of
> lists included additional management features - still I would expect
> the price not to be that different from the basic package. If
As a disinterested observer, I can answer this one. There are two
points.
1. Many industries, including electric power, telephone and software,
are really "capital accumulation" businesses - nearly all the costs are
incurred in the front end, not in ongoing operations. The purpose of
charging the customer is to finance development of new facilities and,
most importantly, pay off the cost of development (read "bonds", in the
case of utilities). There are many strategies for convincing the
customer to do so. Since essentially all services provided have a
trivial added cost, that brings the second point.
2. The first rule of marketing is to set the price according to demand
and perceived value, NOT cost. Does a Mercedes Benz cost 8 times as
much to build as a Geo? Can you go 8 times as fast? Much TV
advertising, for upscale cars in particular, is to increase perceived
value. For instance, let's say I want to build a certain kind of
computer. I don't take my cost and add X% to get my price - I find out
what price I need to sell it at to make the volumes I am targetting, and
then figure out if I can build it (and support it, etc.) and make the
margin I want to make.
Bottom Line: the price is based on what you get, not what it costs.
The costs (after original software development are mainly in marketing
and support, which are spread pretty evenly across all users. Support
per list is probably less for clients with many lists, but also probably
somewhat more per client. This is actually a boon for small list owners
- otherwise they'd have to pay more, and the cost would be prohibitive.
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