When I originally released RakNet I charged $2,000 per application. Later, I charged $0 (free) to increase market share because nobody was buying it at $2,000. Later, as it improved I charged $4,000. I got some sales there, so raised my price to $5,000. All the while I was wondering at the greed of my competitors that charged hundreds of thousands for more restrictive licensing terms. I was competing on price because I could afford to do so, and while my prices were good for an individual at the time, they weren’t enough to hire web designers, support, testers, etc. so I was endlessly stuck as a one man operation. I even read back then on Joel on Software about startups “Don’t compete on price” but didn’t listen.
What I didn’t understand at the time is while there was a HUGE difference between $2000 and $10,000 to me as an individual, to a developer that is the SAME AMOUNT OF MONEY – if your software helps them, they will license it either way, and it’s just as hard to sell to them. This is even more true with a publisher. You could charge basically what it would cost to write, and they would still license your software as long as it saves them time.
The hard part is:
1. Get them to know about your product in the first place
2. Convince them your product is worth using
3. Get through the non-programmers and legal to actually get money into your bank account
Because I undercharged originally, I short-changed my company money licensees would have been willing to pay. And since I was charging one-man prices, I never grew beyond a one man operation.
You might ask, “So what, as long as the quality is the same?” I did, and for programmers it doesn’t matter, because they are looking at your code, not your website. This will get some sales at smaller companies. At larger companies, programmers usually aren’t the ones writing the checks. Before signing any big deal, HR, lawyers, and producers are going to look at your site. And as I found out the hard way, all it takes is for a lawyer to say “This guy’s site sucks, so we don’t even want to deal with him” to stop a deal.
Also, by not financially growing your company, your competitors that do get the funds / clout to do direct marketing, and bundling, and get their software on the front page of gaming sites. I on the other hand have to sell to smaller customer base, many of whom already have my competitor’s product through a bundle. It’s like how I bought Windows Vista with my laptop, something I would have never done if I had the choice. Right now I have so little clout that even some advertisers won’t return my calls.
Because the quality is so good, RakNet actually has #2 marketshare right now, and I’m proud of that. But I only recently started charging realistic prices, and have to play catch-up.