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Should less cost more? Is less worth paying for?

17 Dec 2004 by Jason Fried

So, we’re working on a new product right now. Well, two actually. One is Writeboard and the other is… a secret (for now). But it’s in development and will probably hit the street before Writeboard.

Anyhow, we’re thinking about how to price this new product. We know there’s at least one other product that is sorta like ours, and a few that are distant cousins, but our product has some twists which makes it unique. Plus, it’s dead simple and insanely useful.

We know that the product closer to ours has about 10 times the number of features ours will have, yet we are thinking of pricing ours at almost twice the monthly rate of our competition. The competition actually has a number of different pricing options and packages, but we’ll just have two: Free and Pay.

We think that there’s a premium in simplicity (yeah, I know I said it was dead). We believe people will pay more for something that has less because, in essence, they are paying for just what they need instead of a bunch of other stuff they don’t. Plus, they’re paying a premium for clarity — less features means less clutter and that means a more efficient experience and greater ease of use (in our case, at least). In general, we think pricing should be based on value, not feature count.

What do you think? Is less worth paying for? Have you found yourself happy to pay more for less? I think the iPod is a great example of this — it doesn’t have an FM tuner, built in voice recording, blah blah. It just does a few simple things really well and it’s worth more because of that.

66 comments so far (Post a Comment)

17 Dec 2004 | Hunter said...

I can see a strong argument for less not costing less based on what you outline but without knowing more about the product, hard to say.

17 Dec 2004 | Michael Spina said...

I'd certainly paid more for a simple product that worked, and does what I need it to.

But I must be in the minority. It seems everyone compares feature lists. At least that's what most manufacturers must believe, based on the fact that you can't get anything that just does what it should. "Buy our phone because the camera takes better pictures, and you can download ringtones."

17 Dec 2004 | Solomon said...

This happens to be something that I have pondered for sometime now. I picked up a book by Seth Godin called Free Prize Inside and it answered, at least for me, some of the questions you posed. If we are indeed moving to an experience based economy then it's about the extras.....i.e....design and style of the product, what the product says, simplicity of the product, etc.. Also check out the part of the book on Edgecrafting....this did it for me.....

17 Dec 2004 | Hunter said...

So, simplicity/clarity is a feature to stick on your matrix...

17 Dec 2004 | Mark said...

For me, it all comes down to my opportunity cost. By providing me with "less" are you also decreasing my learning curve and increasing my productive time?

If so then, yes - I would pay more for less.

17 Dec 2004 | JF said...

One thing I can promise you with this new tool is that anyone will understand it immediately. There is zero learning curve.

17 Dec 2004 | Hunter said...

A new take on the popular eating instrument, the knife!

17 Dec 2004 | Chris S said...

If it does what it does better than everything else that does it, then people will pay what you ask provided the pricing structure is rooted in reality.

If it's truly better, then the simplicity/clarity will simply reinforce the inherent quality of the thing/service and make it that much easier to use and talk about.

17 Dec 2004 | pb said...

Joel just wrote on pricing.

17 Dec 2004 | Wade Winningham said...

If something is worth paying for, I'll pay for it as long as it has the specific features I want. For instance, to me, when purchasing a TV, picture-in-picture display is something I'll never use so that feature is meaningless in my evaluation and comparisons.

17 Dec 2004 | Darrel said...

In the physical world, the iPod is great example of simplicity = premium price.

People always question the cost of the iPod until they actually pick one up...then the entire simplicity of the design...from the form, to the finish, to the interface, to the scroll wheel hits them...and they they fork out the money.

The same is true for software *if* you give the end-user the tangible 'pick up and play with it' test.

UNFORTUNATELY, from my experience, most software sold isn't done that way. Instead it's software marketing folks (who I put on the scale of people I actually want to talk with just below used car dealers) selling brochures to middle managers. As such, COMPLEXITY is actually what sells.

Now, in 37sig's case, I think you folks know exactly how to target your audience and aim at the person that will actually use the software, so I don't think you'll have that same issue.

In the end, though, pricing in the software world is a crapshoot compared to selling physical objects. A lot of folks fork out $500 for an iPod but really think twice about paying 99 cents for an MP3.

17 Dec 2004 | Hunter said...

People put a huge premium on simple... Worked well for Apple for years...

They built a whole set of iMac ads based on the number of steps to get the machine out of the box and online.

17 Dec 2004 | Alex King said...

A lot of times people will buy things for what they don't include. Take Dreamweaver for example. The reason I don't use it is not because they don't have enough features, but because they are bloated with features I don't want, such as WYSIWYG editing. Or TopStyle, with their Visual Studio type properties tab. I'm not trying to bash these companies, but I think it proves you point. Less features rule. Why do we all use Notepad?

Maybe there should be a new kind of feature chart, showing what the product doesn't have for features :)

17 Dec 2004 | pb said...

Why do we all use Notepad?
Because it's free.

17 Dec 2004 | JF said...

Maybe there should be a new kind of feature chart, showing what the product doesn't have for features

We've sort of started to do this conceptually with the Basecamp Manifesto.

17 Dec 2004 | Lee said...

If you think...

"People will pay more for something that has less because, in essence, they are paying for just what they need instead of a bunch of other stuff they dont"

...your in lar lar land. That "bunch of other stuff" can be ignored or used when needed. More 37 hype if you as me, and you did.

17 Dec 2004 | Steve said...

Its very easy to choose based on the number of features. I might not need that now, but you never know kind of attitude. With software, extra features should be able to sit in the background when not required. Something solid like ipod would become more complicated if the added a load more buttons to turn it into a phone, but computer software done well, can have extra functions & still be simple.

Personally I find I have to try things before you know whether they are simple or not. Most sofware products have 'easy to use' badge on them, and nearly all of them are bending the truth. If I know product A is much easier than B, & will save a lot of time, I may well pay for it. But to pay for less, I'm not sure!

17 Dec 2004 | Brad Hurley said...

I agree with the principle, but I think it could be an uphill battle. For example, Microsoft Office costs more than Microsoft Works or AppleWorks. Why? Ostensibly because it offers more features and more complexity. I think people have gotten used to the idea that if you want more features, you pay more. Some people might be instinctively resistant to paying more for fewer features or less perceived complexity.

On the other hand, I agree with the posters above who say that if a product/program is so easy to use that once you give it a try you feel like you "must have it" (like the iPod example), then previous perceptions about price vs. feature set don't really matter.

17 Dec 2004 | ramanan said...

I doubt the iPod is priced the way it is because Apple felt that its simplicity warranted a premium. Apple charges a premium for all of their products, the iPod is no different. iPods are successful because they are for the moment quite chic. The fact that they are well made and easy to use may have helped them maintain their place in the MP3 market. I think it is reasonable to charge a premium for something that is well designed and easy to use. If doing less facilitates this, then I would say charging a premium is reasonable. Good luck.

And I would second Joel on Software's essay on the subject of software pricing, it's a great read.

17 Dec 2004 | Larry Burningham said...

Ok, here is my 2 cents.

I think charging more for less works if I at least feel that a lot of work went into making it less. You can tell the iPod was a labor of love and discilpline. Actually you can tell the whole iFamily strategy is designed simplicity. And you can tell that a lot of time and skill went into the product.

So the question is can I do the job with this new application effectively and can I realize the Return on Investment through the experience.

By that I mean I have a Nike MP3 player and my wife has an iPod. I gave up on my player because it just took too many steps to buy and add music. So now it lives in my gym bag never used. Now the iPod is easy to use on both Mac and PC and adding music is easy. The iPod is 30% more expensive. Guess what is on my Christmas list.

Same with Basecamp. Less features than Microsoft Project, but much easier to use and way more useful.

Charge more.

17 Dec 2004 | Ryan Mahoney said...

I think it's odd to compare the ipod (a consumer product and identity good) to a web service. Wouldn't iTunes be a closer relative?

I'm thinking this through. You're an ASP. You've got a web service (or component) that you'd like to sell on subscription basis.

First, I'd look at successful ASP's like Salesforce.com or Yahoo Stores for guidance. But, maybe you're company is special, more a of a boutique (hence the apple comparison?). In that case, price might be more a matter of perception than cost/benefit.

You've done an excellent job of differentiating your company/services from the pack and should price high because:

a) you probably can
b) it might be detrimental to your brand if you don't*

*I think if you're highly successful in the ASP model you're going to eventually face copycat / embrace and extend competition. Establishing yourself as the premium brand now (while you can) could be very strategic.

17 Dec 2004 | jankowski said...

If your product provides the 1/10th feature set of your competitors product in a way that is vastly superior (speed, usability, whatever) to the way their product provides that 1/10th - AND that 1/10th product is the real reason to use their product in the first place, then sure.

It's more a case of executing the concept very well in a niche that is specific and appropriate. If it's just "less", in general, that's silly.

17 Dec 2004 | JD said...

Joel will say that set the price which is double of competitors' price.

Check http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html

JD

17 Dec 2004 | Rob Sutherland said...

Price should be based on value, but not value alone.

A product can suffer from having too many features. A product can suffer from having too few. It is a matter of making the right features thoughtlessly easy to use and the extra features available.

That extra feature, even though I only use it once a year might be the reason for purchasing the product.

17 Dec 2004 | ag said...

It is all about delivering on customers' most important needs. If you are only as good as your competition on features they most value and cut out the rest, then I do not see how you can charge a premium.

I completely agree with jankowski. Be superior on the most important need to get the premium.

17 Dec 2004 | Jeff Croft said...

I dunno. It's tricky.

Someone referenced the old iMac ads that spotlighted the very few steps to get it out of the box and online ("There is no step there."). That worked because at the time, computers were perceived to be difficult and complicated to set up. Getting online was quite a task for your average joe, and everyone knew it.

I'm not sure what Writeboard is all about or who your competition is, but I tend to think that unless they are known for being overly complex to the point of making you less productive, you'll have a hard time selling the simplicity of Writeboard.

I guess what I'm getting it is this: your product is "dead simple," and that's great. But, is their product "simple enough?"

17 Dec 2004 | ryan said...

consumers will not pay more for less, but they will pay more for better. is better is actually less, fine, but keep that secret to yourself. stress quality, not quantity.

17 Dec 2004 | Matt said...

I think the best pricing stucture, regardless of the features or UI or anything, is that it meets the budget of the average user. To price effectively, you need to set up a tier structure which enables you to "price-descriminate" or charge more for those who can afford it. Maybe call it "progressive-pricing," to make it sound nicer. You guys did a wonderful job with the BaseCamp model. If your new product (whatever it is) can support a price system like that, I'd do that. I'd say meaningful granularity trumps simplicty with respect to services.

As a quick rant, I'm not a big fan of the iPod viewed as a "normal" good. It's a luxury commodity which connotes fashion to others--a signaling device. People pay an outrageous premium on it, not because it has a wonderful UI (which I would debate), but because its fashionable. I probably won't win friends over that stance, but its pretty impossible for me to understand why people line up to pay for something that is not "feature streamlined" but rather "feature-crippled" (i.e. non-replaceable battery, no downloads from iPod to HDD, etc).

17 Dec 2004 | John said...

I would certainly pay more for a 37signals product that did less than the competition, as long as it did the things I wanted it to do.

My point is to make sure you make it simple in a good way. Focus on refining the product's core functionality, otherwise you will end up with something that is simplistic (which is much worse than simple).

17 Dec 2004 | lisa said...

I believe it depends on the product.
I'd pay more for less if it was easier to use and met my needs.

18 Dec 2004 | sloan said...

The value proposition is that users will get more productivity from your product. That isn't less, it's more. I'd position it that way. It does what it should and does it better than anyone else. Period.

The biggest barrier is going to be the cost, because if it is THAT much more than the competition you must either have a clearly superior product or a misguided price point.

Of the "other" features out there... are they completely added junk, or are they at least partially useful? If your product is going to cost more and have fewer features you really have to be able to prove that it is better, especially to many CFOs or IT people that would be making this purchase... to them, usability is a hard argument to make most times. They often think a little bit of training is a fix... make it about long term productivity and how your product gives returns on a daily basis. If it is more streamlined, how much quicker, efficient is it to use? How many $ are you making the user... or saving the user in terms of productivity?

18 Dec 2004 | Peter Cooper said...

I think everyone here except Matt, above, has missed the concept of value. People fall into different tiers, but most are driven by value. Some will only pay for something when the ROI (in convenience or time saving, if not actual $$) greatly exceeds the cost of the product/service. Others will pay even when the ROI is slim. A few more will pay for something and then barely use it.

This is why I'm a believer in tiered pricing, as Matt describes above. Basically, read Matt's post, he's on the money.

Of course, there are a lot more factors involved than the price/value link. You might not be that interested in support and growing a large customer base, in which case you can charge significantly more and cherry pick your clients. In fact, with your small staff this is probably preferable unless your product is so simple as to rarely generate support requests.

18 Dec 2004 | Chad said...

Your rationale is spot on. Clarity and simplicity add value. And many people often will not recognize the value of a product unless they feel they paid a little more for it. The iPod is a good example. And hey, if your product is twice as good, then go ahead and charge twice as much for it.

I'm still trying to digest Joel's article below. Entertaining as it is, what I'm gleaning from it is the value of simplicity in pricing.

http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html

18 Dec 2004 | Mike Piontek said...

More features certainly doesn't equate automatically to value, I'd agree there. When I'm looking for an app I find everything I can, try them out, toss the ones that are poorly put together, and pick the one that best suits my needs out of the remaining apps. If that app has less features than another one, I don't care. Sometimes more features can even be a down side, if they're implemented poorly and clutter the app.

The iPod came to mind immediately for me as well. There are other players with more features that cost less, yet the iPod remains the most popular. It's just well made and a pleasure to use. It's hardly the only example.

On the other hand... More features may convince more people to try your product. If they already have something similar, and your app doesn't offer anything new, they'll probably be less likely to try it, especially if it costs more! More features can also increase your chances of meeting people's needs... Everyone has different needs and meeting those requires different features. So long as it's done well it won't add clutter, nor make your app more difficult to use. Apple excels at this.

18 Dec 2004 | Gus said...

I think the iPod is more fashionable than it is usable. I'm not convinced that its usability is any better than the typical top/down/left/right cursor navigation found on many other MP3 players and cell phones, and every body already knows how to use that UI. The first time I picked up an iPod, not having seen it before and not having seen anyone use it, it took me some time to figure out that I was supposed to glide my finger over its surface. I think people pay for it because it looks cool more than anything else.

Furthermore I think the purpose of software is to solve problems, and the more problems it can solve for me the more valuable it is. That doesn't mean that features should be added just for the sake of saying you have alot of features, but there are many genuinely useful features missing from Basecamp that other project management systems have (and many more that no system has yet). I'm not impressed that you that you built a dead simple, feature-less project management system (which is really little more than a blog and a todo list). Any one of your competitors can do that. I'll be impressed when someone makes a project management system that's usable and intuitive and still has the features to meet the unique needs of each organization or individual.

What you lack in innovation you make up for in marketing though. The buzz you've managed to create around Basecamp and your company is phenomenal. Hardly a day goes by that I don't come across at least one blogger singing the praises of 37signals and Basecamp. Which is pretty amazing, considering you openly admit that you'd rather not be bothered with your user's problems and such tedious things as providing good customer service; you want to charge more for something that others are selling for less; and your primary objective is to make alot of money. Even if it means putting ads in RSS feeds!

18 Dec 2004 | peter said...

In the mobile telecomms world - where I currently do work - it seems that we have just found out that for certain people less is really - not more, but - better.

All the devices are crammed full with features that almost noone is using. (and they are rather crappy, given that you have to introduce a new feature - any new feature - and do it often.) And there are entire generations of people who don't want to bother, don't want to surf the internet on a wee screen, etc. And there is suddenly a market for more usable ones.

But that market exist only where people can actually afford more for less. For instance, in Eastern Europe, it's not always the case. The mentality often goes as 'get as much as you can for your money - even if you don't use it now, who knows, it may be good later.'

Ultimately, it comes down to a, how do you communicate and get users, then b, how good is your product to keep them...

18 Dec 2004 | slvrfrg said...

I think there's a lot to be said for perceived value. One of the best examples I've seen of this is with Dreamhost. They've nailed the fact that very few people are ever going to actually use 2500mb of space, use 192gb of bandwidth, need 3000 email accounts, or need to host 15 domains. However, I feel like I'm getting a far greater value for my money than anywhere else that I've found.

The other key ingredient for their method is word-of-mouth. It's pretty easy to see through the marketing to realize that I'm prob never going to use those all those extra features, and if I've never heard of this company, it might sound far-fetched. Kinda like those hosts that offer unlimited bandwidth - there is no such thing (someone has to pay for it).

Moral of the story: especially in a saturated market, perceived value is extremely important.

Does this help answer your question? Perhaps not since it sounds like it's not a saturated market, however it's one way of looking at the value of additional features. Maybe though value can be conveyed through quality as opposed to quantity, depending on the product.

18 Dec 2004 | George said...

I believe most of us buy Microsoft Word because :

A > Its Microsoft,
B > Has all the features you will EVER need, but will never ever use, and
C > Because we have to pay for it.


Only Just a few will use alternative freeware applications mainly because of B and C.

My point is that the more you price an even plain application the better this appeal to the market. My other point is that we do and like to pay brands no matter how good their products are. Thats called trust and fashion..

Its not about simplicity or features. It all comes down to marketing and how to handle consumer (humans) passions and needs.

18 Dec 2004 | kageki said...

From a vendor perspective, the feature comparision is mostly irellevant. Price your product on these criteria:

What revenue do you need to cover its costs?
What will the market bear?

But at some point a customer will ask you, "Why does your product cost more than such and such..." I guess you can tell them that the time it saves them costs less than the price of delta between your product and the competition's and that it'll make them more productive, but that sort of subjective pitch to be snake-oil talk.

18 Dec 2004 | kageki said...

err....

On the other hand, at some point a customer will ask you, "Why does your product cost more than such and such..." You can tell them that the time it saves them costs less than the delta between the price of your product and the competition's, or that it'll make them more productive; but I consider that sort of subjective pitch to be snake-oil talk.

18 Dec 2004 | Peter said...

Something that hasn't been mentioned: If you can make people feel like they don't *have* to compare features, they will be happy to pay more. More people than you think just want the value, but don't want the work to choose the right product.

18 Dec 2004 | Gordon Currie said...

It all comes down to VALUE. One word.

If the product is easy, fun, and delivers value, then I will pay any price for it. If it solves problems and can be leveraged in terms of my business, I will be a loyal, happy client.

Value vs feature pricing needs to recognize that I would be looking for the top 10 features. If you offer 100 features but not the ones I want, I don't buy. Offer 10 features with 8-10 I use, and I start writing your company checks. :+) Really.

WHere the danger lies (in my humble opinion) is when products are priced close to a competitor. If your new product will do what you say it will and it helps us, then it needs to be differentiated from the competition.

When I price my web development services, lots of competitors bids come in at $35 - $55hr CDN. One some projects I will bid $75 to $100 hr ( typically its project based pricing but I think you will see my point). Clients sit back and take notice. And thus my argument begins based on value. And steers the client away from PRICE and towards that magic word...VALUE.

My 2 cents

Gordon

19 Dec 2004 | pb said...

George, people use Microsoft Word because everyone else uses it.

Gus, the iPod circle is a much better interface than the buttons or joysticks. Even if you have no idea what to do when you first pick it up, you figure it out in 5 seconds. And then it is much, much better.

19 Dec 2004 | andy said...

Read Jef Raskin's "Humane Interface." In my opinion, it should be required reading for every interface designer and every project manager. There are several parts where he argues for less features and less customization, and his arguments are very strong. His background definitely backs him up, too.

There are far too many people out there developing software and interfaces who have no idea what GOMS or any other usability matrices are, and rely way to heavily on faulty focus groups and gut instinct.

Also, simplicity of use does not mean lack of features. It's pretty easy to determine whether a feature is relevant or not, and to decide if needs to get the axe.

Ease of use is most definitely a premium feature.

19 Dec 2004 | Charles said...

If the product is better because it is simpler, easier to use, does exactly what you want and nothing more or less, then absolutely you should charge more...it all comes down to the value you deliver the customer.

20 Dec 2004 | Sam said...

In my opinion, features = good, free = better.

20 Dec 2004 | Mike Tee said...

Yes, it's the value, not the features. Value comes from solving my problems quickly and efficiently. Value makes me feel that I have made a good purchase.

Regardless of whether a product has a lot of features or not, if the function of the product itself solves my criteria above... then yes, the price will be worth it.

20 Dec 2004 | Arne Gleason said...

I think the iPod is more fashionable than it is usable.

I agree it has real status appeal which I think comes down to image marketing combined with having brand appeal for the appropriate mavens. The only reason I would have a preference for an iPod, other than its fashion-ability, is its ability to play Audible.com books (which actually is a feature missing from a lot other players).

Heres a nice little tautological maxim: People will pay what they believe something is worth.

Seems like a pointless statement but the words expose a couple of useful handles. If you can get people to believe simpler is better they will pay more (makes the bold assumption that peoples beliefs can be affected one way or the other on this matter).

I think simple to use, with just the features you really need has appeal for products that are equalizers (empower everyone/anyone), where many advanced features -- experts only has appeal for products that are differentiators (competitive advantage). Now, If you can sell simple to use, with just the features you really need as an advanced feature

20 Dec 2004 | Rob H said...

I would pay a premium for a product that does the core function well than a product that is the be all to end all in terms of functionality.

How many products out on the market today do the core things well? iPod is a great example of this. Its a great MP3 player. It's not the swiss army knife of portable MP3 players.

Basecamp is another great example.

I feel that in order for businesses to stay ahead in this economy and marketplace, they need to concetrate on what they do best. A product is more valuable to the end user if it can do its core competancies really well, then a bunch of mediocore ones put together.

-R

20 Dec 2004 | Darrel said...

believe most of us buy Microsoft Word because :

D > Even though it is one of the most complicated, pile o' crap word processors ever made, all of our clients use it.

(A prime example of how, in the software industry, market share is infinitely more valuable that quality of product)

20 Dec 2004 | kageki said...

There's some interesting points here about "Value" but i still think that's irrelevant to pricing out a product. Value is such a nebulous concept, and unless you can quantify what makes your product, "Just better" then you'll be hard pressed to put a dollar value on that value in a manner that works for everyone.

One person's, "easy to use" is another person's, "so fool-proof you need to be a fool to use it."


The value argument also overlooks the fact that you're a complete business and not just a think tank. You have to make ends meet. You have to cover your expenses TODAY so you can make the product BETTER tomorrow.


I think it's almost goes without saying that you should always aim for excellence and make the best possible product you can, but i'll say it because so many people DON'T do that. But that's a completely different goal than putting a price on something, it's a different way of thinking. When you're thinking about modifying the product do you think about, "Well let's figure out what features we can afford to add?" NO! So why would you measure the price by the so called, "Value"

20 Dec 2004 | Josh Williams said...

It all depends on end user needs (and tolerance), but I pay more all the time for simplicity. Sometimes you fork over more cash for the smaller piece of furniture at DWR than the frilly, overgrown, monstrous sofa from a dozen other manufacturers.

Why?

Because it's a better use of space. Because its more practical. In the end, it basically boils down to the items simplicity (or ingeniousess).

One more example: I just bought my second Volkswagon (a Jetta GLI). Having looked at a handful of cars over the last year, it is harder to find a auto brand with better interior design than VW (and perhaps Volvo, BMW, etc.) in terms of dash instruments, gauges, etc.

Toyota and Nissan make some great cars, as does Mazda, and we considered all of these... Sadly, even though their competing cars typically cost a couple thousand less than VW, I can't stand the dash instrumentation in any of them (especially Toyota).

End of story: Good design cost money.

20 Dec 2004 | Darrel said...

End of story: Good design cost money.

...but it can also save money.

20 Dec 2004 | Arne Gleason said...

Good design cost [more] money

Why?
Because good designers demand so much more money that it has a measurable impact on the price of a mass produced item? (probably not)
Because it costs so much more to manufacture a good design? (probably not much)
Because people are willing to pay more for good design? (I think so)

What irks me is when I see a product that is a good design costing hugely more than a poorly designed product that must cost at least as much and some times more to manufacture. Is the price differential due to an our-product-is-great premium or an our-product-sucks discount?

20 Dec 2004 | Josh Williams said...

Because it costs so much more to manufacture a good design?

Oftentimes, I believe this is the truth. It takes a lot more time and foresight to create simple widget, interface, car, sofa, etc., because every element has to be placed with purpose.

The features may be simple, but they shouldn't ever be an afterthought.

20 Dec 2004 | ak said...

I will never pay more for less functionality.

With that being said, it's a semantics question. If you only gave me 6 of the 10 pieces of functionality I needed for a higher price, I would not buy it.

If a product has the functionality I need, the longevity of it's availability (in other words, not vapor-ware or forever in beta (hint hint gmail!)), and actually saves me time, i would pay premium for it.

I know that the ten seconds I save from a good interface allows me to concentrate on what makes me money!

20 Dec 2004 | Jamie said...

Ok, I'm jumping in a little late. But I thought I'd chime in here because of all the Apple references. I hear everyone talking iPod and iMac. But what I keep thinking of in relation to JF's proposal is iLife.

iLife is a killer application. Extremely simple to use. Totally integrated. AND it is cheap as hell. $50 bucks for video editing (iMovie), photo management (iPhoto), music composition (Garage Band), and music acquisition and management (iTunes). Apple can easily charge a premium for this suite of apps, but they don't.

Apple charges far less than the competition (iMove equals out to $12.50 vs $100+ video editing suites). I'm not sure how killer your app is, but for some reason Apple chooses to charge less for simple and quality in this case.

20 Dec 2004 | Darrel said...

It takes a lot more time and foresight

Good design takes more time/money in the design/planning process, but can often result in LESS time/money needed in the manfuacturing/development process.

I'm not sure how killer your app is, but for some reason Apple chooses to charge less for simple and quality in this case.

Uh...you kind of forgot the key component to that...you need a Mac to run it. So Apple *is* charging a premium in that sense ;o)

21 Dec 2004 | Jamie said...

Darrel, you bring up a good point. So maybe the pricing model becomes this (if people would go for it is another issue): These light simple apps are the bait to get people to sign up for the more premium services that 37 Signals offers (the highest plan in Basecamp). For these people all the small apps are free. For others, you have to pay to use the small apps.

In other words, play the Apple game (again). Develop killer apps you can't live without but the catch is you have to buy a Mac (or have one already). If these apps are killer, maybe they'll force people to sign up for the most robust Basecamp plan. Who knows?

21 Dec 2004 | Darrel said...

Jamie:

Yes, that's the key. You need to give something for people to pick up and feel and turn over and touch. I think the free version of basecamp is just that. The only problem with software is that it takes a bit more up-front commitment from the consumer to actually try it out.

I work for a small software company that markets a very niche software product. We have about 4 competitors. All of them have pretty crappy software. The market leader is actually still running a cirppled DOS version. If people TRY the software products, they always say ours is the best. If they merely go on literature/pricing, they rarely consider us seriously (we're the more expensive of the bunch).

This year, we're cutting our prices to be on par with the lowly competition. Sadly, perception is the bigger component in marketing software, and, for a lot of consumers, the perception is that most software is crap, so you might as well buy the cheapest crap.

21 Dec 2004 | sloan said...

I think the iPod is more fashionable than it is usable.
The iPod is also the only player Apple tries to support really well with iTunes, so it is an overall great experience. The player is only part of the equation because you have to get your music INTO the player from CDs or from iTMS, and the iPod/iTunes integration is waaaaay better than say a Sony player...

It is really tough to get people to buy something more expensive with fewer features, but it sounds like you have a hook with the free version. If you have any metrics to "prove" that your product is better that would help. It wouldn't hurt to put a little time into it either, I'm sure you'll discover new ways to improve your product as well.

22 Dec 2004 | sps said...

The one thing about the iPod that I don't think has been mentioned (please forgive my tired eyes if I didn't read every single comment) is that the device has given birth to a whole industry of add-ons. In the software world, at least IMO, plugins act the same way. They cater to the differences in the userbase. I don't need voice recording on my iPod, but I do want to listen to it in my car and other people's cars. I get to pick what features I want to add. I think Apple built a stronger hold on the market by keeping the iTunes/iPod integration simple (one store:one connection, no drivers, etc) and by creating a huge market (aka, community) around it. Toyota's Scion brand is doing this too, albeit, intra-company, by allowing the consumer to customize the options fairly simply.

I'm don't know what your product will be, of course, but if you can develop a community around it, allow people access to make their version of the product just right for them, etc, then you not only add value and loyalty to the simplicity, but you foster support for your product that can take a load off of you, which will provide you with more time to further develop the product.

Also, I just noted that you publish with MT, so I guess another example.

23 Dec 2004 | Joe said...

Amazing. I've owned several mp3 players, I don't care about fashion and I was eager to pay $500 for my 3rd generation 30GB iPod. Not because it offered me less than the $300 20GB mp3 player, because it offered me more, much more. The reason I payed a premium for the iPod is because the iPod is the best digital music solution with the fewest irritations (decent UI/fewer design problems/less bugs than MusicMatch/etc.) I knew that there were great cases, travel speakers, car mounting solutions, and third party software available. It was also the largest hard drive available at the time. The iPod *still* has the largest hard drive available. We shouldn't fool ourselves by thinking that the iPod costs more because it is "simple and does less". The iPod costs more because it is efficient and offers much more than its competitors. Back to the subject, your software had better offer more than "less" if you want to charge more. Apple understands this.

24 Dec 2004 | Arne Gleason said...

Obviously people are not willing to pay more for less, but they are readily able to rationalize ways that something is not actually less when the need arises. Have you ever found yourself dreaming up yet unconsidered and ever more involved ways how something you love is good, even though you already clearly love it (or new ways that what you hate is bad)? I have. I wonder if its because the fundamental reasons that I love or hate something on a gut level are not self-defensible on an intellectual level. Or maybe its some kind of reinforcement feedback to line up all my conceptual assets in one direction (when you have no doubt, decisions can be made more efficiently).

28 Dec 2004 | Dragan said...

Well, it seems to work for Leica cameras too, so yes, go for it - charge more (money) for less (features). Simple is sexy.

31 Dec 2004 | Zach said...

People will only pay MORE for LESS if you have something unique and useful that the other doesn't have.

It's like the quote, "Who cares if there are 1,000 programs for Windows if the 10 you want most are available on a Mac."

That's not a plug for Apple, just pointing out the obvious. You better make sure there's a feature that you have that the other doesn't that makes it worth the amount they're paying.

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