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Comment by beberlei | Hacker News Reader

well, that is economics 101. consumers price goods by value, not by costs. if your costs are higher than consumers are willing to pay, then you will at some point go bankrupt.

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Exactly. No one cares what the product costs to make, they care what it costs from their own pocket. If the app isn't worth $40, then it doesn't have the features and/or the polish to have multiple full-time developers working on it. If the price people are willing to pay is lower than your cost of goods sold, lower your COGS or raise your value proposition. Those are the only options.

> If the app isn't worth $40

Ay, there's the rub. The problem is also related to price anchoring [1]: People [2] accepted the price of $70 for the perpetual value provided by the app (including cloud syncing), but balked at $40/year. The latter price makes the app more expensive over 2 years, and the developer promising updates doesn't have quite the impact to justify the change in the eyes of the angry customers.

If the app initially cost, say, $160, maybe the newer pricing would've been better accepted. I hear Adobe and Microsoft are doing quite well with the subscription models...

[1] https://en.wikipedia.org/wiki/Anchoring

[2] The people who bought it. This is important, because it ignores all the people who thought this wasn't good value. Maybe some of the initial non-purchasers became subscribers. Market analysis is hard.

On the other hand, there's a million different competing not-microsoft-word text editors for writers. Whereas there's no real alternatives to adobe or microsoft products if you need them for your career.

> if you need them for your career.

if you need 'em for your career, then make the person providing your career pay for it.

if you're self-employed, then use an open alternative.

So I guess you’ve never used one of those “open” “alternatives”? Often broken mess, lacking features, incoherent or antiquated UI, etc., ending up costing you more in time needed to ge things done than the paid alternative.

> No one cares what the product costs to make

The production cost is one of the metrics customers use to decide if a price is fair or not, to them. There are other metrics, like the time that can be saved by using the product (ie. some way to quantify the product "use value"), but the production cost is often quite useful to detect abuses--and boy, aren't there a lot of attempts of such abuses.

> production cost is one of the metrics customers use to decide if a price is fair or not

only approximately, and only if the consumer really knows the cost.

Think jewlery (like diamonds), or expensive brand name goods like designer clothing. The production cost for those goods is "low", but the charge is in marketing and status symbol representation (which is modified via marketing).

It could be argued that those two examples are good cases where the customer could be concerned about the value they get, even including the status factor. Diamonds are notoriously high-priced because of a quasi-monopoly, and high-end clothing is pretty often of poor value, quality-wise. If you like designer clothes--and you're not on unlimited budget--you eventually learn what designers/brands to avoid, because the value is just not there, even for that industry.

So this looks like a case in point, where having a rough ideas of the production cost (some parts hand-made, made in France/Italy/England, expansive material like quality cashmere etc.) is important.

> consumers price goods by value, not by costs

But the point is he's a consumer and he isn't pricing by value - he's pricing by costs.

I disagree, I saw it as him pricing by value, but mentioning that the costs don't seem to make sense either.

"consumers price goods by value, not by costs"

That is in itself a great argument for the subscription model. Consumes receive value from continued use over time, so why not fit revenue to the same shape?

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